Energy Choice Now Study Finds Expanded Electric Choice in Michigan Would Save Customers $170 Million Annually

Energy Choice Now said that a report prepared by Continental Economics, Inc. concludes that raising the current 10% cap on electric choice participation in Michigan will lower electric costs for businesses and consumers, "stimulating economic growth and creating thousands of new jobs for Michigan residents."

Energy Choice Now said that the report, "Retail Electric Competition in Michigan: Growing Michigan's Economic Garden," prepared for Energy Choice Now by Dr. Jonathan Lesser, President of Continental Economics, Inc., 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 $170 million annual value is based on the total reported annual MWh in the queue for Consumers Energy and Detroit Edison as of June 30, 2012, times the difference between an estimated average retail price of $55/MWh and an average generation price of $75/MWh. With a total of 8,456,119 MWh in the queue and average savings of $20/MWh, this results in annual savings of $170 million, the report said.

Link to Continental Economics Report

"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."

Energy Choice Now said that 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.

In contrast, Energy Choice Now said that the report shows that since 2008, rates charged by Consumers Energy and Detroit Edison have "soared," despite an average 45% drop in MISO wholesale prices.

According to the report, the rate increase at each utility, by customer class, was as follows from 2008-2012.

Utility    Residential    Small       Large      Industrial
                        Commercial   Commercial   
Consumers 
    Energy     47%         30%         40%           35% 
Detroit
    Edison     28%         20%         13%           18%

Residential = 1,000 kWh per month consumption

Small Commercial= 25kW demand and 5,000 kWh per month consumption

Large Commercial: 100kW demand and 36,000 kWh per month consumption

Industrial: 10,000 kW demand and 4.3 million kWh consumption

The report also translated these increases into an average annual cost per customer:

Average Annual Increases in Cost per Customer
Utility    Residential    Small       Large      Industrial
                        Commercial   Commercial   
Consumers 
    Energy     $559       $1,848      $14,213    $1,217,760
Detroit
    Edison     $397       $1,296       $6,048      $712,080

In contrast, the report said businesses fortunate enough to have chosen a competitive supplier before the 10% cap was quickly reached have enjoyed over $350 million in electricity cost savings over the past three years.

The $350 million estimate is based on shopping MWh for the period 7/2009 – 6/2012, times the difference between the average competitive retail market price (wholesale price plus $10/MWh mark-up) and the average of Consumers Energy's and Detroit Edison's published generation rates each year.

Energy Choice Now said that the report affirms that legislation introduced by Representative Mike Shirkey, R-Clark Lake (HB 5503) and Senator Arlan Meekhof, R-West Olive (SB 1035) to raise the electric choice cap, "is a step in the right direction towards unleashing the benefits of full and open competition for all customers."