Electricity Competition In Texas, Illinois Brought Lower Prices Than Michigan

The debate about opening up Michigan's electricity market to competition took an interesting turn at a recent hearing on the issue.

The Michigan Jobs and Energy Coalition, which includes the state's two largest utilities, Consumers Energy and Detroit Edison, has repeatedly said that open competition in the electricity market would lead to service reliability issues. As an example, the group has said the open market in Texas can be blamed for rolling blackouts that have occurred in the Lone Star state.

But one of the Michigan coalition's allies in the fight, Bob Manning, who is vice chair of the Electric Reliability Council of Texas, testified against that point of view.

In testimony on March 18 before the Michigan House Energy and Technology Committee, Manning responded to a question about rolling blackouts in Texas by saying severe weather caused them, not the less regulated Texas electricity market.

"Rolling blackouts in Texas were weather related," he said. "They were not ready for ice storms . . . [they] had nothing to do with electric deregulation. There are no [electric market] models that protect you from natural events."

That claim about blackouts being caused by electricity competition, was used in the coalition's statewide ad campaign. A representative of the Michigan coalition also made the claim in a Jan 11 article in Michigan Capitol Confidential.

The House Energy and Technology Committee is holding presentation hearings on House Bill 5184, which would lift the 10 percent cap on competition in Michigan's electricity market. The cap reinstated a quasi-monopoly status for CMS and DTE. It was one of two major components of the state's 2008 energy bill, now Public Act 295. The other major component was the establishment of a 10 percent in-state renewable energy mandate.

Getting House Bill 5184 out of committee likely will be an uphill battle. Sen. Mike Nofs, R-Battle Creek, is committee chairman of the Senate Energy and Technology Committee, and has made clear there is little interest in taking up the issue in the Senate.

If no action is taken this year, a new electricity deregulation bill would have to introduced in the 2015-2016 legislative term.

Rep. Mike Shirkey, R-Clarklake, the sponsor of the bill, told the committee he would like to see the House pass the bill and make electricity competition the "official position of the House."

He also said he hoped the hearings would "address some of the scare tactics used against deregulation."

Manning said he had been a strong supporter of deregulation in the late 1990s, but he said his experience as energy manager for H-E-B Grocery in Texas (which is similar to Meijer stores in the Great Lakes region) convinced him that it doesn't work well. He said that when natural gas prices spiraled upward (about a decade ago) competition failed to provide relief for Texas ratepayers.

Yet a comparison of electricity prices over the past decade shows that Michigan rates increased much faster than in Texas, according to the Michigan Public Service Commission.

Phillip R. O’Conner, of PROactive Strategies, a  policy analysis provider specializing in insurance and energy regulation, also jumped on claims by opponents of competition. 

"The idea that Texas has had rolling blackouts is just plain false," O’Conner told the committee.

Testimony of those supporting House Bill 5184 included comparisons between Michigan and Illinois, which have reversed places in terms of which has the highest and lowest rates. Since 2008 when electric competition was capped, rates have climbed in Michigan and the state now has the highest rates in the region. Meanwhile, Illinois, with its deregulated market now has the lowest rates in the region.