Michigan Businesses Urge Governor, Legislature to Increase Competition in State Electric Market

Lansing, MI – Scores of Michigan businesses today petitioned Governor Jennifer Granholm and the state legislature to adopt legislation that would expand the state's competitive electric market, increase customer choice, provide consumer rate relief, stimulate clean energy, and create green jobs. The combined signatories represent 877 facilities, over $278 million in annual electricity costs, 74,634 employees, and thousands of customers who visit their businesses each week. These signatories cross the economic spectrum, from large retailers and industrial manufacturers to small businesses and energy service providers.

This action would revisit legislation adopted in 2008 which significantly limited electric customers' ability to choose their electric supplier through imposition of a 10 percent cap on retail choice. When first considered in 2008, the primary supporters of the retail competition cap said it would never be reached and too much was being made about the restriction on customer choice.

However, since the law was enacted, Consumers Energy and DTE Energy have filed a series of rate increase proposals that have been approved by the Public Service Commission (PSC). Recent U.S. Energy Information Administration data show the state's electric rates increasing almost 10 percent from October 2008 to December 2009. Other electric rates throughout the region did not change, and Michigan's electric rates are now the highest among EIA's North Central Region, which includes Illinois, Indiana, Michigan, Ohio and Wisconsin.

"Reaching the cap on electric competition means the vast majority of consumers are now forced to pay higher electric rates to DTE and Consumers than what is available in the competitive marketplace," said Joel Malina, Executive Director, COMPETE Coalition. "Michigan's cap on competition locks businesses, governments, schools, and hospitals into escalating rates when they can least afford it. At the same time, the imposition of a cap on retail competition has created the surely unintended consequence of creating winners and losers in the Michigan economy."

These rate increases have occurred during the same time wholesale electric rates have significantly declined, and led to electricity customers seeking alternative power suppliers. As a result, the competition cap in both electric service territories has been met in just over one year.

"Wendy's/Arby's Restaurants believes that a robust, competitive market ensures that all consumers have access to reliable and competitively priced energy, said Walt Taylor, Director of Energy for Wendy's/Arby's Group. "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."

In competitive markets, power suppliers compete against each other to provide the best possible service at the lowest cost to attract and retain customers. Comparatively, incumbent power providers in monopoly-regulated states have no incentive to innovate or lower costs because ratepayers are captive to their monopoly-protected supplier. Unnecessarily high energy costs imposed on state businesses then act like a tax, reducing competitiveness and the ability to retain and create jobs.

"As an industrial manufacturer, our company uses large amounts of electricity and relies on affordable rates to keep our business strong and product costs low," said Mark Butler, Chief Financial Officer of Campbell Grinder Company. "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."

Greater competition in Michigan's electric industry will create significant economic and environmental benefits because it stimulates competitive prices, energy efficiency and conservation, and clean energy development. Well-designed, competitive markets allow businesses to shop for innovative energy management solutions and obtain the lowest-cost energy, helping them maintain low prices on consumer goods and services. Unique characteristics of competitive electricity markets also enable clean energy generation to thrive, attracting investment and building green jobs.

"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," said D.J. Oleson, Vice President of Olesons Food Stores. "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."

The volume of businesses who desire more competition grows with every day. Under the rules implemented by the PSC, state power suppliers must maintain a "tracker" showing the volume of customers who have placed themselves in the queue for customer choice. While the market has reached its cap, new potential customers continue to pile up in the queue if additional space becomes available. According to the latest information on the Consumers and DTE Web sites, over 1,000 customers have placed themselves in this queue.

With additional rate increase proposals pending before the PSC, it is important for the Governor and Legislature to eliminate or otherwise increase the cap on retail competition in order to provide electric rate relief, create and retain jobs, and establish a favorable environment for new businesses to locate in the state to stimulate the overall economy.