The Perils of Electric Deregulation for Consumers

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We’ve talked before about the dangers of full deregulation of Michigan’s electricity market. Deregulation of our electric industry would threaten innovation, reliability, and Michigan’s energy future by weakening our ability to produce our own power and invest in new energy technologies.

But perhaps just as important, from a consumer’s perspective, is how full electric deregulation has opened the doors to a host of hustlers, telemarketers, and scammers all vying for the opportunity to lure consumers into contracts promising vast savings that never appear. Deregulating Michigan’s electricity market would expose Michiganders to predatory schemes and scams not seen since the lead-up to the housing bubble burst in 2008.

Traditional Power Companies vs. Retail Electric Companies

Retail electric marketers—like those who are pushing to deregulate Michigan’s electricity market—are not traditional power companies like DTE Energy or Consumers Energy. This piece delineates the differences between the two quite succinctly (emphasis added):

Retail electric companies aren’t really power companies. Instead, they’re middlemen who buy power in the wholesale market…then sell the electricity to consumers, delivering it via the…lines still owned by traditional utilities. …But there’s one major difference: A traditional utility like [DTE Energy or Consumers Energy] can’t raise electric rates without justifying the need to regulators and the public. Retail companies have no such requirement, meaning they can jack up prices at will. These companies have aggressively employed telemarketing, door-to-door visits, TV ads, and pamphlets, luring customers into restrictive contracts promising savings that did not materialize.

If Michigan pursues full electric deregulation, consumers will pay the price—both in terms of higher energy prices and the threat of consumer harassment and coercion.

Deregulation Opens the Door to Predatory Practices

According to the same piece, states that have fully deregulated their electric market have, one by one, gone on to fine retail electric companies for everything from “dubious marketing” scams and “slamming—switching a customer to a new utility without authorization” to “unintelligible contracts and excessive fees.”

In New Jersey, things have gotten so bad that state lawmakers have introduced legislation to prohibit these companies from “making false and misleading claims to potential customers” and limit the number of times they can call consumers with whom they have no existing business relationship. And in Texas, consumers have reportedly overpaid for electricity by over $22 billion since deregulating the state’s electric market in 2002.

This is not the future that millions of hard-working Michiganders need or deserve, especially when our economic recovery is still so fragile.

Michigan Consumers Deserve Reliable, Michigan-Produced Energy

As the debate about electric deregulation heats in up in Michigan, AMP will continue to call for smart energy policy that puts Michigan families, communities, and our energy future first. We are hopeful that, with Governor Snyder’s views on energy policy, Michigan lawmakers will strike a balance that achieves all our goals for Michigan—creating jobs and strengthening our economy, encouraging innovation and sustainability, improving access and reliability, and securing our energy future.