Letter: Keep electricity competitive
Do Michigan consumers want to go forward or backward in reducing their electric bills and modernizing the state’s power system? The Michigan Legislature is about to make this choice in legislation sponsored by Sen. Mike Nofs and Rep. Aric Nesbitt. Their proposals would take the state backward.
Sixteen years ago, under the leadership of Gov. John Engler, the state moved to get consumers out from under the control of the monopolies supplying electric power. While it was never set up as a truly fair “playing field,” customers receiving their power from competitive suppliers grew to a high of 18 percent of the market. But by 2008, the big utilities succeeded in capping the competition at just 10 percent of the market. While Nofs said his bill (Senate Bill 437) would preserve that small amount of competition, it would impose additional restrictions that competitive suppliers are certain would push them out of business in Michigan. Meanwhile, thousands of Michiganians remain on a waiting list hoping to escape from their monopoly supplier.
Michigan had electric power prices below the national average in 2000 when customer choice began, and those prices were still below the national average in 2008. Not now. According to U.S. Energy Information Administration data, the state’s prices have since jumped above the national average and are currently higher than prices in the nearby states of Ohio, Indiana, Illinois and Pennsylvania.
Customer choice is good for keeping prices competitive, but absolutely critical for modernizing the electric power system.
New technologies are poised to fundamentally transform the electric power industry. Small-scale power generation such as solar panels and natural gas micro-turbines are turning customers into energy producers. The electric grid is also going digital with advanced meters, home energy management systems, and smart appliances. These technologies will enable the electric power system to shift from its traditional one-directional utility-to-consumer flow to multi-directional flows.
Homeowners, small businesses, and others would then use the grid as a platform across which they could buy and sell their power and other energy services. Many are calling this transformation the Uberization of the electric power system. The changes enable smarter energy use that produces both environmental benefits and consumer savings.
Michigan, however, will not see these changes until it modernizes its electricity regulations. The Nofs and Nesbitt energy bills take the state in the wrong direction by effectively restoring the utilities’ monopoly on selling power to retail customers.
Monopoly utilities have to get out of retail electricity sales before a 21st century grid platform can emerge. This business should be handed over to competitive private sector companies. The utilities’ monopoly should be limited to owning and operating the electric distribution grid, which has the characteristics of a true monopoly.
The telecommunications industry required a similar limitation, which some experts refer to as a “quarantine,” to unleash the innovation that helped take the United States from landlines to smart phones. The federal anti-trust suit that broke up AT&T in the early 1980s included a quarantine of monopoly telephone service in the U.S. to just local service.
Michigan’s regulated monopoly utilities, of course, do not want retail electricity competition and are fighting hard to eliminate it in Michigan. They insist that taking away customer choice is necessary to ensure reliability and affordable prices. But states that allow retail competition, including Illinois, Ohio and Texas, have proved over the past two decades that they can keep the lights on and offer lower prices than Michigan.
A well-designed competitive electricity system in Michigan would continue to ensure reliability with state, regional (MISO) and federal regulatory oversight. The system would also be planned in a way that maximizes the ability of market forces to deliver new and better services to customers. Michigan needs to move its electric system into the 21st century and not get stuck in the last one with the Nofs and Nesbitt bills.
Michael A. Giberson, associate professor
Rawls College of Business
Texas Tech University
Jim Presswood, Executive Director
Earth Stewardship Alliance