Pandemic Delivers Potentially Costly Electric Bill Lesson To School Complex

Much changed in Michigan when the COVID-19 pandemic struck in early 2020, bringing widespread business lockdowns, stay-at-home orders, closed schools and more.

One change was the amount of electricity used by a sprawling school and community center complex operated by the Morey Education Center in Shepherd.

The abrupt close of operations at the Isabella County complex last March cut the amount of electricity it used by nearly two thirds said Morey’s facilities manager Erik Spindler. (Its consumption went from 17,600 kWh down to 6,400 kWh.)

Spindler reported that he had anticipated comparable cuts in the school’s electric bills from Consumers Energy.

But that’s not what happened. In the first two billing cycles after the state-ordered shutdown, Morey’s utility bills fell less than 10% - from $3,800 to $3,600.

The disparity between sharply lower electricity use and minimal cost savings prompted Spindler to engage in lengthy negotiations with Consumers Energy.

Those negotiations led him to realize that the Morey Center had been operating under a rate agreement that was significantly more costly than necessary. In the process, Spindler also gained a $3,000 COVID-related rebate for the center.

The process put a light on an abstruse aspect of utility-pricing in Michigan — variously called demand rates, ratchets or tariffs — that allow providers to bill their customers whether or not they are actually using power.

Don Johns is a Lansing-based energy consultant who works with nonpublic schools and commercial enterprises. He said that lots of schools, business and commercial operations did not realize they were enrolled in demand-rate plans — only to learn about it the hard way when their operations were shuttered and the bills continued to roll in.

“All of a sudden they were forced to shut down ... but the ratchets were applied, and they ended up being billed at a level close to what they were paying at full operation,” he said.

Michigan utilities argue that demand rates are, on balance, a benefit to customers. The reason, utilities say, is that they provide savings and consistency over time, and allow electric power providers to secure capacity and maintain the distribution system even when demand slackens.

Consumers Energy spokesman Roger Morgenstern said about 6,100 of the company’s business customers are enrolled in demand rate plans that “make economic sense during normal operations.”

Such plans allow the utility to bill customers at 60% of their prior peak usage regardless of the actual amount of energy consumed, Morgenstern said.

“We understand that everything has changed with COVID-19 and we have been working to customize payment arrangements,” he said, citing the Morey Center’s $3,000 rebate as an example.

The Michigan Public Service Commission, the state’s utility regulatory agency, concurs. A coalition of commercial energy users petitioned the commission early in the pandemic for relief for customers whose operations were shuttered by pandemic shutdowns, but remained tied to rate plans designed for normal times.

The commission issued extensive COVID relief measures for residential customers but left untouched the treatment of commercial and nonprofit energy consumers.

MPSC spokesman Matt Helms said in a statement: “In most cases, utilities are working with customers on demand rates to agree to payment plans which would allow 6 or 12 months to pay off bills that were accrued during the first few months of shutdown.”

The Morey Education Center has filed an informal complaint with MPSC, calling the tariff for unused energy “during a government-mandated shutdown... fundamentally unjust.” Spindler said the whole experience has been dispiriting. “It took COVID for us to realize that we were on the wrong rate (plan) for a long time,” he said. “I’d like to think, as customers in good standing for more than 20 years, that we deserve better customer service. I told (Consumers Energy) we were really frustrated. But apparently we don’t have any choice.”