Learning from Yet Another State’s Experience with Deregulation

A cautionary tale that has finally come full circle in the state of Montana should remind Michiganders that a commonsense, balanced approach is needed with any deregulation scheme.  

In the 1990s, Montanans enjoyed the sixth-cheapest power in the country under a traditional regulated system.  But that was before Montana policy makers opted for “one of the worst public policy decisions ever made”—to go all in on electric deregulation. 

Deregulation Decision Hastily Made with Little Public Debate 

Montana’s governor and his allies in the state legislature jumped on the bandwagon sweeping the country at the time—the belief that deregulating utilities would increase competition and decrease the state’s already-low energy rates. 

Unintended Consequences

In a classic case of breaking something by trying to “fix” it, energy rates in the state actually skyrocketed under deregulation, becoming some of the country’s highest.  The competition never really emerged. The incumbent power company, which employed thousands of workers in the state, sold off its assets and pursued a new business model and investments in a fiber optics strategy that never met expectations.  Its stock price plummeted, wiping out the lifetime investments of many Montanans who once took for granted that the company was a safe, low-risk investment.

And the sell-off had other fallout.  “Montanans were aghast that an out-of-state entity would now control not only most of the dams on our major rivers,” Missoulian columnist George Ochenski explains, “but would also own the very senior water rights, giving them legal rights to shut down most irrigation in the Upper Missouri River Basin in a severe drought.”

Happily, NorthWestern Energy has purchased the dams and is supplying more reliable energy to the state.  But it had to pass the cost along to consumers, meaning they paid for the infrastructure twice.

Read more about Montana’s bungled experiment with deregulation in Ochenski’s article, and learn about other states’ mishaps on our downloadable fact sheet.

Locally Produced Energy is Right for Michigan

Rather than doubling down on deregulation, Michigan’s 2008 energy law wisely capped deregulation at 10 percent of the market.  However, even this law’s somewhat balanced approach to deregulation isn’t perfect.  Statewide, 99.9% of Michigan’s families and businesses are paying $300 million more to properly maintain Michigan’s electric system so that 0.1% can pay less. 

The Alliance for Michigan Power strongly supports increasing the use of locally produced energy, which we believe will encourage Michigan’s energy companies to invest in new energy infrastructure, help to grow Michigan’s economy, and create local jobs.  Moreover, it is far more likely electricity rates will be stable and fair for all consumers, who will continue to have access to reliable energy services.

We should work toward an energy-independent Michigan so we aren’t at the mercy of out-of-state companies.