Executive Summary

The Michigan Legislature in May 2000 approved the introduction of competition in retail power supplies. Ending the regional monopoly structure in the generation of electricity was intended to provide customers with lower rates and improved service quality, while also increasing generating capacity for electricity in the state. But attempts are underway to reverse the course of this restructuring.

In numerous radio and television ads, a coalition headed by DTE Energy is warning the public of a power market meltdown if Michigan fails to alter key provisions of the electricity choice program. According to DTE Chairman and CEO Anthony Earley, Jr., “If left unattended, we believe [Michigan’s Electric Choice Program] will lead to a California-like energy crisis. I am referring specifically to significant rate increases for residential and small commercial customers, a financially crippled Detroit Edison, potential job losses in Michigan’s electric industry and service and reliability problems.”[1]

Competitive energy prices and a reliable electrical grid are indeed crucial elements of economic growth and job creation in Michigan. It is incumbent on lawmakers, the media and the public to carefully consider whether a policy shift is warranted. Based on our analysis of state law and market conditions, we conclude that restricting competition in electricity supply would actually harm rather than benefit Michigan consumers and the businesses that employ them. However, some regulatory reforms could improve the system.