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Report: Proposal 3 will reduce energy costs for Michigan ratepayers

Study shows 25x25 plan would provide rate stability, create long-term savings for Michigan residents


Generating one quarter of Michigan’s electricity from renewable sources by 2025 would not have a significant impact on electricity rates and would actually reduce energy costs in the long term, a study released today concludes.

“25% by 2025: The Impact on Utility Rates of the Michigan Clean Renewable Electric Energy Standard” concludes that the renewable energy ballot plan – Proposal 3 in the November election – would cost an average of 50 cents per month for residential ratepayers between 2015 and 2025. The cost would not come close to reaching Proposal 3’s cost cap provision, which limits cost increases related to Proposal 3 to one percent.

The study, by George E. Sansoucy, P.E., LLC and Martin R. Cohen, also concluded that more renewable energy would create more stability in electric prices and help blunt the effects of rate increases Michiganders have been experiencing due to increasing coal and oil costs.

“Proposal 3 would help diversify the state’s energy mix, stabilize electricity rates, and create in-state jobs that can’t be outsourced,” said Chris Kolb, Michigan Environmental Council president. “This report shows that 25 percent is achievable, affordable, and a thoughtful investment in the economic health of our state.”

Martin R. Cohen, one of the report’s authors, said it used data from the utility companies’ federal and state regulatory filings, forecasts by the Energy Information Administration (EIA) and other available information to examine the effect of Proposal 3 on ratepayer electricity costs.

“Renewable energy is becoming more and more cost competitive with other energy sources. Meeting the 25 percent standard will have little effect on Michiganders’ electric bills,” said Cohen.

The report released today was commissioned by the Michigan Environmental Council, which has been intervening in rate increase cases before the Michigan Public Service Commission for the last ten years on behalf of residential ratepayers.

Conclusions include:
  • The impact of Proposal 3 on electric rates would be minimal – Over the decade of 2016 to 2025, electric rates in Michigan would average 0.5% (one-half of one percent) higher under the proposed 25% renewable energy standard than under the current 10% standard. Between 2016 and 2025 monthly electric bills of a typical residential utility customer would be higher by an average of about 50 cents a month.
  • Proposal 3 would reduce rates long term – After the initial investments are made in the first ten years, renewable assets would put downward pressure on rates starting around 2027. By 2030, the higher renewable standard would be saving customers more than 80 cents per month and would continue to do so over the life of the facilities.
  • Cost trends favor renewable energy – Renewable energy continues to decline in price, with some technologies already cost-competitive with fossil-fueled energy. In contrast, the cost of coal-fired power (Michigan’s predominant power source) is increasing rapidly. Nearly 60 percent of Michigan’s electricity comes from imported coal.
  • Proposal 3 would result in greater rate stability – Contracts for wind energy and some other renewable resources can guarantee costs at least 20 years into the future. These long-term guarantees provide greater stability and predictability to electricity rates, making the 25% RES a buffer against volatile fuel markets.
“Michigan needs to become more energy independent. Renewable energy allows us to generate affordable power by taking advantage of our manufacturing expertise in this growing area of the global economy,” said Douglas Jester, an energy consultant with 5 Lakes Energy. “Michigan leads the country in clean energy patents. Proposal 3 will help us turn innovative ideas into the new companies of tomorrow.”

The full report is available at:
http://environmentalcouncil.org/mecReports/25by2025-ImpactonUtilityRates.pdf

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About the report’s authors:

Martin R. Cohen is an independent analyst of utility regulatory and energy issues and a long-time consumer advocacy leader. For 20 years he led the Illinois Citizens Utility Board, and was an officer of the National Association of State Utility Consumer Advocates. He also served briefly as head of the Illinois Commerce Commission and played a key role in creating the Illinois Power Agency. Mr. Cohen has written and testified about a wide range of consumer protection and energy procurement issues.

George E. Sansoucy is the owner of George E. Sansoucy, P.E., LLC which provides valuation, consulting and engineering services to clients throughout the United States. The firm's two primary services are 1) the valuation of public utility infrastructure, energy projects, and complex industrial properties, and 2) consultation services on energy and regulatory matters involving the public and private utilities sector in the United States. He has participated in legal and regulatory proceedings before state and federal courts and administrative agencies, including the Federal Energy Regulatory Commission and the Nuclear Regulatory Commission.

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Contact
Martin R. Cohen, analyst: 773-343-5369
James Clift, MEC: 517-256-0553
Douglas Jester, 5 Lakes Energy: 517-337-7527
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