MWEA Meeting Electricity Rates Charged to Municipals Unreasonable and getting worse!

Transcription

1 MWEA Meeting March 14, 2012 CONTACT INFORMATION RODERICK S. Rick COY CLARK HILL PLC 212 EAST GRAND RIVER AVE LANSING, MI PHONE: (517) FAX: (517) Electricity Rates Charged to Municipals Unreasonable and getting worse! 1

2 Lack of Competition Raises Costs We had competition from It reduced rates for those who chose alternative suppliers It kept rates down for those who stayed with the incumbent utility companies But, then the legislature re-monopolized the electric utility industry in Michgan in 2008 Competition works Airlines Trucking Telecommunications Natural gas 5 It worked in Michigan from Michigan electric markets opened in 2000 Our electric rates were way higher than regional averages Gov. John Engler identified it as a key business disincentive in the 1990 s; every study since continues to identify high utility rates as a disadvantage to locating in Michigan North Star Steel Plant located in Ohio, not Michigan Last major auto plant in Michigan in Lansing, where muni rates lower 6 2

3 Closing the gap, Michigan rates compared to national average Michigan rates were above national average until competition started in New generation under 2000 law From , 2008, independent power producers built 4,000 megawatts of new power Plants in Dearborn, Zeeland, Covert, Carson City and Jackson built at shareholder expense and risk Increased reliability in Michigan Proof that new generation can be built under competition without mandates that customers pay for utility mistakes 8 New Laws 2008 New Laws Act 286 of 2008 Act 295 of

4 New Laws Effective October 2008 Utilities hailed passage Said cleared way for new plants Said would lower rates for factories Said would provide greater r predictability Reality No new plants none needed! Industrial rates increase despite demand reduction Twice a year, predictably, they raise their rates. 10 Act Subjects Future, not actual costs Automatic Rate Increases Choice restricted t to 10% MPSC approval of mergers Cert. of Need (CON) Cost based rates?!? What s happened since 2008? 12 4

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7 What s happened to Consumers Energy rates since 2008 CE electric case Date of increase Amount U /10/2008 $27,468,600 U /2/2009 $139,411,000 U /4/2010 $145,749,000 U /11/2011* $165,475,000 Total higher electric cost $478,103,600 CE gas case Date of Increase *Date of automatic increase per 2008 PA 286 Amount U /23/2008 $22,400,000 settlement U /12/2010 $65,893,000 U /2011 $31,364,000 settlement Total higher gas cost $119,657, What s happened to Consumers Energy rates since 2008 Increase in mills 1. Rate cases a. U general rate case i. Interim 5/09: $179 million ii. Final 11/09: $134.3 million 4 mills b. U general rate case i. Final 11/10: $146 million 4.4 mills Total new rate increases 8.4 mills 8.9 % % increase over 10/ PSCR a. U (2008) PSCR av mills b. U (2010) PSCR av mills c. U (2011) PSCR Total PSCR increases 3. Other increases, 10/08-1/111/11 Nuclear decommission credits expire; stranded cost, electric restructuring, securitization bond and tax, UETM, E-1 discount, RPS, energy optimization, electric choice incentive Total rate case, PSCR, new charges 4.9 mills 2.6 mills 7.5 mills 7.9 % 7.9 mills 8.3% 23.8 mills 25% 20 Results since implementation in October 2008 Michigan overall electric rate increases, Dec to May 2011 (understates DTE/Consumers increases) 15.47% 10.58% 10.33% 5.67% 3.29% 3.13% East North Central Illinois Indiana Michigan Ohio Wisconsin U.S % All sector increases, comparing cents per kwh Source: US Energy Information Agency 21 7

8 Results since implementation in October Midwest industrial rates, May East North Central Illinois Indiana Michigan Ohio Wisconsin In cents/kwh Source: US Energy Information Agency 22 Michigan rates compared to national average Once competition killed, Michigan electric rates increase above national rates Results since October 2008 Gap between Michigan and other states grows Especially Illinois and Ohio, who have used competition to lower rates Michigan rates now above national average Utilities decide they don t need additional power, drop plans for new plants 24 8

9 Results since October 2008 One year from passage of new law, 10 percent competition cap hit Those able to escape utilities get lower rates Now 5,000 companies on waiting list to get out Government is picking winners those who were lucky enough to leave utilities and losers those forced to stay 25 RELEVANT BACKGROUND 2008 Rate Case U CE Proposed Rate Shock to Munis: 25% - 35% Elimination of Muni class of service Grouping with commercial and industrials Munis intervened and Staff proposed permanent pumping credit Learned Munis paying 125% of COS OVERALL GOALS of Muni Coalition Save Munis money now on power costs Lower your future costs Retain pumping credit as long as possible Get solid cost of service information so not subsidizing other classes Re-establish establish municipal class of service 9

10 3 Prior CE Cases 2007 Case U %-40% proposed increase Saved Munis approximately $1,400,000 annually Savings about 18 times investment 2008 Case U % - 25% proposed increase Saved Munis approximately $1,000,000 annually Savings about 7 times investment 3 Prior CE Cases 2010 Case U %-8% proposed increase Saved Munis approximately $900,000 annually Savings about 6 times investment nt NEW 2011 Case U % - 6% proposed increase Savings TBD What to do to reduce rates? 10

11 Supplemental Advocacy Legislative Insist that Munis be their own class of service like schools Ask to have the 10% cap on competitive choice be lifted Legal & Public Relations Consider creating/expanding your own electric utility Consider leaving CE It s time to lower electric bills! We need electric competition more today than ever Business leaders for Michigan benchmark: Michigan s electric rates higher than competitor states MMA survey: Electric rates third in importance in business costs in Michigan, behind only health care and labor costs Electric rates only one of those three set by government! 32 It s time to lower electric bills! August statewide phone poll 800 likely voters: Would you favor a change in state law that would allow all customers to purchase their electric service from any supplier that is able to provide reliable electric service to their area and compete for customers by offering electric service at a lower price? 74% TOTAL FAVOR 18% TOTAL OPPOSE 8% Undecided/Refused Do you think that having competition among companies that provide electric service, like it has been done in the natural gas and telecommunications industries, is a good way or a bad way to control energy costs? 75% TOTAL GOOD 13% TOTAL BAD 12% Undecided/Refused 33 11

12 Conclusions & Recommendations Even though regulators have not been helping much recently, stay the course and put some heat on the New Commission in this case and beyond Complain to legislators and seek legislative changes Secure own customer class of service Consider every option to leave CE or DTE Refuse to just be the passive customer of a monopoly. CONTACT INFORMATION RODERICK S. Rick COY CLARK HILL PLC 212 EAST GRAND RIVER AVE LANSING, MI PHONE: (517) FAX: (517) rcoy@clarkhill.com 12

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