The Debate Over Michigan's Electricity Deregulation: What You Need To Know

By David Eggert,  Associated Press

LANSING (AP) - Some of Michigan's biggest companies and school districts are fighting bills that would alter rules that govern competition in a partially deregulated electricity market.

The debate, fueled by a high-stakes lobbying fight between two major utilities and their competitors, is intensifying this fall and is among a number of big energy issues facing lawmakers.

Some questions and answers about the issue:

What is Electric Choice?

State law guarantees DTE Energy, Consumers Energy and smaller utilities at least 90 percent of power sales in their regions. Michigan fully deregulated the market in 2000 but set the 10 percent cap in 2008.

Who benefits?

About 6,500, or 0.5 percent, of customers - almost all of them commercial and industrial - were in the "choice" program in 2014. They include Dow Chemical, furniture maker Herman Miller and Amway. An estimated 40 percent of public schools participate. So do places such as Oakland County and Saginaw Valley State University. Huron Valley Schools said the district saves $400,000 a year by buying electricity elsewhere.

Who's waiting?

Because the 10 percent limit has been reached, more than 11,000 Consumers and DTE customers are in a queue waiting to buy from competitors. If the cap did not exist, 28 percent of Consumers' sales and 22 percent of DTE's sales could hypothetically go away, according to the Michigan Public Service Commission.

What's the problem?

Utilities, their competitors and others say the current law is unfair for different reasons.

Those favoring full regulation contend the "hybrid" system does not work, impairing long-term capacity and reliability planning at a time coal-fired plants are set to close in Michigan and throughout the entire regional market, and forcing utility customers to subsidize customers of alternative suppliers to the tune of $300 million a year. They say if market conditions change and the competition is less able to buy excess capacity power to sell, their customers enjoying a "free ride" in the 10 percent group could switch back without utilities having enough time to generate more electricity.

Those favoring deregulation say competition works - slowing rate increases in regulated states compared to states without choice and saving $1.1 billion over 15 years - and those on the waiting list could save $230 million annually if not for the cap. They argue that concerns about capacity issues in 2020 and beyond are overblown and utilities were handsomely compensated long ago for lost market share.

What would legislation do?

A Republican-sponsored House bill that would have fully regulated the market and ended the choice program is dead. But the battle is raging on because the new version and a GOP-backed Senate bill keeping the 10 percent limit in place would feature key changes. Alternative suppliers would have to show they could supply sufficient generating capacity for the next three years - a concept backed by Republican Gov. Rick Snyder - and customers would be required to notify utilities three years in advance of their intention to become utility customers.

Utilities say such changes are fair. They also want legislators to eliminate the queue and make the 10 percent cap "hard," noting it is actually slightly higher because of a grandfather provision in the 2008 law. Critics, noting Michigan's high power bills compared to Midwest states, say the legislation would effectively kill choice. They cite a stock analyst's view that competition likely would "whither organically" assuming the legislation makes suppliers' prices uncompetitive.

Some Republicans on the House and Senate energy committees are pushing bills to further deregulate the market, but they may face an uphill climb.

So, what's next?

Committee hearings continue. Snyder would like to sign a wide-ranging energy plan by year's end. It is one of his four priorities in the fall session. "I'm open to leaving a choice element in this," he told The Associated Press in a recent interview. "But you have to actually show that you can provide the energy that you're choosing. It's not right to have it so you can say, `Well I want the best of the free market right now but if it doesn't work out all of sudden I'm going to come back and put the burden on other people."'

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