Big Piece of Utility’s Future Electricity Supply Plans: Michigan Consumers Use Less

In planning to meet the future power needs of Michigan families and businesses, the state’s largest electric utilities are increasingly focusing on ways to make customers use less power. Consumers Energy, one of the state’s largest utilities along with DTE, illustrates this by planning to create incentives for customers to use less power in times of high demand.

As a part of what the utility calls “demand response” efforts, by 2040 Consumers Energy wants to be able to reduce peak demand from industrial, commercial and residential customers at critical times by as much as 1,250 megawatts. The company projects that customers will use about 5,000 megawatts of electricity on average by then, with demand spiking up to 8,000 megawatts during critical periods, as in a heat wave.

Reduction measures could include offering incentives to customers for letting the utility remotely reduce their consumption for a few hours when demand is spiking, according to Jessica Woycehoski, an official with Consumers Energy who works in planning electricity supplies. Consumers Energy already offers this under an “AC Peak Cycling Program,” which give customers a financial incentive to let it remotely shut off their air conditioner during the highest power consumption hours.

Woycehoski also said that the company is also considering surge-pricing plans, through which it would routinely charge more for electricity during the hours of peak use, with lower rates at times of the day when there is less demand.

“There isn’t a specific blend [of demand response methods] when we look out into the future like that because we want some flexibility to determine what are the best programs to meet our customers’ needs when we look beyond the 10 to 20 year forecast,” Woycehoski said. “It’s going to be a blend of various types of programs that are behavioral and also like a direct control mechanism that we have.”

Steven Transeth, who served as a commissioner on the Michigan Public Service Commission — the state office that regulates Consumers Energy — from July 2007 to January 2010, said the plan laid out by the company will cause individuals to change how they use electricity.

“There’s no question that we’ve enjoyed a long decade, a century almost, of unlimited power and being able to use it in any fashion, way, and shape you wanted to and that is going to change,” Transeth said. “I would hope that what we’re going to do is better educate and provide the kind of incentives so that people are aware of their electric use and the options available to more effectively utilize it.”

Jason Hayes, the director of environmental policy at the Mackinac Center for Public Policy, has no problem with the voluntary demand-response proposals, but sees something else in the overall vision represented by DTE and Consumers Energy's current planning processes.

“The changes being proposed by Consumers are part of a subtle, systemwide change in the way that Michigan residents — and really all Americans — are able to use energy,” Hayes said. “While demand-response programs are good management tools, the larger Consumers Energy plans are really about who will control when, where, and how Americans use electricity. Traditionally the consumer was in control; what is being discussed here is something different from that.”