MWEA MWEA Meeting Meeting March 14, 2012 March 14, 2012 CONTACT - - PDF document
3/21/2012 MWEA MWEA Meeting Meeting March 14, 2012 March 14, 2012 CONTACT INFORMATION CONTACT INFORMATION RODERICK S. Rick COY RODERICK S. Rick COY CLARK HILL PLC CLARK HILL PLC 212 EAST GRAND RIVER AVE 212 EAST GRAND RIVER
We had competition from 2000
It reduced rates for those who chose alternative
It kept rates down for those who stayed with the
But, then the legislature re
Airlines
Trucking
Telecommunications
Natural gas
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Michigan electric markets opened in 2000
Our electric rates were way higher than regional
Our electric rates were way higher than regional averages averages
Engler identified it as a key business identified it as a key business disincentive in the disincentive in the 1990’s 1990’s; every study since ; every study since continues to identify high utility rates as a continues to identify high utility rates as a disadvantage to locating in Michigan disadvantage to locating in Michigan
North Star Steel Plant located in Ohio, not Michigan
North Star Steel Plant located in Ohio, not Michigan
Last major auto plant in Michigan in Lansing, where
Last major auto plant in Michigan in Lansing, where muni rates lower muni rates lower
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0.53 0.46 0.41 0.22 0.19 0.16 0.24 0.19 0.36 0.49 0.29
Michigan rates compared to national average
Michigan rates were above national average – until competition started in 2000
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1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
From 2000
Plants in Dearborn, Zeeland, Covert, Carson City
Plants in Dearborn, Zeeland, Covert, Carson City and Jackson built at shareholder expense and risk and Jackson built at shareholder expense and risk and Jackson built at shareholder expense and risk and Jackson built at shareholder expense and risk
Increased reliability in Michigan
Increased reliability in Michigan
Proof that new generation can be built under
Proof that new generation can be built under competition competition – – without mandates that customers pay without mandates that customers pay for utility mistakes for utility mistakes
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New Laws
Act 286 of 2008
Act 295 of 2008
Utilities hailed passage
Said cleared way for new plants
Said cleared way for new plants
Said would lower rates for factories
Said would lower rates for factories
S id
ld pr id r t r “pr di t bilit ” S id ld pr id r t r “pr di t bilit ”
Said would provide greater “predictability”
Said would provide greater “predictability”
Reality
No new plants
No new plants – – none needed! none needed!
Industrial rates increase despite demand reduction
Industrial rates increase despite demand reduction
Twice a year, predictably, they raise their rates.
Twice a year, predictably, they raise their rates.
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Future, not actual costs
Automatic Rate Increases
Choice restricted to 10%
MPSC approval of mergers
Cost based rates?!?
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CE electric case CE electric case Date of increase Date of increase Amount Amount U-
15245 6/10/2008 6/10/2008 $27,468,600 $27,468,600 U-
15645 11/2/2009 11/2/2009 $139,411,000 $139,411,000 U-
16191 11/4/2010 11/4/2010 $145,749,000 $145,749,000 U-
16794 12/11/2011* 12/11/2011* $165,475,000 $165,475,000 Total higher electric cost Total higher electric cost $478,103,600 $478,103,600
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CE gas case CE gas case Date of Increase Date of Increase Amount Amount U-
15506 12/23/2008 12/23/2008 $22,400,000 settlement $22,400,000 settlement U-
15986 5/12/2010 5/12/2010 $65,893,000 $65,893,000 U-
16418 5/2011 5/2011 $31,364,000 settlement $31,364,000 settlement Total higher gas cost Total higher gas cost $119,657,000 $119,657,000
*Date of automatic increase per 2008 PA 286
Increase Increase in mills in mills % increase % increase
1. 1.
Rate cases Rate cases
15645 general rate case
i. i.
Interim 5/09: $179 million Interim 5/09: $179 million
ii. ii.
Final 11/09: $134.3 million Final 11/09: $134.3 million 4 mills 4 mills
16191 general rate case
4.4 mills 4.4 mills 20 Total new rate increases Total new rate increases 8.4 mills 8.4 mills 8.9 % 8.9 %
15415 (2008) PSCR av. 47.46 mills
16045 (2010) PSCR av 53.33 mills
16432 (2011) PSCR 4.9 mills 4.9 mills 2.6 mills 2.6 mills Total PSCR increases Total PSCR increases 7.5 mills 7.5 mills 7.9 % 7.9 %
1/11 Nuclear decommission credits expire; stranded cost, electric restructuring, Nuclear decommission credits expire; stranded cost, electric restructuring, securitization bond and tax, UETM, E securitization bond and tax, UETM, E-
1 discount, RPS, energy optimization, electric choice incentive electric choice incentive 7.9 mills 7.9 mills 8.3% 8.3%
Total rate case, PSCR, new charges Total rate case, PSCR, new charges 23.8 mills 23.8 mills 25% 25%
10.58% 15.47% 10.33%
Michigan overall electric rate increases, Dec. 2008 to May 2011 (understates DTE/Consumers increases)
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All sector increases, comparing cents per kWh Source: US Energy Information Agency
5.67%
3.29% 3.13%
East North Central Illinois Indiana Michigan Ohio Wisconsin U.S.
6.46 6.1 6.23 7.73 7.22 6.5 7 7.5 8
Midwest industrial rates, May 2011
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In cents/kWh Source: US Energy Information Agency
5.87 3 3.5 4 4.5 5 5.5 6 East North Central Illinois Indiana Michigan Ohio Wisconsin 0.53 0.46 0.41 0.22 0.19 0.16 0.24 0.19 0.36 0.49 0.29 0.15 0.37
Michigan rates compared to national average
Once competition killed, Michigan electric rates increase above national rates
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1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Gap between Michigan and other states grows
Especially Illinois and Ohio, who have used
Especially Illinois and Ohio, who have used competition to lower rates competition to lower rates
Michigan rates now above national average
Utilities decide they don’t need additional
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One year from passage of new law, 10 percent
Those able to escape utilities get lower rates
Now
Now
Government is picking winners
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2008 Rate Case U 2008 Rate Case U-
15245 CE Proposed
Rate Shock to Munis: 25%
Elimination of “Muni” class of service
Grouping with commercial and industrials
Grouping with commercial and industrials
Munis intervened and
Staff proposed permanent pumping credit
Staff proposed permanent pumping credit
Learned Munis paying 125% of COS
Learned Munis paying 125% of COS
Save Munis money now on power costs
Save Munis money now on power costs
Lower your future costs
Lower your future costs
Retain pumping credit as long as possible
Retain pumping credit as long as possible
Get solid cost of service information so not
Get solid cost of service information so not subsidizing other classes subsidizing other classes
Re
Re-
establish municipal “class of service”
2007 Case U
5%
5%-
40% proposed increase
Saved Munis approximately $1,400,000 annually
Saved Munis approximately $1,400,000 annually
Savings about 18 times investment
Savings about 18 times investment
2008 Case U
10%
10% -
25% proposed increase
Saved Munis approximately $1,000,000 annually
Saved Munis approximately $1,000,000 annually
Savings about 7 times investment
Savings about 7 times investment
2010 Case U
5%
5%-
8% proposed increase
Saved Munis approximately $900,000 annually
Saved Munis approximately $900,000 annually
S
in b t 6 tim in tm nt S in b t 6 tim in tm nt
Savings about 6 times investment
Savings about 6 times investment
NEW 2011 Case U
2%
2% -
6% proposed increase
Savings TBD
Savings TBD
Legislative
Insist that Munis be their own class of service like
Insist that Munis be their own class of service like schools schools
Ask to have the 10% cap on competitive choice be
Ask to have the 10% cap on competitive choice be lifted lifted
Legal & Public Relations
Consider creating/expanding your own electric
Consider creating/expanding your own electric utility utility
Consider leaving CE
Consider leaving CE
We need electric competition more today than
Business leaders for Michigan benchmark:
Business leaders for Michigan benchmark: Michigan’s electric rates higher than competitor Michigan’s electric rates higher than competitor states states
MMA survey: Electric rates third in importance in
MMA survey: Electric rates third in importance in business costs in Michigan, behind only health care business costs in Michigan, behind only health care and labor costs and labor costs
Electric rates only one of those three set by government!
Electric rates only one of those three set by government!
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August statewide phone poll 800 likely voters: August statewide phone poll 800 likely voters: Would you favor a change in state law that would allow all customers to purchase their 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 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? area and compete for customers by offering electric service at a lower price? 74% TOTAL FAVOR 74% TOTAL FAVOR 18% TOTAL OPPOSE 18% TOTAL OPPOSE 18% TOTAL OPPOSE 18% TOTAL OPPOSE 8% 8% Undecided/Refused Undecided/Refused Do you think that having competition among companies that provide electric service, like 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 it has been done in the natural gas and telecommunications industries, is a good way or a bad way to control energy costs? a bad way to control energy costs? 75% TOTAL GOOD 75% TOTAL GOOD 13% TOTAL BAD 13% TOTAL BAD 12% 12% Undecided/Refused Undecided/Refused
Even though regulators have not been helping much
Even though regulators have not been helping much recently, stay the course and put some heat on the New recently, stay the course and put some heat on the New Commission in this case and beyond Commission in this case and beyond
Complain to legislators and seek legislative changes
Complain to legislators and seek legislative changes S l f i S l f i
Secure own customer class of service
Secure own customer class of service
Consider every option to leave
Consider every option to leave CE or CE or DTE DTE
Refuse to just be the passive customer of
Refuse to just be the passive customer of a a monopoly. monopoly.