Deregulation hiccup in Michigan


The state of Michigan deregulated its electricity industry in 2000, intending to reduce energy costs to consumers by creating a competitive market and encouraging the construction of new generating facilities. As part of the deregulation legislation, residential customers were told that their rates would be cut by 5%, and that this figure would remain unchanged until 2006.

Existing providers such as Detroit Edison and Consumers Energy were bound by this legislation – and have had to watch while new providers have moved in to the state and taken over their C&I customers. The new providers say they are unable to beat the deal offered to residential customers under the 2000 law; the existing utilities hold that the new-comers are simply targeting customers with large demands, offering better deals because they aren’t tied to the rates set by the state regulators.

This situation has seen the formation of Citizens for Long-term Energy Affordability and Reliability (CLEAR) which is involved in an extensive publicity campaign to encourage residents to call for a change in the law. Without this, the larger utilities are suggesting that residential customers will see an increase of as much as 30% in their monthly bills once the cap is lifted in 2006.

Regulators have recently allowed the incumbent utilities to charge a transition fee for businesses that leave them for another supplier, a move criticised by large energy users. Meanwhile competition has seen an increase in the construction of new power plants in the state, but the fight for customers is far from over.