Will Lansing Play Electrical Games

December 21, 2004
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LANSING — Efforts to substantially alter Michigan's landmark electric choice law could resurface next year.

Backers of a package of bills that foundered in the recently ended legislative session promise to make another run at the issue when the new legislature convenes in 2005.

Introduced in July, the six bills sat in the Senate Committee on Technology and Energy and died with the end of the legislative session.

Claiming that changes to the electric choice law are needed to create an even playing field between Michigan-based electric generators and out-of-state energy re-sellers that siphon off the largest and most profitable customers, the coalition behind the legislative proposal expects to push the issue again in early 2005.

"We're not going anywhere," said Kelly Rossman-McKinney, spokeswoman for the Citizens for Long-Term Energy Affordability and Reliability, or CLEAR.

CLEAR, a coalition formed and supported by DTE Energy, has provided the main push for the Senate bills, which would have changed a 2000 law that created a competitive marketplace for electrical service in Michigan.

The coalition's campaign and the work in the Senate Committee on Technology and Energy has raised awareness of the issue and set the foundation for revisiting it next year, Rossman-McKinney said.

"Legislators know this is an issue they're going to have to grapple with," she said.

Among the measures proposed in the bills were the following requirements:

  • That alternative sellers of electricity are required to have a 15 percent emergency power reserve.
  • That all power suppliers contribute to a state fund to provide financial assistance to low-income persons.
  • That utilities are allowed to recover the cost of transitioning a customer to an alternative supplier (so-called stranded costs).
  • That utilities are allowed to set a deadline when customers who switch power companies can return to their previous supplier at their old regulated rate.

CLEAR pushed the bills as needed changes that would assure a reliable and stable electric system in Michigan in a competitive era.

Critics, led by the Customer Choice Coalition — a consortium of education and business interests led by large electric customers, mostly manufacturers — attacked the bills as benefiting the major power companies and eroding savings generated for customers through slowly emerging competition that remains in its infancy.

Among the entities the coalition says would benefit from the bill is the state's largest electric utility, DTE Energy, with 2.1 million customers in southeastern Michigan.

One coalition member, Haworth Inc., estimates it would lose $490,000 annually in savings it has realized from lower rates stemming from customer choice.

Beyond that savings loss, Chairman and CEO Richard Haworth wrote last summer to local lawmakers, Haworth would have to pay another $350,000 a year if electric choice were altered under the proposed bills.

In opposing the bills, Haworth called the legislation "a very self-serving package" that "negatively impacts all businesses in the state."

"At a time when Michigan is struggling to keep its valued manufacturing jobs and is on constant alert to help small business stay healthy and expand, nothing could be worse than to pass this self-serving package that only helps the utility industry and will strap ratepayers with the higher electric prices in the entire region for years to come," Haworth wrote.

The electric choice law enabled all customers to choose their electric generation supplier as of Jan. 1, 2002, provided for a one-time 5 percent residential rate reduction, froze all electric rates through Dec. 31, 2003, and created a rate cap for residential customers through at least Dec. 31, 2005.

Rate caps for small commercial and industrial customers expire on December 31, 2004.

David Waymire, a Lansing lobbyist representing the Customer Choice Coalition, promises another vigorous fight next year if the same bills that were proposed in 2004 are reintroduced.

"Despite what DTE Energy says, our current electric restructuring law is working quite well," Waymire said. "There's no need for this legislation."

That kind of opposition kept the bills bottled up in the Senate Technology and Energy Committee, which held a series of hearings during the summer and fall. The committee, chaired by the bills' co-sponsor, Sen. Bruce Patterson, R-Canton, never took action on the bills.

Sen. Patterson's legislative director, Christopher Gillet, said the committee is still interested in examining issues surrounding the 2000 electric choice law, although he's unsure whether the bills proposed this year will get another look. One issue to explore is the effectiveness of the electric choice law and whether it's working as intended, Gillet said.

"We do have some issues we want to explore a little more," Gillet said. "It's something we're not abandoning by any means. We're definitely not giving up in continuing to monitor how the market develops and whether it's good for Michigan."

Another possibility for the next legislative session, he said, is to examine whether to codify into law certain aspects of a recent Michigan Public Service Commission ruling that granted DTE Energy some of what it sought through the legislation.

The commission on Nov. 23 granted DTE Energy's Detroit Edison an $87.3 million rate increase to cover costs associated with pensions, implementing clean-air controls, and a state fund to help low-income people cope with winter heating bills and inflation.

The rate case also allows Detroit Edison to recoup stranded costs when customers leave for an alternative electric supplier and to set down provisions for customers who switch power suppliers and then return at a later date.

Together with a $248.4 million rate increase it granted last February, the commission this year authorized $335.7 million in higher rates for Detroit Edison.

Michigan Attorney General Michael Cox last week filed a motion challenging the rate hike.

The Public Service Commission also granted Consumers Energy Co. a $63.2 million rate increase to cover stranded costs from 2002 and 2003.    

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