Commentary
In Michigan, lower energy rates or free thermostats?
Michigan homes pay the highest energy rates in the Midwest
Michigan residential energy costs are the highest in the Midwest. Next month, DTE Energy will move millions of customers to peak-hour pricing. | Shutterstock
Recent headlines have trumpeted the apparent generosity of a major Michigan monopoly utility. “Consumers Energy: 30,000 thermostats offered to help with winter heating costs,” proclaimed WWMT-TV.
“Consumers Energy remains committed to helping our friends and neighbors, in the coldest days of winter and as the temperatures hopefully warm soon,” said Brian Rich, senior vice president and chief customer officer of the utility.
Another way the utility could help its friends and neighbors would be by maintaining a strong focus on keeping electricity and natural gas rates low. But a look back through the company’s financial reporting shows it may not be quite as committed to that sort of help for its friends and neighbors, even during the coldest days of winter.
Despite a clear record of strong profits and charging the 12th-highest average retail electric rates in the nation, Consumers continues to push state regulators for regular increases in electricity and gas rates for its customers. According to Yahoo Finance, Consumers has earned an average net annual income over the past three years of almost $790 million and a trailing twelve- month net income of $901 million.
In 2021, residential electricity customers in the state of Michigan paid the highest rates in the region, which are also more than 28% above the national average. Residential customers in Michigan paid an average of 17.54 cents per kilowatthour for their electric service, according to the federal Energy Information Administration.
In comparison, EIA data indicates that residents of Ohio, paid 37% less, at only 12.77 cents/kWh. Residents of Illinois paid 13.18 cents/kWh, or 33% less than Michigan residents. Indiana residents paid 13.37 cents/kWh, or 31% less than Michiganders. The national average residential electricity rate was 13.66 cents/kWh.
Despite the disparity in electricity rates, both nationally and in comparison to adjacent Midwest states, Consumers Energy has consistently been approved by the Michigan Public Service Commission to implement near-annual rate hikes.
In hearings for 17 of 18 rate cases over the past decade, the MPSC, the state agency responsible for overseeing the utility’s rates and plans, has approved almost $1.4 billion in rate increases on electricity and natural gas rates. State regulators have also ensured the utility received an average guaranteed 10% return on equity — profits it earns on operations.
Only once, during a 2017 hearing for a requested rate increase, have state regulators chosen to disallow an increase. In that case, the utility had requested a $58 million rate increase, but the rates were actually reduced by $24 million. This ordered reduction in electricity rates followed the passage of the federal Tax Cut and Jobs Act of 2017 and accounted for the new, lower federal tax rate the company paid as a result.
Last month, state regulators approved a $155 million rate increase for the utility. This increase was 43% less than the company had requested. Even so, the average monthly bill for residential customers will increase by an estimated $0.77.
Jason Hayes is director of environmental policy at the Mackinac Center. Email him at hayes@mackinac.org.
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In Michigan, lower energy rates or free thermostats?
Michigan homes pay the highest energy rates in the Midwest
Recent headlines have trumpeted the apparent generosity of a major Michigan monopoly utility. “Consumers Energy: 30,000 thermostats offered to help with winter heating costs,” proclaimed WWMT-TV.
“Consumers Energy remains committed to helping our friends and neighbors, in the coldest days of winter and as the temperatures hopefully warm soon,” said Brian Rich, senior vice president and chief customer officer of the utility.
Another way the utility could help its friends and neighbors would be by maintaining a strong focus on keeping electricity and natural gas rates low. But a look back through the company’s financial reporting shows it may not be quite as committed to that sort of help for its friends and neighbors, even during the coldest days of winter.
Despite a clear record of strong profits and charging the 12th-highest average retail electric rates in the nation, Consumers continues to push state regulators for regular increases in electricity and gas rates for its customers. According to Yahoo Finance, Consumers has earned an average net annual income over the past three years of almost $790 million and a trailing twelve- month net income of $901 million.
In 2021, residential electricity customers in the state of Michigan paid the highest rates in the region, which are also more than 28% above the national average. Residential customers in Michigan paid an average of 17.54 cents per kilowatthour for their electric service, according to the federal Energy Information Administration.
In comparison, EIA data indicates that residents of Ohio, paid 37% less, at only 12.77 cents/kWh. Residents of Illinois paid 13.18 cents/kWh, or 33% less than Michigan residents. Indiana residents paid 13.37 cents/kWh, or 31% less than Michiganders. The national average residential electricity rate was 13.66 cents/kWh.
Despite the disparity in electricity rates, both nationally and in comparison to adjacent Midwest states, Consumers Energy has consistently been approved by the Michigan Public Service Commission to implement near-annual rate hikes.
In hearings for 17 of 18 rate cases over the past decade, the MPSC, the state agency responsible for overseeing the utility’s rates and plans, has approved almost $1.4 billion in rate increases on electricity and natural gas rates. State regulators have also ensured the utility received an average guaranteed 10% return on equity — profits it earns on operations.
Only once, during a 2017 hearing for a requested rate increase, have state regulators chosen to disallow an increase. In that case, the utility had requested a $58 million rate increase, but the rates were actually reduced by $24 million. This ordered reduction in electricity rates followed the passage of the federal Tax Cut and Jobs Act of 2017 and accounted for the new, lower federal tax rate the company paid as a result.
Last month, state regulators approved a $155 million rate increase for the utility. This increase was 43% less than the company had requested. Even so, the average monthly bill for residential customers will increase by an estimated $0.77.
Jason Hayes is director of environmental policy at the Mackinac Center. Email him at hayes@mackinac.org.
Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.