Michigan’s electricity market is a tale of two cities

David Mengebier

The “haves” are Michigan’s regulated utilities.

We’ve assured the state that we have reliable and affordable power for Michigan’s homes and businesses.

We’ve made millions in investments here in power plants and assets. For example, Consumers Energy and DTE Energy, co-owners of the Ludington Pumped Storage Plant, are investing $800 million in that facility to increase its electric output, while employing hundreds of Michigan workers to help boost the state’s economy.

Michigan’s regulated utilities employ thousands of people here and pay millions in taxes which support Michigan communities, schools and roads. At Consumers Energy, we say you can count on us to keep our promise to Michigan. We’ve done this for nearly 130 years.

Meanwhile, the “have-nots” are out-of-state energy marketers. They report to companies headquartered in places like Baltimore, Houston, and Chicago.

The out-of-state marketers have not made real investments to serve or fulfill their obligation to their Michigan customers. They employ very few people here. They pay essentially no taxes here.

Despite the lack of investments in Michigan to ensure a reliable, robust and affordable electric system, the out-of-state marketers remarkably serve 10 percent of Michigan’s electric market.

These marketers rely almost exclusively on purchases from a tightening electric market to meet their customers’ needs. They rely on surplus power generated by others, mainly utilities, which they then sell to their customers.

As recently identified by the federal grid operator, Michigan’s Lower Peninsula is electric capacity short and faces a 300-megawatt shortage by 2017. That’s enough capacity to serve about 150,000 homes, or the cities of Jackson, Traverse City, Frankenmuth and Grand Ledge combined, or 64,000 small businesses. Those who say Michigan should just import power may be unaware that the import market is drying up.

Thirty-four coal units in the state have shut down or will shut down between now and 2025. The surplus relied on by the out-of-state marketers is effectively gone.

So what are the out-of-state energy marketers doing to prevent a rapidly-approaching electricity shortfall? Incredibly, there’s no sign these marketers are investing in Michigan to serve their customers.

If the out-of-state marketers had planned for their customers and invested in real assets, Michigan would not face a shortfall. If they take responsibility now, it’s possible Michigan can manage through this situation. But the bottom line is that the out-of-state marketers must invest in physical assets here to serve their customers.

Critical energy legislation now before the Michigan Senate — SB437 and SB438 — simply requires that out-of-state marketers plan for firm electric capacity for their customers for at least two years going forward. If Michigan’s shortfall worsens, then that reasonable planning requirement moves to three years.

This simple and fair requirement can ensure statewide electric reliability for Michigan. And that’s only one reason to support these bills, which also ensure that Michigan can provide a reliable and affordable energy future to our state’s manufacturers, small businesses, families and residents.

After all, keeping the lights on and the factories humming isn’t just a nice thing. It’s an essential thing if Michigan is to continue to grow and prosper.

David Mengebier is Consumers Energy’s senior vice president of governmental, regulatory and public affairs.