New legislation would allow out-of-state competition in Michigan’s energy market
By Saodat Asanova-Taylor
Capital News Service
LANSING – Should Michigan allow more out-of-state energy companies to enter its energy market?
While some lawmakers agree that it’s necessary to provide alternative choices for customers, industry groups counter that it might jeopardize Michigan’s ability to generate sufficient power in the future.
The legislation would overturn the current 10 percent ceiling on the energy market served by out-of-state utilities.
A 2008 law that replaced competition with government-controlled rate setting caps electric competition at 10 percent.
Rep. Mike Shirkey, R–Clarklake, the primary sponsor of the bill, said one of the fastest-growing expenses for Michigan is energy, and the state must eliminate obstacles to fair competition.
“The reality is that businesses in our state are negatively affected, as factory electric rates are higher in Michigan than neighboring Indiana, where the rates are 22 percent lower,” he said. “It makes Michigan business and government customers pay a $1 billion premium,” Shirkey said.
Customer Choice Coalition, a group of businesses, associations and power suppliers that opposes the proposal, said Michigan electric customers pay the highest costs in the Midwest with rates nearly 30 percent higher than they were in 2008. In contrast, wholesale prices of electricity nationally decreased by 40 percent.
According to Shirkey, the 10 percent cap significantly limits the number of Michigan customers having access to a competitive and open electricity market.
“The artificial 10 percent level of competition doesn’t have any meaning, other than resulting in the government picking winners and losers,” he said.
“I think open competition is healthy right now. It drives innovation, efficiency and lower prices. We need to provide competitive energy costs,” Shirkey said.
Co-sponsors include Reps. Amanda Price, R-Holland; Bob Genetski, R-Saugatuck; Dave Agema, R-Grandville; and Mark Meadows, D-East Lansing.
Meanwhile, some industry groups and legislators strongly oppose the bill.
The Michigan Jobs and Energy Coalition said it would let out-of-state companies line their pockets at the expense of Michigan customers.
Phil Lewis, senior account executive at the public relations firm Truscott Rossman, said the change in policy would be a huge risk for the state economy. The firm represents the coalition.
“Michigan is on the path to generate long-term energy sustainability. The cost associated with that is an investment in infrastructure. If we change the policy, it will follow with customers’ increased electricity bills and loss of jobs,” he said.
Sen. Mike Nofs, R-Battle Creek, who chairs the Senate Energy and Technology Committee, said his committee reviewed the energy policy in 2011. Results revealed that it was working as intended and there is no need to make changes.
“If we extend choice for companies to get energy from out–of-state companies for a cheaper price, it will leave about 1.8 million consumers at the household level with higher bills. They have to pay more to keep the infrastructure going to produce the same amount of energy,” he said.
According to Nofs, common practice shows that out-of-state companies go after big industries that use a lot of energy and never come out and get residential customers.
“I don’t think it is good for us. We can’t afford it right now because people don’t have the money. We allow one company to get a cheaper price and let millions of residents pick up the debt and pay the increased cost,” Nofs said.
Jim Weeks, executive director of the Michigan Municipal Electric Association, said he endorses the concept of a deregulated energy market but is concerned that out-state energy companies will not have the same obligation to serve as local companies.
“They can work for 4-5 years, and if the national economy turns around, they complete their contracts and leave for better places. It means local energy companies have to generate more energy to be able to pick up the customers when they return,” he said.
Weeks said the legislation is not a win-win way for Michigan to provide reliable investments in energy development and job creation.
“Out-of-state companies mainly transmit energy through wires from other states. They don’t build plants and don’t create jobs,” he said.
“So our government has to decide whether we need to sacrifice long-term economic development for short-term lucrative business profit,” Weeks said.
James Ault, president of the Michigan Electric and Gas Association, said that if the state allows more out-state companies into the market, they should bring more innovative alternative energy development techniques to justify their presence.
“In eight to 10 years, most of Michigan’s energy plants operating on coal will shut down. Eventually there can be a shortage of energy and jobs,” said Ault.
“The out-of-state companies need to bring some innovative and cost-effective technology that can be used in the long run to generate alternative energy, build more plants and create jobs,” Ault said.
The bill is in the House Committee on Energy and Technology.