Michigan regulators face key restructuring decisions

March 20, 2001
Six months into restructuring, Michigan electricity rates are still the highest in the Midwest, and there will be less competition in the state than last year, a Michigan business group said. The new law seems to have spurred plans to build new power plants in the state, but the plants will not be on line for several years. As a result, the Michigan Association of Business Advocating Tariff Equity said, utilities plan to rely on out-of-state power to meet the state's summer electric needs.


By the OGJ Online Staff

HOUSTON, Mar. 20�Six months into restructuring, Michigan electricity rates are still the highest in the Midwest, and there will be less competition in the state than last year, a Michigan business group said Tuesday.

"So far, Michigan consumers have seen very little in the way of tangible positive developments from electric restructuring,'' said Mike Sarafolean, chairman of the Michigan Association of Businesses Advocating Tariff Equity (ABATE) steering committee and energy procurement manager for North Star Steel Co., a unit of Cargill Inc. "Restructuring is off to a slow start, but the next year will be critical,'' Sarafolean said in a statement.

While prices remain high, the new law seems to have spurred plans to build new power plants in the state, But the plants will not be on line for several years. As a result, ABATE said, utilities plan to rely heavily on buying out-of-state power to meet Michigan's electric needs for the coming summer.

The Michigan legislature passed electric restructuring legislation last year, and the new law went into effect in June 2000. The business organization reviewed its effect between July-Dec. 31, 2000.

Noting it is still early in the game, Sarafolean said the Public Service Commission can make restructuring work to benefit consumers, if it makes the right decisions on three key pending cases.

Among the key issues to be decided by the state regulators, ABATE said, are "netting," transmission, and unbundling.

In the netting case, the decision will determine how much customers will have to pay to use an electric supplier other than their current incumbent provider. Low stranded cost payments mean more competition, the organization said. If this case is decided fairly, ABATE said it believes there will be no payments needed. Indeed, Michigan customers may get a rebate, given the high market price of power in the Midwest, it said.

ABATE argued the commission needs to push hard for Detroit Edison Co., a unit of DTE Energy Co.; Consumers Energy Co. a unit of CMS Energy Corp., and American Electric Power Co. to come up with a transmission program that will break through system bottlenecks. The business group said this will allow purchase of more power from outside of Michigan.

The business said regulators need to make sure all elements within the existing electric system are priced appropriately, including generation, transmission, and distribution. If regulators get this wrong, competition will be hindered, ABATE argued.