Michigan advocates seek stronger voice for residential ratepayers

Compared to large industrial users, residential ratepayers are underrepresented in gas and electric cases that go before the Michigan Public Service Commission, advocates here say.

As state lawmakers work on a new comprehensive energy plan for Michigan, members of the governor-appointed Utility Consumer Participation Board hope that will include more funding to advocate on behalf of residential energy users.

The UCPB issues grants to a variety of nonprofit organizations that then intervene in rate cases on behalf of ratepayers. The board receives about $600,000 a year through a 1-cent surcharge on utility bills. The surcharge applies to regulated utilities with more than 100,000 customers.

Jim MacInnes, chairman of the five-member UCPB, is hoping state lawmakers increase funding to $2 million a year, which would be funded through a roughly 3-cent surcharge on bills. He said the UCPB and the Attorney General’s Office have saved ratepayers “hundreds of millions of dollars over the past five years” through their advocacy.

“We’d like to expand our scope and expand our funding to save ratepayers even more money,” said MacInnes, who is also the president and CEO of Crystal Mountain Resort in northern Michigan.

And in light of legislative proposals calling for utilities to adopt Integrated Resource Planning, “there’s going to be more work that needs to be done to evaluate what’s going on to make sure ratepayers are getting the low-cost solution,” MacInnes said.

The UCPB was formed in 1982 under Public Act 304, which allowed utilities to more quickly recover costs for supplying electric and gas compared to a full rate case. The money generated through utility bills goes into the Utility Consumer Representation Fund, which is split by the UCPB and the Attorney General’s Office. The UCPB portion is given out in grants to nonprofit groups. In 2014, both entities received about $600,000 each through surcharges. Five percent of the funding is for administrative costs.

UCPB grantees include Citizens Against Rate Excess, the Michigan Environmental Council and the Great Lakes Renewable Energy Association. Maclnnes said each group takes up different kinds of rate cases.

Residential rates increase more

But compared to groups like the Association of Businesses Advocating Tariff Equity, which often intervenes in utility rate cases on behalf of large industrial users and is funded by those customers, advocates say residential customers have less of a voice.

Indeed, electric costs have shifted in recent years from industrial to residential users. There has been a movement, led by ABATE and other industrial ratepayer advocates, to try and reach a “true cost of service” between the two customer classes.

Citing data from the U.S. Energy Information Administration, the UCPB says residential rates have increased 37 percent since 2008, while commercial and industrial rates increased 16 percent and 4 percent, respectively.

Last year, industrial users sought to change the way rates are set in order to prevent large users from subsidizing smaller ones. The plan was scaled back after concerns by the Attorney General’s Office and other residential advocates that it would have shifted costs too much.

“If you look at residential rates, Michigan has the highest in the Midwest,” MacInnes said. “The rates have been shifted from industrial users to residential ratepayers in cost-of-service cases.”

Larry Ward, executive director of the Michigan Conservative Energy Forum, said the issue is even more pressing as Consumers Energy and DTE Energy have approached the MPSC with rate increases in the hundreds of millions of dollars.

“Where’s your check and balance there? Who’s looking out for ratepayers?” Ward asked.

He said the UCPB and advocacy groups have been constrained in the type of cases they can intervene in, but the groups still offer a good return on investment for residents.

“The UCPB is limited in its scope and limited in its funding so you can only get so much accomplished,” Ward said.

‘Who cares about their politics?’

MacInnes said he believes there is some hesitation to increase UCPB funding because some of the grants are directed toward environmental groups.

“The way I look at it is: Who cares about their politics? If they’re saving ratepayers money, great,” he said.

The group is pursuing changes through the state Legislature, either as part of a broad energy package or as a separate bill, MacInnes said.

“There seems to be some interest, particularly on the part of the Senate,” he said.

State Rep. Aric Nesbitt, the Republican chairman of the House Committee on Energy Policy, said his energy reform bill package looks to keep the bureau’s current funding levels intact.

“I look forward to meeting with folks to ensure residents and small businesses have a stake in prices and ensure they’re represented as we look at the true cost of service,” Nesbitt said.

He is also interested in finding out whether the bureau can operate more efficiently or whether more work can be done in-house rather than issuing grants to outside groups.

While Nesbitt has not seen a specific proposal to increase funding ton $2 million a year, “My door is always open,” he said.

MacInnes says a relatively small investment by ratepayers — up to 3 cents per month — could end up paying big dividends on electric bills over the long run.

“High energy prices are like a tax, particularly affecting low-income people the most,” MacInnes said. “We have to do everything to make sure everyone is well-represented.”

3 thoughts on “Michigan advocates seek stronger voice for residential ratepayers

  1. I have worked at the Connecticut ratepayer advocate’s office for 30 years. An effective advocate representing residential customers is very important in this changing utility landscape. Our office helps save ratepayers close to $500 million annually over the past decade, that is 166 times our budget.

  2. Doesn’t the Michigan Public Service Commission Staff represent, among others, the residential rate payers in Michigan? It has been my experience that the Staff tends to be very consumer / residential sympathetic in proceedings. The Staff has the expertise and the funding to ensure that residential concerns are heard and fully vetted. While other points of view are good (and are heard today under the existing non-profit funding scheme) it is not necessary for the ratepayers of Michigan to fund the Staff AND groups representing every conceivable residential point of view. More is not necessarily better.

  3. If the point of “true cost of service” was to more accurately signal market prices to residential customers in order to influence them into adopting energy efficiency measures and reducing their consumption, that effort has failed. In the face of 35% increases in residential rates since 2008, per residential customer consumption of electricity has been reduced less than 2%, according to EIA figures for Michigan.