Government, Higher Education, and Sustainability

Electricity choice offers significant benefit to schools

Districts put utility savings into improving classroom programs.

May 29, 2015
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As debate about implementing a fully regulated electricity market in the state powers up, Michigan K-12 school districts are faced with the prospect of losing the Electric Choice Program that has helped reduce electric expenditures and allowed reinvestment into the classroom.

In March, House Bill 4298 was introduced to the Committee on Energy Policy seeking to restore Michigan to a fully regulated electricity market by eliminating customer choice, prohibiting alternative electric suppliers from entering into new contracts, and requiring retail customers to return to incumbent electric utilities when existing contracts expire.

Since Public Act 286 was approved by former governor Jennifer Granholm in 2008, Michigan’s electricity market has had a 10 percent cap on electric choice for customers of large utilities through the Customer Choice and Electricity Reliability Act.

The purpose of the act was to ensure all retail customers in the state have a choice of electric suppliers and to “improve the opportunities for economic development in the state and to promote financially health and competitive utilities in the state,” according to PA 286.

More than 90 representatives from organizations across the state have testified before the Committee on Energy Policy arguing both for and against the HB 4298 since it was introduced. Those in favor of full regulation of the electric market view it as a means to ensure reliable and affordable energy for the state moving forward without great cost to Michigan families and businesses by unfair subsidies.

However, the issue of choice has a significant impact on school districts that participate with the Michigan Schools Energy Cooperative Electric Choice Program.

MISEC has advocated on behalf of the state’s K-12 public schools and community colleges in terms of securing and managing energy since its establishment in 1997, and helps control electric costs by providing a reliable supply of competitive electricity through the MISEC Electric Program.

Although PA 286 implemented a 10 percent cap on electric competition, a number of public schools throughout the state have been able to participate in the program for more than a decade, including Huron Valley Schools, Kent Intermediate School District and the Ottawa Area Intermediate School District.

Ron Koehler, assistant superintendent of Kent ISD, said the district was one of the entities that initially joined when MISEC was formed and has been a choice customer through MISEC as long as the organization has been in operation.

“There were school districts that got involved early with MISEC before the cap, and so those school districts have been saving money year in and year out,” said Koehler. “We have other districts that aren’t saving money through this because they didn’t get involved as early as others, and the choice opportunities were capped.”

Public school districts within Kent ISD involved in the program include Caledonia Community Schools, Comstock Park Public Schools, Godfrey Lee Public Schools, Kelloggsville Public Schools, Sparta Area Schools, Wyoming Public Schools and some of the Grand Rapids Public Schools.

“At Kent ISD alone, we saved $151,399 in 2014 in utility costs, and our savings increase every year. Over the life of the plan, we have had cumulative savings of $667,000 — and that is a significant savings to our taxpayers,” said Koehler.

“The cumulative savings to the school districts here, including Kent ISD, has been $3.7 million, and those are dollars that, instead of going to utility costs or diesel purchasing costs, those dollars can go to the classroom.”

By reducing utility costs, Koehler said Caledonia schools were able to save close to $110,000 in 2014, which is the equivalent of two teaching positions with salaries and benefits. The addition of two teachers would reduce class size and improve instruction for students due to more individual attention, said Koehler.

“Grand Rapids saved about $215,000, and that may be four teachers relative to first-year teacher salaries and benefits, but you can understand there is a savings there that you are not spending on a fixed cost like utilities,” said Koehler. “You can spend it on classrooms or other services — direct services to students.”

Julie Gillespie, interim superintendent for Ottawa Area Intermediate School District, said while it is difficult to say specifically where the funds are allocated, the savings derived from being involved with the Electric Choice Program certainly go into student programming.

“We offer programming for special needs students, for career tech ed students and for some other special populations so we are able to invest in those programs,” said Gillespie. “We have been involved with the Electric Choice Program since about 2001 to 2002. It has been an excellent program for us and (offers) really some pretty significant savings.”

With energy costs only second to personnel expenses in terms of the most expensive part of the school budget, Gillespie said over a period of roughly 13 years, Ottawa Area ISD has had a cumulative savings of approximately $620,000.

Jim Baker, superintendent of Huron Valley Schools, indicated the Highland-based schools have been on the Electric Choice Program for more than 10 years and estimates returning to the base DTE service rate would increase utility costs by $400,000 for the current fiscal year, according to the April 13 written testimony submitted to the Committee on Energy Policy.

“At Huron Valley Schools, we receive the lowest funding in the state. We have made more than $37 million in expenditure reductions since 2003 to 2004. We work very hard to look for ways to save money in our district so our limited resources can provide maximum benefit to our 9,600 students and our community at large,” said Baker in the statement.

“House Bill 4298 would have a devastating impact on our ability to continue the quality education and programs we provide.”

If HB 4298 was approved at the state level, resulting in an elimination of energy choice, Gillespie said it would have a pretty significant impact on the Ottawa Area ISD when taking into account a nearly 25 percent savings on energy cost in the last year.

“That would mean we would have to find those funds somewhere else and, because of the volatility of energy costs, it is really difficult to plan ahead for the upcoming year,” said Gillespie.

“We would have to make some tough choices. Our hope is this (program) will continue to be offered to schools. It is really vital to us in terms of containing costs.”

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