Michigan Lawmakers Propose Legislation to Increase Consumer Energy Choices

Legislators in Michigan have stood up for their constituents by introducing legislation to ease limitations on the number of consumers in the state who can purchase power from competitive power suppliers. The bipartisan companion bills introduced by Senator Wayne Kuipers and Representative Roy Schmidt would raise the state’s limit on retail choice from 10 percent to 25 percent of the utility’s total electricity demand.

This legislation comes on the heels of a petition by scores of Michigan businesses, including many COMPETE members, to lift the limitation on electricity choice.

The bills would amend a state law adopted in 2008 that significantly limited consumers’ ability to choose their electricity supplier with a 10 percent limit on retail choice. Cap supporters claimed it would never be reached, that it would create jobs and new investment, and would not result in negative effects on customers.

However, these promised benefits were never realized. The caps were reached in one year and rates charged by monopoly utility companies rose almost 10 percent from October 2008 to December 2009. Michigan’s electricity rates now rank highest in the region as prices have declined significantly nationwide. More than 1,000 customers are in a “tracker” queue waiting for additional customer choice, and a major proposed power plant project cited as justification for the state’s re-monopolization law has been postponed.

Electricity demand is expected to grow as the economy rebounds, and opening up the state’s electricity market will help meet demand by incentivizing new power suppliers and creating competitive pressure among incumbent utilities to keep rates down. In competitive markets, competition between power suppliers spurs innovation to provide new products and services at the lowest cost to attract and retain customers.

Comparatively, monopoly power providers have little incentive to innovate or lower costs because ratepayers are captive and cannot access an alternative supplier. Unnecessarily high energy costs imposed on state businesses then act like a tax, reducing economic competitiveness and the ability to retain and create jobs.

When power suppliers compete against one another, consumers win. This proposed legislation will allow markets to work, create lower-cost electricity supplies, promote private investment in clean energy generation and green jobs, and stimulate innovative solutions to meet electricity needs and environmental objectives.

The economy is just starting to rebound and additional rate increase proposals are pending before the Michigan Public Service Commission. The Governor and Legislature must raise the cap on retail competition to provide electric rate relief, create and retain jobs, and establish a favorable environment for new businesses to locate in the state.

Bill Massey | June 2, 2010