The State Senate committee on energy and technology conducted in Lansing last Nov. 1 a hearing on proposed changes in Public Act No. 286 of 2008 which governs the operations of the power-generation industry in Michigan.
The proposed changes in the law call for the opening of the industry to full competition. Public Act No. 286 regulates the industry, allowing only two major players in power generation and distribution.
These two companies are DTE Energy and Consumer Energy, which provide 90 percent of Michigan’s electricity needs. Other companies supply the remaining 10 percent.[box type=”default” size=”large”] Proponents, oppositors clash on bid to deregulate industry [/box]During the hearing, the State Senate committee heard the pros and cons on the proposed changes in the present law.
The committee is chaired by Senator Mike Nofs (R, 19th district). The committee members present at the hearing were Senators Tonya Schumaker (R, 20th district), Jim Mareau (R, 12th), Rick Jones (R, 24th district), John Proos (R, 21st district), Hoon Yung Hopgood (D, 8th district), Steven Bieda (D, 9th district) and Coleman Young II (D, 1st district).
Testifying before the committee, Mike Burns of the Michigan Public Service Commission (MPSC) gave an overview of the operations of Michigan’s regulatory body, informing the senators that the commission had received 15 petitions for rate increases.
He said that Michigan’s power rates are relatively high, noting that the transport of coal to Michigan is jacking up the rates. He added that the MPSC continues to review the power rates prevailing in regulated and unregulated states.
One of the proponents of the changes in the law sought lower rates, saying this would serve well Michigan’s power consumers especially at this time of economic difficulties.
A representative of the Energy Choices Coalition, another proponent, said that the law’s provision on 10 percent supply cap harms businesses as this restricts competition. He argued that due to the present regulatory framework, “90 percent of Michigan’s power users are deprived of low power rates.” He added that while Michigan puts a cap on competition, other states welcome competition.
Bill Sanders, a restaurant owner, testified that his business is being killed by the high power rates, adding that low rates could lead to the creation of jobs.
At the same hearing, groups opposing the proposed deregulation of the industry, led by the Michigan Jobs and Energy Coalition (MJEC), maintained that the state’s present energy policy embodied in Public Act 286 of 2008 is a “perfectly good policy” as it ensures “stability, efficiency, sustainability, investments and growth.”
They said that some provisions of the present law have yet to be implemented and that DTE Energy and Energy Consumer have poured in more investments and signed contracts amounting to hundreds of millions of dollars based on Public Act 286.
MJEC maintained that the present power rates are “reasonably fair,” saying it is better to have a power-supply provider based in the state than to source the supply from out-of-state companies which “take the money and run.”
It cited the advantages to the state of a regulated environment, saying that in the “deregulated states, customers have generally low satisfaction rating.”
Gerard Anderson, president and CEO of DTE Energy, testified that in response to Public Act 286, DTE has been spending $1.1 billion a year in an effort to improve its power-generation capability. “In making the investments, we are aware of the affordability of power,” and that is why “we have adopted cost-cutting measures” that brought the cost of projects down by $100 million.
Anderson said that DTE Energy’s power plants are now aging as these are already 40 years old and that “we are facing significant reinvestments in the next few years.” He maintained that deregulation drives prices high, noting that the deregulated states have higher power rates.
He said that the nature of the operations of utilities requires “a stable, predictable, sensible regulatory climate,” adding that now is not the time to make changes in the law.
MJEC also cited the positive impact the present energy policy has had on residents and businesses and stressed that changing it now would jeopardize Michigan’s ability to meet the state’s future power needs.
Aside from Anderson, other MJEC members who testified at the hearing were Sandy Baruah, president and CEO, Detroit Regional Chamber; Chuck Hadden, president and CEO, Michigan Manufacturers Association; John Russell, president and CEO, Consumers Energy; Rich Studley, president and CEO, Michigan Chamber of Commerce.
They cited the significant amount of investments and jobs the policy has brought to the state since it was signed into law in 2008.
Steven Fetter, president of Regulation UnFetterd, told the committee that Michigan’s energy policy is making regulatory observers in the financial community take notice. Because of the stability the law brings to the market, Michigan now ranks among the top 15 states in financial-community supportiveness.
This is important because the ability of the utilities to access affordable funding means they can share that benefit with Michigan families and businesses because the cost of capital gets factored into utility rates, Fetter said.
GE Energy’s Robert Prantil said that when GE invests in a state, one of the things it considers is the stability and predictability in the rates it pays for services, such as electricity. He urged state leaders to consider how important it is for businesses investing in the state to know that the terrain will not shift unexpectedly.
The other groups also batted for the maintenance of the status quo.