Michigan utility regulators, analysts, and executives argue that average industrial rates for electricity by state don’t tell the whole story.
Julie Mette Bennett, CEO of Public Sector Consultants, a Lansing-based consultancy, said clients of DTE Energy and Consumers Energy Co. “We really need to get more detail about measuring more types of customers to have a really smart conversation about whether or not our pricing is competitive because the average is just the average.”
Ford said last week that its two new manufacturing complexes in Kentucky and Tennessee will use 86 gigawatt-hours per year in electricity — roughly the electricity used to power 17 million homes.
Norcia said DTE and other utilities can charge a lower price to high-volume industrial users such as a battery factory because the cost of service is lower due to the large volume of electricity.
“So it would be a lot less than the 8-cent figure (per kilowatt-hour) in a deal like this,” he said. And that’s what we were going to put on the table.”
After a change in the state’s energy law seven years ago, electricity prices in Michigan are based on the cost of service for each user category – residential, commercial and industrial.
This change in law sought to end a longstanding practice of offering so-called “economic development” rates to attract new businesses to Michigan at lower electricity prices than their competitors would pay.
As a result of the law change, the Michigan Public Service Commission is limited to licensing special contracts to large industrial users who can demonstrate that their exit from the utility’s customer base would be detrimental to other customers, said Dan Scripps, chairman of the MPSC. .
“It really limited our ability to give private economic development rates to try to attract a company,” Scripps told Crain’s.
In December, the commission approved a price case for Consumer Energy to sell Hemlock Semiconductor Corp. in Saginaw County nearly electricity to supply its 400-megawatt manufacturing plant after Hemlock threatened to build its own power plant. Hemlock produces polycrystalline silicon, a material used in solar cells and semiconductor devices.
Hemlock’s special rate came as a result of a 2019 change in the state’s energy law that the company lobbied. Electricity makes up 40 percent of Hemlock’s semiconductor costs, according to the House Tax Agency Analytics of a change in law.
Brian Rich, Senior Vice President and Chief Customer Officer, Consumer Energy Corporation.
Private contracts are limited to existing consumers or DTE customers and are not available to a new customer looking to move to Michigan, limiting the backlash that utility companies can get to strike private deals on new business rates.
“I think their reluctance is that they have a large number of industrial customers and they have some explanation,” Scripps said.
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