Two Visions for Michigan’s Energy Future

On March 12, the Alliance for Michigan Power held a telephone town hall to discuss electric deregulation. One of the key things we learned is that, when asked, “When it comes to electric deregulation, what is your biggest concern?,” 42 percent of participants responded with “the impact on Michigan’s energy future.”

We thought it would be helpful, then, to explore a bit further what the energy future looks like for Michigan—with electric deregulation and without it.

A Future with Electric Deregulation

Perhaps our best gauge of what Michigan’s energy future could look like under a system of electric deregulation is what has happened in other states:

Price uncertainty. During the tele-town hall, former Michigan Senate Majority Leader Ken Sikkema said electric prices on average were about 25 percent higher in states that deregulated than states that have maintained a traditional regulatory framework. Some are worse than others; for example, since Maryland deregulated, consumers have experienced rate increases of 40 – 80 percent.

Unreliable power. If we deregulate Michigan’s energy market, we will lose control of our energy supply. Take Texas, for example, which experienced some rolling blackouts last year. When electricity markets deregulate, the rules that provided certainty to proceed with new power plants also go away. That undermines investors’ willingness to invest, ultimately undermining reliability.

Lost jobs and local investment. As has happened in other states like Illinois, which sees hundreds of jobs at risk due to possible power plant closures, deregulating our electricity market could threaten local jobs along with the consumer spending and tax revenue that accompany them. Local investment could also decline due to long-term reliability issues and unpredictability in the marketplace.

Unfair cost shifting. Consider that even under the current 10 percent cap, 99.9 percent 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. Fully deregulating our electric utility system will only increase this disparity for many Michiganders

A Future with Locally Produced Energy

To understand what Michigan’s energy future could look like if we maintain our current regulatory framework, we can look at what has already happened in the years since our state’s 2008 energy law was enacted.

Planning for the future. Michigan is continuing to expand its ability to meet its future energy needs, and the 2008 law has provided a stable environment to attract investors to help improve and grow our state’s energy infrastructure—especially as our state’s economy recovers and demand for energy increases.

Increased innovation and reliability. A reliable energy environment and long-term planning is better suited to supporting innovation. Our current energy policy requires Michigan providers to gradually increase their use of renewable energy, and so far Michigan energy providers are on track to meet the 2015 target of 10 percent renewable energy production. Unregulated energy marketers aren’t subject to the same requirements. As we’ve seen in other states, renewables development is occurring mostly in regulated markets. So deregulation could actually harm Michigan’s ability to reap the benefits of new technologies.

Economic benefits. Local energy providers support local jobs and a strong Michigan economy, and continuously re-invest in the communities they serve. Meanwhile, out-of-state energy companies would simply take Michigan consumers’ money out of state. Under a traditional regulatory system for electricity, with growing capacity to produce our own power, local energy providers will continue to create local jobs and invest in local communities across the state

Clearly, these are two very different visions of Michigan’s energy future. AMP believes we should continue to build on the existing foundation of a system that is working for Michigan, not adopt a risky strategy that has proven disastrous in most other states that have tried it.

The good news is, our elected officials in Lansing have heard our concerns about electric deregulation and have slowed any movement toward deregulation considerably. While deregulation is still a possibility, we’re making progress toward securing an energy future anchored in power produced by Michiganders for Michiganders.

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