Rep. Shirkey Introduces Reform to Increase Competition in State’s Energy Market, Will Save Consumers Hundreds of Millions of Dollars

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‘Michigan Electric Customer Freedom Act’ Eliminates Arbitrary 10% Cap on Electric Competition, Provides Sensible Market Restraints to Accelerating Rate Increases

LANSING – State Rep. Mike Shirkey today introduced legislation to create a fully competitive retail electricity market in Michigan, which would end the monopoly-style system that economists claim has cost Michigan job providers and families $3 billion since 2008.  The Michigan Electric Customer Freedom Act will deliver more affordable electric service and more tools to manage energy costs to Michigan customers in a safe and reliable manner, saving companies and families hundreds of millions on their electricity bills each year.

“In 2012, Governor Snyder called on policymakers to begin the process of crafting reforms and improvements to Michigan’s current energy law,” said Shirkey, R-Clarklake. “Nowhere is reform more critical than in empowering Michiganders with the freedom to cost-compare before choosing their own electricity supplier.

“Giving Michigan job makers and families a fully competitive retail electricity market will lower rates, help families manage and save on their energy costs, and ensure that customers who want to purchase ‘green’ energy have every chance to do it as cost effectively as possible.”

House Bill 5184 would remove the 10 percent cap on electric choice and open Michigan’s electricity market to full competition.  This measure also provides robust protections for our critically important utilities as Michigan navigates from its hybrid model to a fully competitive model.

Since 2008, Michigan’s monopoly-style energy policy, which is a byzantine hybrid of a partially regulated/partially deregulated system, has resulted in energy costs for consumers that were $3 billion higher than the lower rates enjoyed in nearby states such as Indiana, Wisconsin, and Ohio, according to economist Dr. Jonathan Lesser and Dr. Philip O’Connor.  The findings were recently published in a formal response to the October “Draft Report on Electric Choice” coauthored by the Chairman of the Michigan Public Service Commission and the Director of the Michigan Energy Office.

Michigan’s hybrid system costs Michigan an estimated 21,000 jobs each year, according to Lesser and O’Connor.

“Michigan manufacturers spend hundreds of millions of dollars more each year on electricity than their competitors in neighboring states,” said Jonas McCluskey, president of Elm Plating a high-quality metal finisher in Jackson.  “The lack of competition in Michigan’s energy market dramatically drives up prices not just for manufacturers, but for their customers as well.  Bringing choice to the state’s electric market would make a real difference in the lives—and pocketbooks—of nearly every Michigander.”

According to the U.S. Energy Information Agency, Michigan businesses that were able to choose a competitive electricity supplier before the 10 percent cap on competition was reached have saved more than $350 million since 2009.

Over 11,000 companies are currently on waiting lists for the opportunity to choose a competitive electricity provider.  These job providers alone are paying an estimated $235 million more in electricity each year than they need to, while trying hard to compete with companies located in other nearby states.  For most of these electric customers on the waiting list the reality is they will never be afforded the opportunity to truly manage their electric costs. Additionally, this hybrid system, by definition, creates a world of 10% winners and 90% losers.

Electricity prices, including business and residential rates, have gone up an average of 2.7% nationally since 2008, while rates have skyrocketed by over 30% in Michigan in that time.  That’s an increase of over 1,000% more than the national average since Michigan abandoned electric choice in 2008. During this same period, while wholesale costs of electricity have dramatically dropped, the retail prices consumers and businesses pay have gone up.  This is substantially due to the fact there is no market influence present.

“Higher than competitive-market electric rates operate like a tax on Michigan consumers and job providers, taking hundreds of millions of dollars a year out of our local economies.  This common sense reform will empower job makers and families to stay in Michigan, grow their businesses and invest in their communities,” said Shirkey.