Consumers Energy electricity rate increases 50% during peak hours
Consumers Energy's 1.6 million residential electricity customers began paying 50% more during peak afternoon hours this week in an effort to reduce energy generation in the future.
The subsidiary of Jackson-based CMS Energy Corp. has notified its customers in the Lower Peninsula's central, northern and western regions in recent weeks of the utility’s move to the new standard summer peak rate. The rate is in effect from 2 p.m. to 7 p.m. weekdays starting Tuesday through September. A 2019 pilot that included nearly 50,000 customers showed households most likely will be paying about $2 more per month without changing their behavior.
The higher cost during certain times of the day is a part of a greater trend in the energy industry seeking to reduce power generation as it pivots to relying on greener and renewable resources by providing a financial incentive to ratepayers to not use the dishwasher, do laundry or vacuum when energy demand is at its highest.
The peak-use system could come to more Michigan residents, as DTE Energy Co., which services much of eastern Michigan, is testing its own program.
For Consumers Energy, its clean energy plan includes retiring its coal generating stations by 2040.
"Some of the power plants that get built don't get use for much of the year," said Consumers spokesman Brian Wheeler, noting energy consumption doubles on hot summer days in Michigan. "They are built to meet the peak. The peak is very rare in Michigan. In southern states like Florida, they might be used year-round.
"This became a question of 'Is there a more affordable approach and a more environmentally appropriate approach?' This can make a significant impact by simply shifting that usage to different hours of the day."
The new rate has customers paying almost 15 cents per kilowatt-hour during peak hours and about 10 cents during off-peak times. That is more reflective of the actual cost of power generation at different times of the day and year since the last kilowatt-hour produced is the most expensive. The 2019 pilot showed a 3.5% reduction in peak-hour energy use.
Consumers charges about 10 cents per kilowatt-hour during nonsummer months.
The utility's price structure change also eliminates for the summer an increased rate for households that use more than 600 kilowatt-hours of energy each month. On average, Consumers Energy customers use 650 kilowatt-hours of energy each month, Wheeler said, so some customers could pay less per month under the new system if they make adjustments.
Despite more people working from home during the pandemic, the change is not expected to increase Consumers Energy's revenues, Wheeler added. It was supposed to be implemented last year but was delayed because of the COVID-19 pandemic. Total energy use by Consumers Energy customers actually has declined since COVID-19 came to Michigan, though as more business activity has resumed, demand is increasing again.
Michigan is looking at a 40% to 50% probability of temperatures above average in the summer, the National Weather Service and National Oceanic and Atmospheric Administration said in April.
Consumers Energy isn't alone in the move to time-of-use rates. DTE is running its own pilot with 14,000 customers that it expects to expand eventually to its 1.8 million residential electricity ratepayers in southeast Michigan and the Thumb region. When that could happen has not been finalized, DTE spokesman Chris Lamphear said.
DTE's Shift & Save pilot has participants paying 16.6 cents per kilowatt-hour from 3 p.m. to 7 p.m. June through September compared to the typical 15.7 cents most customers pay. Off-peak hours are discounted at 14.9 cents per kilowatt-hour. From October through May, the peak costs fall to 15.4 cents per kilowatt-hour.
For customers who do not change their behavior during the pilot, they are paying $2 to $5 more per month, Lamphear said. The company gave estimates to participants showing if they do change their behavior, they could save $10 to $15 per month.
DTE also plans to retire its coal power plants by 2040. The Detroit-based utility is building a new natural gas plant in East China Township that is expected to come online next year.
"You always have to be prepared to meet the demand of your peak period," Lamphear said. "There are a certain number of plants in operation. That peak can be lowered so that there are fewer facilities running at any given time. That benefits all of our ratepayers and the environment. ... It's all geared at education and incentivizing."
Time-of-use rates have been used to help facilitate renewable energy integration into the grid in other states, said Greg Keoleian, director for the Center for Sustainable Systems at the University of Michigan. Most energy providers in California have transitioned to these rates, for example.
“For solar, for example, it’s there during the noon hours, but if you have heavy demand when people get home from work, when the solar is going down, it’s a challenge for utilities to meet that demand,” Keoleian said. “It is all about being able to manage the demand more cost-effectively and also to do it with lower environmental impact.”
Michigan ratepayers can reduce the impact of the rate increase by increasing the temperature on their air conditioners during peak hours. One degree difference can reduce a bill by up to 3%, according to Consumers Energy. Using ceiling fans or closing off vents in parts of the house not being used can help, too.
Replacing air-conditioning filters once a month, installing programmable thermostats and swapping out incandescent lightbulbs for LEDs also can help save on energy costs.
The Michigan Public Service Commission charged with regulating utilities approved the rate change for Consumers Energy customers in December.
In a statement, the commission said it "believes this rate will empower customers who shift some of their households’ electricity use — such as air conditioners, washers and dryers and other energy-intensive devices — away from the times of day when overall demand on the electric grid is highest to save money."