Expand Competition to Lower Michigan Energy Rates, Stimulate Economy

COMPETE today joined scores of businesses in encouraging Michigan’s elected officials to pass legislation restoring the state’s competitive electricity market. The combined signatories represent 877 facilities, more than $278 million in annual electricity costs, 74,634 employees, and thousands of customers who visit their businesses each week. This action would roll back legislation enacted in 2008 that limited competitive retail electricity options to 10 percent of otherwise monopoly utilities’ electricity consumer demand.

Since the re-monopolization law’s passage in 2008, many Michigan consumers have been unable to benefit from competitive pricing options and have experienced a series of rate increases by DTE Energy and Consumers Energy, the two monopoly-protected electric suppliers. Because the limit on competition was reached in only one year, the vast majority of consumers are now captive to monopoly providers and higher electricity rates than is currently available in the competitive marketplace. Recent Energy Information Administration (EIA) data shows an almost 10 percent increase in electric rates from October 2008 to December 2009, and Michigan’s rates are now the highest in the EIA’s North Central Region.

These rate increases have occurred while wholesale electricity rates have declined across the nation, creating demand for competition options. With the market closed, potential customers are denied lower-cost competitively priced electricity. Under rules implemented by the Michigan Public Service Commission (PSC), state power suppliers must maintain a “tracker” showing the volume of customers who have placed themselves in the queue for customer choice. According to the latest information on the Consumers Energy and DTE Energy Websites, over 1,000 customers have placed themselves in the queue.

In a letter sent to the Governor and state Legislature, dozens of job-producing businesses outlined their concerns related to the law. Mark Butler, Chief Financial Officer of Campbell Grinder Company, described how unnecessarily high energy costs imposed on state businesses have acted like a tax, reducing competitiveness and the ability to retain and create jobs as the economy tries to rebound. Butler said:

“Our company uses large amounts of electricity and relies on affordable rates to keep our business strong and product costs low. Escalating rates impact our bottom line and limit our ability to invest in new employees and facilities. If we were able to shop for electricity in a fully competitive market, we could save significant amounts of money and pass those savings along to our customers and employees.”

Walt Taylor, Director of Energy for Wendy’s/Arby’s Group, explained how businesses that operate in multiple markets experience first-hand how competition is creating economic and environmental benefits:

“Wendy’s/Arby’s Restaurants believe that a robust, competitive market ensures all consumers have access to reliable and competitively priced energy. In these challenging economic times, a fully functioning competitive electric market will not only achieve these goals but will also advance the development of additional products and services.”

D.J. Oleson, Vice President of Olesons Food Stores, detailed how higher electricity rates negatively impact customers, not just businesses, and used a historical example to predict competition’s full potential. Said Oleson:

“Electricity continues to be our biggest utility expense. Our industry uses a great deal of electricity to provide our customers with the quality fresh food products they demand at a fair price. Anything we can do to lower our utility cost will make us more competitive in providing these products to our customers. We constantly evaluate our electric usage to try to find the most efficient lighting and equipment. We have saved a great deal with natural gas deregulation, now it is time to do the same for electricity.”

With additional rate increase proposals pending before the public service commission, it is important for the Governor and Legislature to eliminate barriers to retail electricity competition in order to provide rate relief, create and retain jobs, and establish a favorable environment for new businesses to locate in the state and stimulate the overall economy.

Joel Malina | April 28, 2010