Turn on your television any given evening, and you’re likely to see an ad for a car dealership or mattress retailer touting “the lowest prices around!” Competition is a hallmark of the American free market economy. But just because competition works for many industries, when it comes to electricity, open access markets have been a disaster, and consumers have paid the price.
Because of how electricity is produced and distributed, the electric grid is a shared resource that plays an essential role in nearly every aspect of our daily lives, economy, and national security. When something affects one aspect of the electric system, the ripple effects spread to all consumers. The electric system is fundamentally different from most other product or service markets and, as such, a regulated energy market is vital to keeping electricity reliable, fair, and affordable.
Deregulation = Volatile Rates and Decreased Reliability
During the heyday of electric deregulation in the 90s, allowing out-of-state companies to compete with local energy providers seemed like a logical extension of ideas that had helped transform other industries like aviation and telecommunications, generating lower prices and more options for consumers. But experiments with electric deregulation have proven that it doesn’t play out in practice as anticipated in theory. States that deregulated their energy markets saw rates soar and reliability plummet, and several of them lost control of their energy futures, becoming dependent on out-of-state interests and other states’ energy leftovers.
Out-of-state energy providers not subject to the same oversight as regulated utilities can pick and choose whom to serve, and since profit is the goal, they will often choose the most profitable customers—usually large industrial customers—while leaving low-income families and small businesses to shoulder the burden of the state’s electric infrastructure. A well-regulated electric market is the surest way to protect energy reliability, affordability, and fairness for all Michiganders.
Easy Come, Easy Go
Currently, out-of-state providers aren’t required to guarantee capacity for their Michigan-based consumers, which means a cloud of uncertainty hangs over Michigan’s energy future. These out-of-state energy companies can also choose to stop serving their Michigan customers at any point if business is bad or they find the market isn’t profitable. This lack of guarantees puts all consumers at risk, because capacity shortfalls don’t just affect consumers who participate in deregulation; they affect everyone who uses our electric grid.
In addition, electric deregulation drives electric infrastructure jobs and investment out of state, which weakens both our economy and our security.
Regulation is Imperative for Michigan’s Energy Future
Regulated electric utilities have a proven record for keeping electricity reliable for all Michiganders, and oversight by the Public Service Commission helps keep costs in check and the public in the loop. So while competition in the free market might get you a cheaper mattress, electricity is too vital to leave to bargain salesmen.