The Michigan Economic Development Corporation — this state's corporate welfare arm — has always appeared to find giving direct answers to questions about its performance a challenge. Policymakers trying to assess the effectiveness of programs run by the agency are frequently given information that is sketchy, clouded and elusive. The situation got worse several years ago when a mysterious internal decision was made to further restrict what the agency will disclose.

The MEDC hands out millions of dollars to businesses as an incentive for them to create or "retain" jobs in the state. The data needed to evaluate these deals seems fairly simple: How much money did a corporation or developer receive, when did it get it, and were jobs added or retained since? If there are other relevant factors, the MEDC should explain them. But the agency has never disclosed this kind of information clearly or concisely.

Until sometime in late 2008 or early 2009, the MEDC did at least disclose how much money it gave to each business. Then, mysteriously, the information flow stopped. The agency asserted that it could no longer reveal how much companies were actually given, because doing so would violate the state law that prohibits releasing confidential tax return information. From that point on, the MEDC has only disclosed how much each firm was offered.

Perhaps coincidentally, not long after this the MEDC inked deals with Ford, GM and Chrysler responsible for a large share of a recently announced unfunded liability of nearly $10 billion created by MEDC "refundable" tax credits given to companies in the previous decade, in deals lasting up to 20 years.

In the light of this liability, and the holes it opened up in the current and next year's state budgets, Michigan Capitol Confidential is seeking information about that policy change of roughly six years ago. We have asked the MEDC:

1 — Who made the decision?

2 — Did the MEDC ask for a legal opinion from the attorney general's office about disclosures?

3 — If so, has this request, or its response, ever been made public?

These questions were sent to MEDC spokesman Michael Shore on March 9.

Meanwhile, a consensus might be forming among state lawmakers that steps should be taken to bring transparency to the agency. And if the MEDC believes that a law prohibits it from giving policymakers the information they need, nothing prohibits the Legislature from amending that law to permit the disclosures.

“I think a good broad tax policy applied in an equitable way has the most bang for the buck,” said Rep. Martin Howrylak, R-Troy. “Some people might agree or disagree with me about that, but on the argument that MEDC should be required to provide more transparency there really isn’t anyone who disagrees; it cuts across the political spectrum.”

“The need for greater MEDC transparency is best summarized by what happened between 2008 and 2011,” Howrylak continued. “If anybody had actually been closely monitoring what they were doing with the job incentives they probably would have stopped. Instead they ran up over $10 billion in exemptions while just sort of keeping track on the back of an envelope. That situation alone shows that we need more oversight.”

Howrylak also said that bringing transparency to the MEDC should start with businesses that receive public dollars from the agency being required to disclose basic information.

“It seems reasonable that if we are giving someone money we should expect them to be willing to allow basic information to be disclosed about what they’re basing their claims on as justification for receiving it,” Howrylak said. “It’s not as if they’d need to turn over company secrets, like how they operate systems or their patents, it is just basic information. If they are not willing to let that information be divulged, that’s all right, too; but then they just shouldn’t get the money.”

According to Rep. Jeff Irwin, D-Ann Arbor, the lack of disclosure prevents legislators from doing their jobs.

“MEDC should be required to produce information about the incentives they give to businesses in its entirety,” Irwin said. “Companies that take the money should have to agree to allow the information to be disclosed. Otherwise how are we supposed to do any analysis? How are we supposed to know whether that money would be better used to fill potholes or do other things instead of using it for job incentive programs?”

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State's Corporate Welfare Agency Tone Deaf to Requests for Transparency

MEDC Boss Says Agency Changing; Has Long History of Backing Bad Companies

There is No Good Reason the MEDC Should Exist

Beer Website Provides More Information About Taxpayer Investment Than the State

MEDC Feeling the Heat for Corporate Welfare Deals Coming Home to Roost

A legislative package sponsored by House Majority Floor Leader Aric Nesbitt, R-Lawton, would bring significant changes to Michigan’s electricity market.

The provision drawing the most attention repeals the only remaining piece of a 2000 reform led by then-Gov. John Engler, which ended the monopoly status of Michigan's largest electric utilities. Under that reform, known as “Energy Choice,” customers could buy their power from an alternative generator, while the power lines through which the juice flows remained a regulated monopoly.

Not surprisingly, the state’s two large utilities, Consumers Energy and Detroit Edison, were not pleased, and never stopped pressuring lawmakers to undo the reform. In 2008, as part of the same legislative package that imposed a 10-percent renewable energy mandate on utilities, the former monopolies won a 90-percent victory: In addition to causing industrial scale windmills to sprout across the Michigan landscape, the package limited electricity generation competition to just 10 percent of the market.

Nesbitt, who chairs the House Energy Policy Committee, explained the reasoning behind his support for ending Energy Choice in Michigan.

Nesbitt: “It’s an eight-bill package (House bills 4297 – 4304) that includes things that I think a lot of people are probably going to like. It keeps the RPS (Renewable Portfolio Standard) at the current level of 10 percent and allows alternative energy to be purchased from out of state (ending the in-state requirement on the mandate) and it allows us to get out of the high fees charged to ratepayers through the energy optimization program. Yes, it would also put an end to what’s been called deregulation (Energy Choice), under which 10 percent of ratepayers can purchase energy from alternative suppliers adding costs to other ratepayers.”

“The whole idea that allowing those alternative suppliers to sell energy in the market is deregulation is a misnomer. What it is really creating is an artificial market within a regulated industry. The utilities have to maintain enough capacity to cover that 10 percent of customers if the users decide to switch back to them. So, what happens is the 10 percent who are purchasing from the alternative suppliers are being subsidized by the other 90 percent that aren’t.”

“Having those alternative suppliers selling here does nothing to help address the issue of building generation for reliability. Making a few rate comparisons doesn’t really cover the whole issue. It leaves out the question of reliability and capacity. It also doesn’t address all the regulations we have to deal with that come down from Washington.”

“But even with that said, nationally rates are lower in what are called regulated states. The deregulated state Michigan is often compared with is Illinois, which fluctuates with Indiana, a regulated state, for having the lowest rates in the region. But the Illinois legislature has just introduced a new $2 [per month] surcharge to open nuclear plants and that’s going to change the picture. And you also have to look at other regulated neighbor states like Iowa and Missouri that have lower rates than Illinois has.”

Energy Choice Now Executive Director Wayne Kuipers disagrees with Nesbitt on this issue.

Kuipers: “Representative Nesbitt has said the utilities are subsidizing the customers who are on Electric Choice. It’s not true. All suppliers, both monopoly utilities and competitive suppliers, are required to meet the same standard of power reserves. Monopoly utilities do not provide reserves for competitive suppliers. There is no subsidy. Representatives of the utilities have said this as well. They are also mistaken.”

“I would like to point out that first Consumers and DTE said that they need capacity in case customers return, and that costs money now. Then they said that if customers return, Consumers and DTE won’t have capacity to serve the additional load, and that reduces reliability. Then Nesbitt says that returning customers will result in a 4-5 percent rate decrease. Then the utilities say that the extra capacity for returning customers will cost more, and therefore rates for existing customers will increase. It sure appears that they will say whatever it takes until something sticks.”

“Electric Choice is a competitive supply of power, where prices are set by competition, not regulation. Over 100 billion kilowatt-hours have been supplied in Michigan under competitive electric choice rates, saving customers over $1 billion. The current level of electric choice supply is enough to supply 1.2 million residential customers, with a population of 3 million people. Procedural rules for electric choice are not ‘regulation.’”

“Competitive, or alternative, suppliers of energy must provide the same capacity as regulated utilities. Since Electric Choice began in 2000, new plants totaling 4,000 MW have been built in Michigan. None of these plants was built by a regulated utility.”

“Opponents of electric competition say that prices are higher in competitive states and the trends in prices are unfavorable for customers compared to traditional states. That is not true: Prices in competitive states between 1997-2013 rose less than in traditional states and were negative versus inflation. They say that investment in generation has been and will be inadequate in competitive states and only traditional regulation can provide the certainty necessary for such long-term financial commitments. The truth is that competitive and traditional states have both added substantial capacity in line with relative load growth, with competitive states increasing the ratio of production to consumption.”

“We understand why opponents of customer choice don’t like Michigan being compared to Illinois. It is because Illinois, as a fully competitive state, is such a raging success for Illinois customers. No one involved in energy will compare states that have nothing in common and are therefore not meaningful. You have to compare similar states. Michigan, Illinois, Indiana, Ohio, and Wisconsin are all heavily industrialized, have large cities, and similar climates. A question that legislators and regulators should ask is: Why are Michigan’s rates so much higher than Wisconsin’s are? Wisconsin has built and is now operating three brand-new baseload power plants. Michigan has one of the oldest fleets in the country. Surely our costs should be lower.”

“When Michigan switched to being a competitive-supply state, our rates went from being above the national average to below the national average. Since 2008, when Michigan switched back to monopoly control, our rates exploded, jumping 30 percent above the national average, 20 percent above the regional average. This happened while national wholesale prices went down 45 percent and rates increased nationally by just 2.7 percent.”

The Wind Energy Part

As Nesbitt stated, his package of bills includes language that covers wind energy. Kevon Martis, director of the Interstate Informed Citizens Coalition, a nonprofit organization concerned about the construction of wind turbines in the region, said that he is very supportive of that aspect of the package.

“From the perspective of the thousands of Michigan residents whose townships have been ‘blown away’ by Gov. Granholm's 50-story-tall wind turbine mandate, Nesbitt's proposed freeze of our 10-percent renewable energy mandate is truly welcome news,” Martis said. “The rural supporters of the IICC know better than most that it isn't easy standing up to the enviro-profiteers who hijacked our energy policy in 2008. We intend to stand shoulder to shoulder with the Legislature in this fight for sound energy policy. Common sense has prevailed in Ohio and it is time for Michigan to follow their example and roll back the mandates.”