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Deregulation Likely to Hurt Low-Income Michiganders




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As AMP continues to mark Keep Michigan Warm Month, we feel it’s worth discussing the potential harm full electric deregulation (sometimes called “electric choice”) could bring to low-income Michigan households. The risky HB 5184, introduced by State Representative Mike Shirkey (R-Clarklake), could put some of our state’s most vulnerable citizens at significant risk.

Simple Fairness

Currently, Michigan’s system of partial electric deregulation has created two different tracks for Michigan consumers: a regulated track and a deregulated track.

Right now, 99.9% of Michigan families and businesses are sharing the $300 million cost of maintaining Michigan’s electric system so 0.1% can pay less by purchasing their power from a non-utility supplier. Under full electric deregulation, low-income Michiganders could bear an even greater share of the burden as out-of-state electricity marketers cherry pick more lucrative energy users. While even our current situation lacks basic fairness, expanding to full deregulation would add to the imbalance.

Price Volatility

As the experiences of other states continue to illustrate, full electric deregulation is more than likely to result in price volatility. While a Michigan-based regulated electric utility seeking to raise electric rates must justify any rate change to state regulators, out-of-state competitors typically do not have to comply with such rules. That means they can increase rates as they see fit.

Price volatility is a more significant problem for lower-income households because they spend a disproportionately larger share of their income on their energy bills. Keep in mind that low-income Michiganders have the same energy costs as other customers, but their budgets have much less room for unpredictable increases. An unexpectedly high bill one month could start a financial tailspin for some customers that may last for months.

Michigan’s current energy policy ensures that prices are more stable. Moreover, Michigan energy companies often offer budget payment plans and other assistance programs. Budget programs help customers know and plan for what they must pay each month. A fully deregulated electric market would not have this kind of safety net, leaving low-income Michiganders with a higher level of uncertainty month to month.

Uncertainty

Of course, no one can predict the future; but that’s precisely the danger. In looking at the record of other states’ bad experiences with deregulation, it’s clear that such a move poses more potential threats than it does benefits for consumers, especially those in low-income households. The uncertainty an electric deregulation scheme will create is simply too big a risk given Michigan’s fragile economic recovery.

Full deregulation of our electricity market would stifle investment, economic growth, and job creation—all things we need desperately for the benefit of low- and high-income Michiganders alike. All Michiganders should be wary of electric deregulation, but low-income Michiganders stand to lose more than most if the electricity market is thrown into disarray.