After Proposal 1, After Plan B, Electricity Front and Center

Part I: Background

Later this year, Michigan’s electrical utilities are expected to satisfy the 10% Renewable Portfolio Standard (RPS) requirements of PA 295 of 2008. Partial reregulation of electricity in Michigan under the same PA 295 of 2008 denied choice of supplier on 90% of electricity consumption, while exempting large, politically potent, electricity consumers. At the same time, the U.S. EPA is progressively tightening their noose around the neck of the coal industry with an array of ever more restrictive regulations upon coal-fired power plants. A political clash of titans is looming in Michigan.

Taken together, these circumstances will trigger a wild four-way donnybrook pitting electrical utilities, electricity consumers, and environmental wackos against one another later this year. But this is only three parties, so why do you say four-way? Large industrial consumers have substantially escaped the consequences of PA 295, while smaller Michigan consumers – including residential consumers – have experienced the fifth highest rate of electricity cost increases in the nation. These two electricity consuming groups’ interests do not coincide.

Michigan’s electricity rate policy has gyrated wildly since 2000, reflecting changes in partisan control of Michigan’s government and fluctuations in the fortunes of the various parties involved. Michigan fully deregulated its electricity market in 2000 under Public Acts 141 and 142 when our government was under exclusive control of the Republicans. This deregulation allowed all consumers to purchase electricity from any willing generator, while requiring Michigan’s traditional utilities to deliver this chosen power. Sometimes called ‘electric choice’, this arrangement leveled off Michigan consumers’ electricity costs, but was not well received by Michigan’s traditional electrical utilities.

The eight year Michigan experiment in genuine deregulation was dissolved by PA 295 of 2008, which placed a 10% cap on the total Michigan wattage permissible from non utility generators. This created a hybrid regulatory scheme which allowed large electricity consumers to avoid high utility rates while delivering smaller consumers and residential customers into the clutches of Michigan’s traditional utilities. Not surprisingly, Michigan electricity rates soared 5% per annum for the unfortunate 90%.

Michigan’s Democratic controlled government in 2008 was not content to just deliver homeowners and smaller commercial consumers into the merciless mercenary hands of our utilities, they also had to fulfill the delusions agenda of the environmental wackos. Hence the establishment of the Renewable Portfolio Standard requiring that 10% of all Michigan electricity come from green, renewable, exclusively Michigan-produced sources by 2015. With great fanfare, they announced that this RPS would reduce Michigan consumers’ electrical bills.

What they did not tell Michiganders was that this reduction would be measured against a fantasy guidepost: a ‘new conventional coal fired power plant’. The Michigan Public Service Commission (MPSC) set this guidepost electricity rate at $ 133 per MWh ($0.133 per kWh) in 2009 when the actual cost of generating electricity in Michigan was in the vicinity of $ 50 – $ 75 per MWh ($ 0.05 – $ 0.075 per kWh). Except for some very expensive biomass experiments, all of these renewable sources have come in less expensive than the very high guidepost rate, but much more expensive than the actual current cost of generating electricity in Michigan.

Look at your DTE or Consumer’s electricity bill; the line item is ‘Power Supply Charges – Power Supply Energy’ on a DTE bill, ‘Electric Power Supply Charges – Energy’ on a Consumers bill. On this March 2015 DTE residential electricity bill (at left), the power cost charge was $ 0.06912 per kWh, plus another half cent in surcharges.
The power cost number on this March 2015 Consumers bill (at right) is $ 0.083791 per kWh, minus a $ 0.003760 per kWh power supply credit. About $ 0.08 per kWh net. These are the current 2015 electricity generation cost numbers you should compare to the $ 0.133 per kWh MPSC Guidepost Rate. The illusion of RPS cost effectiveness only exists when the guidepost rate is 90% above reality.  How RPS is driving your electricity bill up. Relentless positive action, anyone?

The fortunes of Michigan’s environmental wackos took a sharp downturn with the Republican sweep in the 2010 elections, so they attempted a recovery by putting Proposal 3 on the 2012 ballot. Known as ’25 x ’25’, Proposal 3 would have raised the Renewable Portfolio Standard to 25% by 2025. The environmental wackos, funded by intensively laundered California money that came from ‘green’ venture capitalists hiding behind entities like Green Tech Action Fund, were vigorously opposed by Michigan’s electrical utilities and much of the Republican establishment. Large electricity consumers were not much in evidence, perhaps due to crummy business conditions at the time, but more likely due to the Proposal’s limited effect upon their still deregulated costs. Interestingly, a pre term limited Governor Snyder went against the vociferous support of his mentor, Michigan’s ur-RINO, William Milliken. Proposal 3 failed at the polls and everything went quiet on the electricity front for a while.

In Part II tomorrow, we’ll discuss how the Obama Administration’s militant environmental regulation rampage has dramatically limited Michigan’s options to control your electric bill.