Electric Competition in MI - Fact vs Fiction 4-15-11

8/7/2019 Electric Competition in MI - Fact vs Fiction 4-15-11

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Electric Competition for Michigan NOW!www.competition4mi.com

Michigan Consumers Deserve Electric Rate ReliefAddressing Fiction With Facts Regarding Electric Competition in Michigan

Electric Competition for Michigan [email protected]

517.515.1583

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FICTION : It’s t oo soon to revisit a decision from almost 3 years ago that imposed a 10% cap on competition.

FACT :

The cap on competition has already harmed Michigan consumers and should be fixed now.

It is not too soon to take steps to revitalize Michigan businesses, enabling them to grow their businesses andcreate new jobs.

The 10 percent cap was hit in 2009.

According to the U.S. Energy Information Administration (EIA), on a total average basis, Michigan now has thehighest electric rates in the Midwest.

Today, nearly 4,000 Michigan businesses – representing tens of thousands of jobs – desire to have a choice intheir electric suppliers but are on waiting lists kept by Detroit Edison (DTE) and Consumers.

FICTION : It’s too soon to tinker with the 2008 comprehensive energy legislation because it addressed everything from renewableenergy standards to de-skewing of rate, and those elements need time to develop.

FACT : Electric Competition for Michigan Now does not seek to revisit the entirety of the 2008 law.

We are only seeking to increase the cap on competition from 10% to 35% and only in the Detroit Edison andConsumers Energy territories. Raising the cap will provide a greater number of businesses, local units of government and all consumers with a choice in their electric supplier and lower costs of electricity.

Many companies wishing to buy renewable energy would rather have the opportunity to buy directlygenerators, not being forced to buy through a monopoly utility.

FICTION : Increasing the cap will result in rate increases for the remaining customers.

FACT: In fact, remaining customers will see very little change, and could even see lower rates, as the utilities would

have to buy less power as customers move to Electric Choice because of savings from Electric Choice,according to evidence presented by Energy Michigan in Detroit Edison’s current rate case (U-16472).

When a customer moves to Electric Choice, the utility experiences substantial savings in its costs of providingpower for the remaining customers. These savings are automatically passed on to the remaining customersthrough the Power Supply Cost Recovery proceeding.

The decrease in utility revenue is off set by the decrease in utility power costs. In fact, remaining customerscan actually receive net savings – and lower rates – due to Electric Choice.

FICTION : Deregulated or competitive states have higher rates than regulated, monopoly-structured states.

FACT : The “fiction” has confused cause with effect.






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It was the previous high cost of regulated rates in certain states that drove the need for competition.Policymakers and customers wanted to introduce competition in direct response to high electric rates.Michigan is no different.

Michigan has the highest average electric rates in the Midwest (Ohio, Indiana, Illinois, Wisconsin andMichigan), and average Michigan rates exceed national averages according to the EIA. Those gaps betweenour Midwest competitors have increased since the end of competition; prior to ending competition,Michigan’s rates were below the national average.

FICTION : The 10% cap was needed so that DTE and Consumers could finance needed new power plants.

FACT : A “certificate of necessity” provided for in PA 286 – not the 10% cap – guarantees the utility the recovery of

its planned costs for new power plants.

The issue of new plants may be moot with respect to an increase in the cap on competition. Due to the

significant reduction in electricity demand from the economic recession and flat projections going forward,there is no impending need for the construction of expensive new power plants. In September 2010, in CaseNo. U-16412, Consumers testified that there will be excess capacity in the Midwest until 2026.

It is not the 10% cap on competition, but rather the provision for a “ certificate of necessity ” in the current lawthat provides financial security for investment in new power plants.

We are not proposing any changes to the procedures for a “certificate of necessity.” Thus, an increase in thecap on competition will not impede a utility’s ability to invest in new generation.

Since June 2009, the Midwest ISO reliability tariff has required all suppliers – both traditional utilities andcompetitive suppliers – to provide capacity to cover their loads plus reserve margin. Thus, utilities needgeneration only to cover the load they serve, not Electric Choice load.

FICTION : Since the amount of electric load taking advantage of retail competition stood at approximately 3% when the current law was enacted in 2008, the 10% cap will never be met, or at best it will take years before it will be met.

FACT : Both utilities have grossly and repeatedly underestimated businesses’ demand for retail electric competition .

The 10% cap was reached in the first year after the law was enacted ( CE in Aug ’09 and DE in Dec ‘09 ).

The artificial cap is discriminatory and places thousands of Michigan businesses – on the Electric Choicewaiting lists – at a competitive disadvantage. Our Michigan government should not be in the business of picking winners and losers among Michigan businesses, local units of government and consumers

By imposing the cap on competition, policymakers have taken away the ability of the vast majority of electric

consumers to shop for the best price for electric power and energy.

FICTION : Raising the cap on Electric Choice is not a top-priority issue for Michigan residents.

FACT: Job creation is a major state priority.

Michigan residents prefer competition, by an overwhelming majority.






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In a statewide poll in the fall of 2010, 79 percent of Michigan residents said homeowners and businessesshould be able to select their electric company, just as they choose their telecommunications and natural gasproviders.

FICTION: Power plants will not get built in a competitive market.

FACT: History proves otherwise – power plants have already been built in a competitive market.

After the passage of PA 141 in 2000 to allow retail competition, independent generators installed more than4,000 Megawatts of new generating capacity within the state.

The construction of this new generating capacity was done by private developers and did not require theimposition of costs onto the backs of ratepayers. Instead, the shareholders of these private developers wereresponsible for all of the costs and risks associated with such projects.

SUMMARY:

Priority: The competitive position of Michigan businesses is a top priority – creation and preservation of jobs, retention of businesses within the state, non-discriminatory access to competitively priced energy.

Changed Circumstances: The Michigan situation is different and more is known now, compared to 2008. Seen clearly andsupporting the needs for increased competition are:

The effects of the economic recession on Michigan’s com petitiveness with other states;

The degree of customer desire for competitive electric supply,;

The Midwest ISO’s current requirement for capacity from all suppliers.

Remedy: The part of the current law that impedes Michigan’s competitive position is the 10% cap on Electr ic Choice. Wepropose that the cap be raised to 35%.

We are not proposing changes to any other part of PA 286 passed in 2008.

Additional Benefits: Increasing the cap on electric competition will ultimately improve utility efficiencies and improvecustomer service, just as competition does for every other Michigan business.

Electric Competition for Michigan NOW! is a coalition of customers, suppliers, and trade associations whose mission is to promote theright for Michigan consumers to have real energy choices when selecting their electricity provider. Electric Competition for MichiganNOW! supports eliminating, or at minimum increasing, the cap on electric competition.

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Electric Competition in MI - Fact vs Fiction 4-15-11