Michigan energy companies pocket $14B in loans from feds after hiking rates

After receiving $1.9 billion in state-authorized rate hikes since 2013, Michigan’s energy monopoly companies were granted $14.04 billion in loans from the U.S. Department of Energy for green energy projects.

Gov. Gretchen Whitmer mandated the state’s energy companies to derive all their energy from so-called clean energy by 2040.

The Loan Programs Office of the U.S. energy department announced the loans on its website on Jan. 16.

DTE Energy will receive $8.81 billion from two loans and CMS Energy will receive one loan for $5.23 billion.

The loan office noted that the loans would offer recipient companies lower interest rates, and said this would mean savings for their customers. A representative of one of the companies confirmed that it would save on interest costs.

“We would use any federal loan money to fund capital projects in lieu of higher interest rate debt to reduce customers’ costs,” said Brian Wheeler, media relations specialist for CMS Energy, in an email to Michigan Capitol Confidential.

He added that the energy company passes along borrowing costs for capital projects to customers through natural gas and electric rates.

Michigan’s other energy monopoly, DTE, received permission Jan. 23 from the Michigan Public Service Commission to raise rates by $217.38 million. News of the increase came one month after the energy department announced the loans.

The loan program has come under fire from various experts, including Ted Bolema, a member of the board of scholars at the Mackinac Center for Public Policy.

“Secretary Granholm herself had a poor record of doling out money to politically connected green energy initiatives as governor of Michigan,” said Bolema in an email to CapCon. He said that the department rushed through loans during the last days of Granholm’s time in office, suggesting it had lowered standards.

As the state’s utility regulator, the MPSC approved 17 out of 18 requests for a rate increase as of February 2023, according to Jason Hayes, energy and environmental policy director at the Mackinac Center for Public Policy.

State regulators have assented to three additional increases since then.

DTE Energy was approved for a $368 million increase in electric rates on Dec. 1, 2023. A month earlier, regulators approved a $113.79 million increase for natural gas service on Nov. 7.

The company had $6.49 billion in gross profits in 2023, representing a 6.91% increase from the previous year, according to Macro Trends, a research platform for investors. DTE has yet to release financial information about 2024, and it did not respond to CapCon’s request for comment on its loans.

CMS Energy’s latest approved rate hike was for $92 million on March 1, 2024.

The company reported $4.54 billion in gross profit for 2023, a 2.66% increase from 2022, according to Macro Trends.

Hayes criticized the state’s mandate to convert energy infrastructure to what he says are unreliable sources. “Faced with these increased costs, monopoly utilities are all too happy to turn to state regulators to approve rate increases, which are passed on to utility customers and taxpayers,” stated Hayes in an email.