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Energy Economist Says Michigan Has Only Two Smart Choices

On March 18 Dr. Lawrence Makovich, an energy policy expert from IHS Cambridge Energy Research Associates, addressed the House Energy Policy Committee concerning Michigan’s potential electric capacity shortfall.

In his testimony, Dr. Makovich outlined why state lawmakers needs to act now to secure Michigan’s energy future. 

Something Needs to Change

Dr. Makovich first spoke about Representative Nesbitt’s legislation directly, saying that Michigan needs to address its partially deregulated electric system for a number of reasons:

 • Michigan’s outdated energy policy currently allows 10 percent of electric customers get their energy from out-of-state energy providers and avoid the costs associated with actually getting the power they use. 

• As a result, $350 million a year in extra energy cost gets placed on the 90 percent of Michigan electric customers who get their power from local energy providers.  That also makes regulated electric rates higher than they should be for most Michiganders.

• Besides the cost problem, there is a reliability problem. Michigan’s partially deregulated electric system doesn’t make it clear who is responsible for planning and building the necessary generation and infrastructure to support long term capacity.

Learning from Past Mistakes

In recounting California’s failed attempt to deregulate energy, Dr. Makovich noted that, while energy prices fell initially, they actually dropped so low that energy providers couldn’t make the necessary investments to ensure capacity was able to meet supply and demand. 

Reliability took a major hit in California—with brownouts, blackouts, price spikes, and consumer fraud all following.Moving forward, Dr. Makovich said, only two options make sense for Michigan:

1. Return Michigan’s electric system to a fully regulated system to protect electricity reliability and affordability while also ensuring local energy providers can plan for our state’s energy future.

2.  Adjust the partially deregulated system so the 10 percent of consumers buying their power from out-of-state energy companies still share the cost of maintaining our electric system.  He also suggested these customers should commit to specific timeframes to purchase their power from retail energy marketers to make it easier for local energy providers to plan for fluctuations in capacity needs.

AMP believes that state lawmakers need to act now to address this impending supply shortfall, and secure Michigan’s Energy Future.  Our state’s families and business need a affordable and reliability energy policy where everybody pays their share.

What do you think about Dr. Makovich’s statements on Michigan’s energy futureLet us know.