The Price of Power: DTE Energy’s new proposal could mean much higher bills for Michiganders
On July 3, DTE Energy filed a rate case with the Michigan Public Service Commission. If it is approved, it would increase electricity bills for DTE residential customers by $240 per year by 2022.
Rate cases decide how energy costs are divided up amongst residential, commercial, and industrial customers. They also determine which of these three will shoulder most of the burden of rate increases. As we have been doing for the past ten years, Michigan Environmental Council (and partner organizations Natural Resources Defense Council, Sierra Club, and Earthjustice) has intervened in these cases and worked to rein in costs for residential ratepayers and to ensure that the residents of Michigan are not being asked to pay more than their fair share. To achieve those goals, we have advocated for the rapid retirement of expensive coal power plants and the expansion of programs that help customers reduce energy use and save money.
In Michigan, utilities are different from other companies because they are monopolies, meaning they have no competition and residents don’t get to choose which utility sells them electricity. For instance, if you live in Detroit, you must buy your electricity from DTE. It is the role of the Michigan Public Service Commission (MPSC) to make sure that monopoly power is not being abused and its MEC’s role to point out to the MPSC when we think that is happening.
DTE’s rate case is a clear instance in which residential customers are being asked to foot expensive and unnecessary costs. In a series of articles, we will breakdown what is in the rate case and what it means for DTE customers and Michigan as a whole. In this first article let’s start with the bottom line: DTE’s proposal to saddle residential ratepayers with much higher electricity bills.
Massive rate and cost increases on residential customers
In this most recent rate application, DTE requested a $524 million revenue increase. After subtracting $196 million out due to a federal tax cut for corporations, the increase amounts to a $328 million rate increase for DTE ratepayers that, if approved, will hit bills starting in spring of 2019. That is a rate increase of 6.7 percent across all customer classes with residential customers footing the largest increase of just over 9 percent. This translates into a typical residential user’s bill going up by $9.42 per month or $113 annually according to the rate application filed by DTE.
On top of the 9 percent increase in the first year, by 2022 DTE wants to spend over $800 million for upgrades to their distribution system, upgrades to existing plants (even those they are planning to close in the next few years) and to build a massive new gas plant in St. Clair County. Between 2020 and 2022, DTE is asking for residential ratepayers to pay 54 percent of that amount, or $447,609,000.
When you combine the 9 percent rate increase, a proposed increase in a fixed charge, and the new infrastructure costs, the average residential DTE customer will pay close to 19 percent more, or about $240, a year by 2022.
Commercial and industrial customers, on the other hand, would only see between a 10 and 13 percent rate increase over that same time period.
Michigan already has some of the highest residential rates in the Midwest and the country. Ten years ago, Michigan residential rates were identical to the national average. Since then, our residential rates have increased by 52 percent versus national rates that increased only 25 percent. Only 10 states in the nation have higher residential rates than Michigan, and it’s not a mystery why. Over the last few years Michigan decision makers have approved policies that substantially shifted costs from industrial customers onto the backs of residential customers. Right now, the gap between Michigan’s residential and industrial electric rates continues to heavily favor the industrial side with residential customers in Michigan paying twice as much per kilowatt-hour.
The truth is that these staggering rate increases are not necessary. Investments in a combination of renewable energy and programs that help customers reduce energy use overall could save us billions of dollars over the next fifteen years. For example, when DTE sought approval to build the massive new gas plant, MEC and our partners put forward clean energy alternatives that would have saved customers $1.8 billion over the next fifteen years when compared to the cost of the plant. Unfortunately the MPSC approved the new gas plant despite the availability of cheaper alternatives.
What can you do to stop your energy bill from spiking?
Tell DTE in person to reduce costs for residential customers by investing in cheap, renewable energy and reducing energy waste. DTE is hosting an open house on October 23 from 4-7 p.m at the Wayne County Community College, District Downtown Campus (Atrium 1001 W. Fort Street, Detroit) to talk about the company’s vision for our energy future.