Surging Demand for Retail Choice in Michigan Underscores Need to Lift Limits on Competition

A significant and growing backlog of customers eager to obtain the opportunity to choose among competing retail electricity providers underscores the need for Michigan lawmakers to revisit a state law severely limiting customer choice.
                                                         
A 2008 state law barred thousands of customers from access to the state’s competitive retail power market by limiting customer choice to 10% of each utility’s total electricity demand. Those arbitrary limits, designed to protect utility investment in new power generation facilities that have since been canceled, were reached within the first year, far sooner than anticipated by the legislation’s framers.
 
Since then, for those left captive to monopoly utility electric service, rates have increased as the number of customers seeking the freedom to obtain less expensive power supplies has surged.
 
Data compiled by the Michigan Public Service Commission (PSC) demonstrates the growing customer demand for retail choice. “Alternative energy suppliers serve approximately 7,000 electric choice customers throughout the state,” the PSC noted in its annual report on retail electricity competition in Michigan.
 
“As of December 2011, Consumers Energy had just over 1,000 customers participating in the electric choice program and Detroit Edison had approximately 6,000 choice customers participating. The electric choice programs for both companies were fully subscribed at the 10 percent cap throughout the year,” the report said.
 
That’s the good news. But it’s bad news for the many customers left captive with no choice but to pay rising rates charged by the state’s utilities.
 
By 2009, the PSC report details, customers waiting in the queue for competitive retail power choice quickly numbered 663 in Detroit Edison’s service territory and 38 in the service territory for Consumers Energy. By 2010, those numbers had mushroomed to 1,714 for Consumers and 1,100 for Detroit Edison. Last year, those numbers had surged to 3,739 and 2,646 for Consumers and Detroit Edison respectively.
 
In addition to the compelling queue statistics noted above, perhaps lawmakers should consider another alarming trend highlighted in the PSC’s annual report.
 
Michigan’s weighted average residential retail rate was below the national average from 2001 to 2008 and has been above the national average since 2009, immediately after passage of the state law limiting retail electricity competition.  “Similarly, Michigan was below the 10 largest average from 2000 to 2009 and has been above the 10 largest average since 2010,” the PSC report said.
 
Michigan’s weighted average commercial retail rate was above the national average from 2001 to 2009 and is still above the national average as of 2011. Michigan’s weighted average industrial retail rate straddled the national average from 2001 to 2008 and has been above the national average since passage of the re-monopolization law in 2008.
 
COMPETE urges Michigan lawmakers to reverse the 2008 law and allow Michigan electricity customers to choose among the many competing suppliers vying to enter the state’s market. Put simply, competition works. It promotes affordable and abundant supplies of electricity that is often cleaner in terms of its impact on the environment. Let competition work, and Michigan businesses will access more cost-effective supplies and innovative services that will help them to create jobs and revitalize the state’s economy.

Bill Massey | February 13, 2012