Report: More Electric Competition Will Lower Costs for Consumers

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LANSING — A report released today concludes that raising the current 10 percent cap on competitive electricity in Michigan will lower electric costs for businesses and consumers, stimulating economic growth and creating thousands of new jobs for Michigan residents. 

The report, “Retail Electric Competition in Michigan: Growing Michigan’s Economic Garden,” prepared by Jonathan Lesser, president of Continental Economics Inc. and sponsored by Energy Choice Now finds that allowing more customers to shop for electricity in the competitive market would save an estimated $170 million per year on electric costs, money that could be reinvested to grow Michigan’s businesses.  The report affirms that legislation introduced by State Rep. Mike Shirkey, R-Clark Lake, (HB 5503) and State Sen. Arlan Meekhof, R-West Olive, (SB 1035) to raise the cap is a step in the right direction towards unleashing the benefits of full and open competition for all customers.

“It’s no coincidence that Michigan businesses, which are denied the opportunity to shop for electricity in the competitive market, suffer from the highest electricity rates in the Midwest and rates that are higher than the national average,” said Wayne Kuipers, executive director of Energy Choice Now.  “Higher electric costs are crippling Michigan businesses and serving as a deterrent to economic growth, which is why nearly 10,000 businesses are currently languishing on a waiting list to gain access to competitive electricity.”

Specifically, the report documents how a lack of competition in Michigan, a result of 2008 legislation that capped competition at just 10 percent of total electric use, contributed to a steady and significant increase in electricity rates by the state’s two largest utilities, Detroit Edison  and Consumers Energy.  These rate increases, the report notes, stifle Michigan’s efforts to remain competitive as it struggles to climb out of the recession.

Among the report’s key findings:

  • Between 2000 and 2008, when all Michigan consumers were able to choose their own electric supplier, the gap between Michigan retail electric rates and those of neighboring and competing states began to close, and rates in Michigan fell below the national average.
  • Since 2008, rates charged by Consumers Energy and DTE have soared:
  • Residential customers at Consumers Energy have been hardest hit, suffering a 47 percent increase in their electric rates over the last four years
  • Small commercial customers of Consumers Energy have experienced a 30 percent rate increase, while DTE customers have experienced a 20 percent rate increaseLarge commercial customers of Consumers Energy have experienced a 40 percent rate increase
  • Consumers Energy’s industrial customers, the largest electricity consumers of all, have experienced a 35 percent rate increase, while DTE’s industrial customers have absorbed an 18 percent rate increase.
  • Businesses fortunate enough to have chosen a competitive supplier before the 10 percent cap was quickly reached have enjoyed over $350 million in electricity cost savings over the past three years.
  •  While Consumers Energy’s and DTE’s rates have soared, wholesale generation rates in MISO, the competitive wholesale electric market in which these two utilities operate, have decreased an average of 45 percent.

“Competitive markets are absolutely essential for driving innovation in any industry, and innovation is absolutely essential to drive down costs, provide consumers products they need, and grow business,” said Rod Williamson, the Energy Development Manager of Dow Corning Corp., a supplier of silicone materials.  “Two of Dow Corning’s Michigan facilities have been able to access the competitive electricity retail choice market and we’ve reduced our electricity costs by approximately 30% at those facilities, compared to the utility standard tariff rate.”

“As this report outlines, the key to unlocking the economic potential of lower electricity costs is to create a steady path towards full retail competition in Michigan,” Lesser said.

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