Regulation of Electricity Rates

In 1999, Michigan’s electricity rates were higher than the national average and electricity rates in adjacent Great Lakes states. In response to customer demand, state legislators passed Public Act 141, which authorized an electricity choice program. Michigan opened up its electricity system to allow retail electricity sales and recognized the right of residents to buy from the energy providers of their choice. This situation is analogous to the deregulation of the telephone system, when customers were able to choose providers other than old “Ma Bell.” [172]

P.A. 141 of 2000 provided every electricity customer with a choice of an electricity supplier.[173] But in 2008, the Michigan Legislature effectively reversed itself on electricity choice by passing Public Act 286 of 2008, removing market options and reinstituting monopoly provision of electricity to the majority of Michigan residents. The language of Public Act 286 guaranteed DTE and Consumers Energy, and other monopoly providers in Michigan’s Upper Peninsula — currently UPPCO and UMERC — the legal right to provide electricity to 90% of the retail electricity market within their respective operating areas. The energy choice market is now capped at 10%.[174]

Those interested in accessing the electricity choice market must obtain service in the state from one of the monopoly utilities and then apply to be added to the electricity choice wait list. The Michigan Public Service Commission’s 2019 “Status of Electric Competition in Michigan” report indicated that, in December 2019, 5,817 customers were enrolled in the choice program, but another 6,447 were on the wait-list.[175]

That report also noted that the choice program is currently fully subscribed and that, if the cap did not exist, choice participation would be approximately 27% in Consumers Energy’s operating area, 17% in DTE’s operating area, 16% in the Upper Peninsula Power Company’s area, and 20% in Upper Michigan Energy Resources Corporation’s operating area.[176]

When paying for their rates, “full-service” customers of DTE or Consumers, who have not entered the choice market, will receive a monthly bill from that utility containing customer charges, distribution charges, other fees and taxes, as well as charges for their electricity supply.

Electric rates for full-service utility customers are set by the Michigan Public Service Commission, a state government body that, among other things, was created to “establish fair and reasonable rates for regulated services…for Michigan’s utility customers.” They approve the rates that monopoly utilities propose to charge their customers. Alternative energy suppliers do not have their rates regulated, as their rates are constrained by operating in a competitive market.