Frank Zaski Articles

Summary of EIA and MPSC electric rates

By Frank Zaski

The following are summaries of recent EIA and MPSC electric rate statistics with emphasis on the Residential category.

EIA May 2018 Statistics

The EIA reports national and state electric rates and other electric statistics.

  • Comparing May 2018 with May 2017, Michigan Residential electric rates increased while rates declined for Commercial, Industrial, Transportation and Overall.
  • For the 5-state Midwest region, rates declined in all rate categories.
  • Only 10 states have higher Residential electric rates than Michigan. We just passed New Jersey in the rankings.
  • Michigan’s Residential rates are 119% higher than our Industrial electric rates. Only four other states have a more burdensome skew in favor of industry.

https://www.eia.gov/electricity/monthly/epm_table_grapher.php?t=epmt_5_06_a

https://www.eia.gov/electricity/monthly/

MPSC July 2018 Statistics

The MPSC reports monthly rates for Michigan’s regulated electric utilities. Big industry in Michigan is benefiting from a major shift of their electric rates to the smallest and poorest ratepayers (250kWh/month).

  • Comparing July 2018 with July 2017, electric rates for the smallest CMS Residential users increased 3.3% but declined 3.7% for the largest Industrial users. The cents per kWh gap is substantial, 17.74 vs 8.13 (118%).
  • The gap is even larger for DTE ratepayers; 17.55 (¢/kWh) vs. 7.23 (a 143% difference). Rates for DTE Industrial users went up 3.3% and Residential increased 1.0% since last year.
  • Ten years ago (July, 2008), the percent gap between DTE’s smallest Residential users and the largest Industrial users was 49%, now it is 143%. This gap for CMS ratepayers was 42% 10 years ago, now it’s 118%.
  • The reason? There was a 48% rate increase for the smallest CMS Residential users over the past 10 years, while their largest Industrial users received a 4% decrease. Small Residential ratepayers at DTE had their rates increase 64% over the past 10 years while rates for the largest Industrial users were held flat.

Within the Residential rate category alone, there has been a major rate shift from the largest (1000kWh/month) Michigan Residential user to the smallest (250kWh/month).

  • In 2008, rates for the smallest DTE Residential users were actually 6% lower than for the largest users. Today, small users have a 10% disadvantage compared with big Residential users. At CMS, the gap between the big and small users was 3% ten years ago. Now it is 10%.

https://www.michigan.gov/documents/mpsc/rates1_594951_7.pdf

https://www.michigan.gov/mpsc/0,4639,7-159-16377_52818—,00.html

In addition to an over-stimulated economy and the largest federal and state income tax cuts, big industry is also benefiting from a major electric rate changes in Michigan.  Yes, there is a cost of service difference between big and small electric users.

However, the above statistics and trends suggest a couple of questions: 

Are Michigan’s rates fair and are those least able to pay subsidizing other electric users?

2017 Residential Electric Sales and Rates in Michigan

Based on EIA statistics for the 2017 calendar year:
https://www.eia.gov/electricity/monthly/current_month/epm.pdf

Electric sales have declined in Michigan, the Midwest and US for over the past 1, 5 and 10 years
Electric sales in Michigan have declined in all sales groups; Residential, Commercial, Industrial and in Total. This has been the case for the Midwest and US as well. https://www.eia.gov/electricity/data/browser/

Michigan’s electric rates remain high, especially for Residential customers

  • Electric rates in Michigan are higher than those in the Midwest and US for all rate categories
  • Overall Michigan rates (11.39 cents per kilowatthour) are less competitive than in the Midwest (10.08¢) and US (10.54¢)
  • Our Industrial rates ((7.32¢) are only somewhat higher than those in the Midwest (7.02¢) and US (6.91¢)
  • The largest gap is that our Residential rates (15.47¢) are much higher than those in the Midwest (13.23¢) and US (12.40¢). Table 5.4.B.

The gap between Michigan’s Residential and Industrial electric rates continues to heavily favor Industrial. Residential customers in Michigan pay 111% more per kilowatthour than our Industrial customers. This compares unfavorably with more reasonable spreads in the Midwest (88%) and US (89%).

The Michigan gap narrowed a bit in 2017 (111%) compared to 2016 (120%). However, only four other states maintain a larger skew in favor of Industrial than Michigan.

Sources:
https://www.eia.gov/electricity/monthly/epm_table_grapher.php?t=epmt_5_06_b
https://www.eia.gov/electricity/monthly/current_month/epm.pdf
https://www.eia.gov/electricity/monthly/

Residential Electric Rates in Michigan

Michigan’s electric rate situation today
According to EIA electric statistics for the month of July 2017 (most recent available):

  • Michigan’s Industrial electric rates are fairly comparable to those in the Midwest and US
  • Commercial rates in Michigan are also fairly comparable to those in the Midwest and US
  • The All Sector rates in Michigan, however, are significantly higher than those in the Midwest and US
  • The greatest gap is that Michigan’s Residential rates are much higher than those in the Midwest and US. Our Residential rates are 20% higher and higher than in all but 11 US coastal states
  • Michigan’s Residential rates are more than double our Industrial rates (113% higher). This severe rate skewing is higher than in all but three other US states.

https://www.eia.gov/electricity/monthly/epm_table_grapher.php?t=epmt_5_06_a

Ten year trend
Comparing rates in the second quarter 2017 vs. Q2 2007:

  • Michigan’s Residential ratepayers were the hardest hit with a 52% increase vs 20% for Residential in the US
  • Our Industrial rates increased only 12% vs. 8% nationally
  • Michigan’s All Sector electric rates increased 33% vs 15% for the US

Major skewing within the Residential rate classes
According the September MPSC statistics:

  • 10 year ago, Residential ratepayers who used the least amount of electricity 250 kWh/mo. had the lowest rates among residential users. Today, they have the highest rates while those who consume a much higher amount (1,000 kWh/mo.) receive the lowest Residential rates

DTE: Over the past 10 years, DTE’s smallest Residential users (250 kWh per month) experienced the highest rate increase (69%) and the big Residential users were impacted less (46%).
In sharp contrast, DTE rates for their largest industrial users had the smallest increase of only 4% over the past 10 years. http://www.dleg.state.mi.us/mpsc/electric/download/rates1.pdf

CMS: CMS piled even more on to their smallest electric users. Over the past 10 years, rates for their smallest residential users increased 77% vs 56% for those using 1,000 kWh per month or more. Rates for the largest CMS industrial users increased only 12%
http://www.dleg.state.mi.us/mpsc/electric/download/rates1.pdf

Electric and high gas bills must be considered together
While Michigan’s household electric bills (in dollars) are comparable to the US average, our heating bills are ranked 2nd highest in the US. Most ratepayers pay both gas and electric bills and they must be considered together. https://wallethub.com/edu/energy-costs-by-state/4833/#methodology
Flat electric bills also ignore that Residential electric usage has declined roughly 7% over the past 10 years.

The trend towards piling ever increasing electric rate on to our smallest Residential users is placing a major burden on those least able to pay.

Michigan Electric Rate Statistics

The following is a summary of electric rates and bills in Michigan. Most data is from the US EIA (Energy Information Administration) and MPSC reports. (Sources listed below)

Summary
Michigan’s electric rates, and particularly our Residential rates, have increased faster than in the US and Midwest and are now considerably higher. In the effort to make our Industrial rates more competitive, substantial rate burden has been transferred to our Residential rate payers, particularly the smallest users. Often, the smallest users are ratepayers with the least ability to pay. These higher electric bills are particularly burdensome since Michigan has some the highest heating bills in the country. Overall, Michigan’s high electric rates and severe rate skewing has diminished the quality of life for many households.

Details

Ten years ago, Overall electric rates in Michigan were below the national average (8.53 vs 8.75 cents per kWh 1st qtr.). Now they are above the national average (11.44 vs 10.27 cents). Our rates increased 34% while the national rates increased only 17%. (EIA)

Ten years ago, Michigan Residential rates were identical to the national average (10.06 cents). Since then, our Residential rates increased 52% vs. only 25% nationally (15.33 vs 12.61).

While Michigan’s Residential rates jumped 52% in 10 years, in sharp contrast, our median household incomes declined 9%. The median Michigan household income was almost the same as the US average in 2005, but dropped $4,800 below thru 2015. http://www.deptofnumbers.com/income/michigan/

The argument that it is OK to raise Residential electric rates because the average Michigan household electric bill (in dollars) was only at the US average doesn’t hold water. Most people pay both electric and gas bills. The total heating/electric bill in Michigan is most likely higher than the US total bill because our heating fuel usage is well above average. Note, there are a number of formulas to distribute costs among the various rate classes.

Michigan routinely ranks among the top 5 in residential use of natural gas. https://www.eia.gov/state/print.cfm?sid=MI

And in this analysis, Michigan electric bills are ranked 43rd in size, but our heating bills are 2nd. https://wallethub.com/edu/energy-costs-by-state/4833/#methodology

Perhaps some explanation for our higher rates, Michigan is one of only 6 states in the top tier of the most accommodative public service commissions for solid return on equity and unique recovery mechanisms. See slide 8 in this May 212017 DTE presentation: http://phx.corporate-ir.net/External.File?t=1&item=VHlwZT0yfFBhcmVudElEPTUyNTczMTZ8Q2hpbGRJRD02NzE4MTk=

Michigan electric rate situation in 2017

According to the 1st Qtr. 2017 EIA report: https://www.eia.gov/electricity/monthly/epm_table_grapher.cfm?t=epmt_5_06_b

Residential rates in Michigan are 16% higher than the Midwest average and 18% higher than the US average. Our households have the highest Residential electric rates in the US except for 10 coastal states.

Total (All Sector) Michigan rates are 14% higher that the Midwest average and 11% higher than the US average. This too is the highest rates between the US coastal states.

Industrial rates in Michigan are fairly competitive being only 5% higher that the Midwest average and 11% higher than the US average. Michigan’s Industrial rates are actually lower than those in Wisconsin and Indiana.

Michigan Residential rates are more than double our Industrial rates (108% higher). This skewing definitely favors Industrials compared with the ratios for the Midwest (+84%) and the US (+90%).

If Michigan Residential rates were the same as the Midwest average (18% lower), our households would have saved almost a one billion dollars ($948 million) on their utility bills (18% x $5.264 billion 2016 annual residential expenditures). A billion dollars in the pockets of Michigan’s households would have done more for Michigan’s economy than giving big business these breaks in their electric bills.

DTE and CMS rate statistics according to June 2017 MPSC report: http://www.michigan.gov/documents/mpsc/rates1_594951_7.pdf

DTE

Over the past 10 years, rates for DTE’s average Residential user (500 kWh per month) went up 50% while the average Industrial rate actually declined 1%. DTE’s smallest Residential ratepayers (250 kWh per month) got the worst deal. Their rates went up the most for any rate group (+66%). The DTE rate for these small users (17.38 cents) is now 148% higher than for that for the largest Industrial users (7.00 cents).

Ten years ago, this relationship was far more balanced at only 48%. Ten years ago, the DTE’s Residential users who used the most electricity per month had higher rates than the smallest users (11.17 vs.10.48 cents). Now, the smallest users get the higher rate burden (17.38 vs. 15.61 cents).

CMS

Over the past 10 years, rates for CMS’s average residential user (500 kWh per month) went up 61% while the average Industrial rate increased 30%.

CMS piled the most rate burden on to their smallest electric users (250 kWh per month). Their rates increased 78% while average Residential (+61%) and large users (+54%) suffered less.

The CMS rate for these small users (17.22 cents) is now 103% higher than for that for the largest Industrial users (8.48 cents). Ten years ago, this difference was far more balanced at only 38%.

Ten years ago, CMS’s Residential users who used the most electricity per month had higher rates than the smallest users (10.50 vs.19.69 cents). Now, the smallest users have the biggest rate burden (17.22 vs. 16.15 cents).

It appears ratepayers most able to pay got the rate breaks at the expense of those least able to pay.

Data sources:

EIA Overall: https://www.eia.gov/electricity/monthly/

Q1 2017 https://www.eia.gov/electricity/monthly/epm_table_grapher.cfm?t=epmt_5_06_b

Trends: Electricity Data Browser https://www.eia.gov/electricity/data/browser/

DTE and CMS rates http://www.dleg.state.mi.us/mpsc/electric/download/rates1.pdf

New England senators, witness question pipeline financing practices

For your Nexus and Rover discussions:

Many utilities (including DTE) are locking their ratepayers into long term natural gas pipeline contracts. This is troublesome particularly for proposed, unneeded pipelines. Note clips from this article.

Large gas pipelines traditionally are financed by utilities and other large customers that determine they will save substantially with lower rates, Sen. Elizabeth Warren (D-Mass.) observed. “But does it make sense to make home heating customers and small businesses bear the risk when the state lets utilities pass the costs through? Giant pipeline companies should not be allowed to force consumers to pay for these huge uneconomic projects,” she said.

N. Jonathan Peress, who is EDF’s gas air-policy director, said the magnitude of new gas pipeline projects under developed combined with what’s been built in the last 10 years could lead to a capacity bubble. “It could impose unnecessary costs on energy customers for expensive yet unneeded pipeline capacity, and ultimately constrain deployment of lower cost energy sources like wind and solar in the future,” he warned.
http://www.ogj.com/articles/2016/06/new-england-senators-witness-question-pipeline-financing-practices.html?cmpid=EnlDrillingJune172016&eid=288216020&bid=1436704

In Michigan, the proposed Nexus pipeline is 50% owned by an unregulated division of DTE Energy, the state’s largest utility. While only 5% of the gas flowing thru Nexus is destined for Michigan, DTE Gas and Electric is trying to have their ratepayers pay the costs (subsidize!?) for a substantial portion of this pipe in their monthly bills. The Sierra Club Michigan Chapter is protesting at the MPSC and notified FERC. http://elibrary.ferc.gov/idmws/common/opennat.asp?fileID=14267826

An article (based on the SC post) appeared in Michigan’s largest newspaper reporting this situation. http://www.freep.com/story/news/local/michigan/2016/06/13/critics-dte-pipeline-plan-bad-ratepayers/85608948/

In Ontario, business, utility and industrial users stated to the OEB that they do not want unnecessary and costly overbuild of the Dawn Parkway pipeline needed to transport additional Rover/Nexus gas from Dawn. They believe the government will mandate reduced natural gas consumption (through RE and EE). They know they would have to pay for pipeline legacy costs as well. http://www.ontarioenergyboard.ca/oeb/Industry/Regulatory%20Proceedings/Policy%20Initiatives%20and%20Consultations/2015%20Natural%20Gas%20Market%20Review%20%28EB-2015-0237%29

If we are serious about complying with COP21 and substantially reduce GHG emissions, we cannot be locked into 20 year natural gas pipeline contracts, particularly for new, unneeded pipelines. Ratepayers must be made aware of this.

PS. I have a ton of info on why Nexus and Rover are not needed, including:

THE PREMIUM DAWN HUB PRICE FOR NEXUS AND ROVER IS GONE
(This is the reason they decided to build these pipelines)
http://elibrary.ferc.gov/idmws/common/opennat.asp?fileID=14211961

Rover, the pipeline to nowhere
http://elibrary.ferc.gov/idmws/common/opennat.asp?fileID=14250168