What Michigan’s Proposal to Eliminate Energy Choice Means for Your Business

Michigan residents and business owners pay the highest electricity rates in the Midwest and significantly more than the national average.

Since competition was capped at 10 percent in 2008, Michigan’s electricity rates have increased by 24 percent and are now 20 percent higher than the regional average, according to the U.S. Energy Information Administration’s historic state electricity profiles. That’s more than three times the rate of increase nationally.

Michiganders have paid $10.5 billion more than they would have compared to Illinois customers who had access to market-based power prices, according to a recent study by Compete.

Lawmakers in Michigan seem to agree that a change is needed, but they have different opinions on how to fix it.

Solution 1: Eliminate Choice Entirely

House Energy Committee Chairman Rep. Aric Nesbitt and Senate Energy & Technology Committee Chairman Sen. Mike Nofs have proposed legislation that would implement onerous requirements on Alternative Electric Suppliers (AES), ultimately resulting in the practical elimination of the retail electric choice market in Michigan.

Though the proponents of Senate Bill 437 claim the bill allows the 10 percent choice market to stand, in fact the bill would raise costs to the point that customer choice would not be economically viable. Some of the customers currently on electric choice service include the state’s largest employers and nearly half of the state’s public schools.

The plan under consideration in the House, House Bill 4298, mirrors Senate Bill 437 but includes even more onerous requirements on AESs.

Solution 2: Expand Choice

Meanwhile, State Senator Mike Shirkey and State Rep. Gary Glenn have been leading the charge in defense of electric competition, as well as the potential expansion of retail choice.

Senator Shirkey’s proposed Senate Bill 235 would give the Michigan Public Service Commission the authority to expand the 10 percent cap on electric choice to all Michigan customers, opening Michigan’s electricity market to full competition. This bill has yet to have a hearing in the Senate Energy and Technology Committee. Choice advocates have said an expansion of choice would bring down prices and lower costs, potentially saving customers hundreds of millions of dollars each year.

Under the current 10 percent cap, Michigan residents and business owners who buy their energy on the open market have saved $350 million since 2009, according to a fact sheet by Energy Choice Now citing federal energy information.

“When you have 90 percent (of customers) who are paying high, uncompetitive rates, and 10% who are paying competitive rates, it seems you ought to be going in the direction of the competitive rates,” said Rick Coy, spokesman for the Association of Businesses Advocating Tariff Equity, or ABATE, in a recent article.

State Rep. Gary Glenn has also introduced legislation to expand choice. “Electric choice means that public schools and business people, colleges and universities can choose to buy electricity from the cheapest source available,” he said in a recent video on his website. “In my district, Bay City Schools saves $200,000 a year, while the current law prevents any public school in Midland County, for example, from accessing the same savings. Electric choice means we can save taxpayers money. It means we can make Michigan more attractive to new investment and the creation of new jobs.”

Waiting For Choice?

There’s much debate about whether electric choice helps or hurts Michigan, but the facts show that the availability of choice (or lack thereof) has a clear impact on the price customers ultimately pay.

From 2001-2008 when Michigan had full and open competition in the electric market, retail rates were significantly below the national average every year for the only time in the last 25 years, according to Energy Choice Now.

There are more than 11,000 electric customers currently on waiting lists to choose their provider, and retail choice advocates estimate they would save an additional $235 million each year. Michigan customers appear to have an appetite for choice—82 percent of residents said they believe homeowners and businesses should be able to select their electricity provider the way they choose their phone and natural gas providers, according to a recent poll conducted by the Marketing Research Group (MRG.)

The Value of a Stable Energy Provider Amid Uncertainty

Michigan legislators have not yet made a decision on the matter, but both advocates of electric choice and those opposed are likely to be watching closely, as will commercial electric customers.

While most customers in Michigan may not have a choice in their electric suppliers now, there are some factors they can control when it comes to managing their energy costs. They need more than a contract; they need a dedicated energy management provider.

Constellation offers a full range of integrated energy solutions to allow Michigan customers to manage another commodity – their natural gas. That includes the ability to minimize volatile pricing by using a strategic approach to purchasing and taking advantage of a natural gas choice program that allows them to take advantage of more competitive prices.

For businesses in certain Detroit counties, we even offer a Utility Alternative Savings program that guarantees the distribution portion of the bill will be lower than the local utility’s distribution rates.

How to Take Action

If you care about being able to choose an electric supplier and are concerned this choice will be taken away, there are several ways to get involved.

First, you can contact your Senator and House representatives. Let them know you want your business or organization to have continued access to competitive pricing.

You can also add your name to a growing list of Michigan businesses that oppose the policies in SB 437.

Finally, you can stay informed about this issue and others that could impact the way you purchase electricity and the prices you pay.

To learn more about updates concerning the legislation threatening electric choice customers in Michigan, download the recording of our recent webinar from Wednesday, October 14th.