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LANSING—Restructuring our electricity system has led to higher costs for residents, while still leaving them without choice according to PIRGIM’s new report, Lessons Learned: Michigan Electricity Restructuring Report. In 2000, Michigan joined several other states in altering our electricity system to create competition with the hopes that customers would see lower costs and more choices. So far, those goals have not been met and it is unlikely they ever will be.

“Instead of lower costs and more choices, consumers are paying more for electricity from the same providers,” stated David Pettit, consumer associate for PIRGIM. “In Michigan, as well as other states, the current restructured system has failed residents and small businesses.”

The Utility Consumer Participation Board (UCPB) works to ensure the interests of ratepayers are represented equally before the Public Service Commission. The UCPB authorized PIRGIM to write this report in order to study the effects of restructuring in both Michigan as well as six other states. The report shows that Michigan’s experience is not unique and includes lessons learned from other states.

The report’s findings include:

• - Restructuring not only raised rates, but after seven years incumbent utilities still provide 90% of our electricity, including virtually all electricity provided to residential customers.
• - Residential customers paid hundreds of millions of dollars for the choice program, yet received no choices and no benefits.
• - Residential customers experienced higher costs because of a lack of energy efficiency programs and because they were forced to absorb a shifting of costs from large industrial customers.
• - The current structure lacks long-term comprehensive planning, which has had negative impacts on the stability of the electric system and has left us more reliant on volatile natural gas.

“Residents have paid for the option of choice for over seven years now, yet the market of competitive providers never materialized,” said Pettit. “The time has come for us to recognize the complete failure of our current restructuring experiment and fix our electricity system.”

The idea of repealing competition and returning to a regulated environment garnered attention last week when Speaker of the House Andy Dillon (D – Redford) proposed it as part of a possible solution for the state’s budget crisis. However, the details of any such legislation will be critically important in determining how beneficial the shift will be for residential customers.

Whether Michigan decides to attempt to repair the current system or return to a completely regulated electric system, several features will deliver better results for consumers:

• - Long-term planning that includes all available resources (including energy efficiency programs for customers) based on least cost principles
• - When the planning process indicates that new generation resources are needed, they should be procured in a manner that lowers the generating plant costs to ratepayers
• - A serious commitment to implementing energy efficiency and low income programs in order to reduce total costs for consumers and lessen the need and high cost of purchased power and imported electric generation fuels
• - An improved approach to general rate cases for utilities which does a better job of taking the public interest into consideration

“Residents and small businesses have paid too much for their electricity since 2000,” said Pettit. “Better planning and a commitment to energy efficiency will benefit consumers by lowering costs and creating a stable supply of electricity.”

Additional Contacts:
Geoff Crandall, MSB Energy Associates, (608) 831-1127x304 Don Keskey, Clark Hill PLC, (517) 318-3014 Martin Kushler, PhD, (517) 655-7037

PIRGIM is a non-profit, non-partisan, statewide, member-based organization dedicated to protecting Michigan consumers since 1972. For more information, please visit www.pirgim.org.