ISSUE #5: Environmental concerns

The MPSC is also to be commended on its brief but excellent discussion of the many environmental myths that surround the debate over electricity restructuring. The MPSC Staff Report points out that an open, competitive electricity marketplace will benefit the environment in three primary ways:

1. "The direct access program will allow customers to choose from available "Green" power suppliers, thus enhancing the market for clean generation." 38 

2. "[A] direct access program should promote the development of smaller gas-fired power plants, . . . [which] will be more environmentally friendly, since gas combustion produces virtually no sulfur oxides which contribute to acid rain and also produces less carbon dioxide than burning coal." 39 

3. [A] program of customer choice will encourage the development of new competitive energy conservation programs. . . . Direct access will allow energy service companies to develop innovative programs tailored to meet the individual needs of their customers." 40 

The MPSC is correct to argue that competition will have such beneficial environmental effects, but it is important that realize such benefits will develop only if the market is free of artificial constraints and unjustifiable stranded cost loss recovery. In particular, the staggered direct access schedule for residential consumers may discourage the development of a more environmentally friendly marketplace. This is because residential customers may actually prove to be more demanding shoppers than commercial and industrial users. A recent poll found that 66 percent of Americans surveyed, "would be willing to pay a few dollars more a month . . . to receive power that was produced using non-polluting, environmentally-friendly technology." 41  Therefore, if residential customers are not granted the ability to immediately shop around for a service provider of their choice, the pro-environmental effects of a competitive marketplace will be impeded.

More importantly, if Michigan utilities are granted recovery of supposed stranded costs associated with less efficient plants, it will encourage these firms to continue to use older and potentially more pollution-prone technologies instead of switching to modern, cleaner technologies. In this sense, stranded cost recovery is not only an anticonsumer policy, it is an anti-environmental policy as well. Recovery on such inefficient plants and assets should be denied.

Recommended Action #8: Ensure that the pro-environmental benefits of competition manifest themselves by giving all customers the choice to shop for green power immediately, and by denying stranded cost recovery for inefficient utility investments.