How Electric Power Rates Are Determined

One of AMP’s primary concerns is access to fairly priced energy for all Michigan consumers.  It’s hard to envision a strong energy future for Michigan without reliable energy that is also affordable.  So that begs the question:  How are electric rates in Michigan determined, anyway?

Energy Prices in Michigan Are Regulated by the MPSC

In any business, costs fluctuate, and that’s reflected in the prices consumers pay.  However, when it comes to energy in our state, the Michigan Public Service Commission (MPSC) approves all rates for electric and natural gas service provided to customers.

In order to set new rates, Michigan utilities must appeal to the MPSC through a formal legal proceeding called a “Rate Case.”  They must show that their costs of doing business have changed.   The MPSC will then examine each case for several months, seeking input from experts in government, the industry, or the non-profit sector, and of course, customers themselves.

Only then can rates be changed.  This is one of the key protections consumers enjoy under a regulated system.  In a deregulated system, far less transparent spot markets influence pricing and therefore unexpected, frequent—and potentially dramatic—changes in energy costs are much more likely.

Factors That Impact Utility Prices

Countless factors influence electric rates in any system, including:

Keeping Costs Down

Michigan’s energy companies do their part to keep costs down. They also help their customers use energy more effectively.  Here’s more information on what you can do to keep your improve your energy efficiency.

For more information on rate setting, check out this helpful guide to How Gas and Electric Rates are Determined.