A new state Senate bill would lock in Michigan’s high energy costs by providing subsidies for utility bills but do nothing to bring down costs for consumers.

Senate Bill 353 of 2023 aims to amend the Michigan Energy Assistance Act, a law that provides financial assistance to Michiganders who have difficulty paying their utility bills. The proposed amendments increase the number of households able to receive funds from the Michigan Energy Assistance Program. They would do this by redefining the term “eligible low-income household” and expanding the time of year funding can be disbursed.

But the Legislature could avoid the need for this bill if it would simply allow energy choice and transparent competition between energy sources.

Various kinds of households are eligible for the aid, including those that have a low-capacity fuel tank, have received notices of a past-due bill, or have pre-paid account balances below a certain level. Current law defines an “eligible low-income household” as one that lives on 150% or less of the Federal Poverty Guideline. The proposed amendments in SB 353 would increase this to 200%. Today, a four-person household with a combined income of $45,000 or less qualifies. The proposed amendments would bump this limit to a household income of $60,000 or less.

The Michigan Energy Assistance Program is also currently limited so that no more than 30% of its budget can be spent outside of the “crisis season” of Nov. 1 through May 31. Proposed amendments would remove that window, allowing for aid payments throughout the year.

These are Band-Aid solutions. Legislators should address the underlying reasons for high energy prices: state-imposed utility monopolies and the mandated construction of unreliable energy.

Electricity choice refers to the ability to choose your electric utility, just as you are free to choose your cable or satellite TV or cellular service. In Michigan, the vast majority of utility customers must receive their electric service from one of five monopoly electric utilities, depending on where they live.

Government restrictions on the pool of service providers inevitably lead to increased prices and diminished service quality. In 2021 the average residential rate for a kilowatt hour in the state of Michigan was 12.93 cents, with access to energy choice strictly limited to no more than 10% of all retail electricity sales. In neighboring Illinois, a state that allows its residents to benefit from energy choice, residents paid only 10.14 cents per kWh, almost 22% less. In Ohio, another electricity choice state, residents fared even better. They paid only 9.76 cents per kWh, or 25% less.

Energy choice alone isn’t the only thing the Michigan Legislature can do to lower electricity rates. State mandates that require the construction of expensive and unreliable wind and solar are pushing electricity rates higher.

As commodity prices remain stubbornly high, the price of wind and solar have both rapidly increased over the past few years. Federal programs like the Inflation Reduction Act attempt to address this through increasing government spending and subsidies by large amounts. But these actions tend to shift the costs of wind and solar from the utility bill to the tax bill.

Wind and solar are diffuse energy sources, meaning Michigan needs a lot of wind turbines and solar panels to collect enough errant gusts of wind or fleeting sunbeams. Without tens of thousands of turbines or millions of solar cells, utilities can’t hope to produce enough electricity to replace the energy produced from natural gas, coal, or nuclear plants.

Additionally, the wind doesn’t always blow, and Michigan is one of least sunny states in the lower 48. That means we need a reliable energy source to meet our electricity needs when wind and solar inevitably fall short. The only way to do that is by effectively building a second supply of generation equipment. Given current technology and economics, that second system will typically be powered by natural gas. If Michigan ceased wasting time, money, and effort on mandates to build unreliable wind and solar, we could build a clean, safe, affordable and reliable system based on nuclear power and natural gas. That system would get the job done and help to keep electricity rates in Michigan much lower.

Free-market options combined with reliable energy sources could solve Michigan’s problem of high electricity prices far more effectively than the government aid programs being promoted by Senate Bill 353.

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