Michigan Electricity and Gas Market Liberalization
Consumers in Michigan benefit from what is known as a hybrid energy market – meaning that the market for electricity and gas is partially open to competition. Since 2000, Michigan's Electric Customer Choice Program and Natural Gas Customer Choice Program have opened up the energy markets to competition. Consumers have been able to choose alternative electricity and gas suppliers, but a cap limits the number of consumers who can choose to 10% of each traditional utility’s yearly sales.
How does Energy Market Liberalization Work?
In most of the United States, electricity markets are closed or highly-regulated. This means that if you live in a company’s service area, that company is your only choice for electricity or gas service. But in 16 US states, consumers have either limited or total ability to choose their own energy supplier. This openness gives consumers more flexibility, and also drives down prices – since electricity and gas suppliers must compete on price and other attributes to attract new customers.
Electricity Market Liberalization
Michigan offers limited electricity and gas market liberalization. Traditional electricity utilities, like DTE Energy and Consumers Energy, are required to give consumers in their service area the opportunity to choose an alternative electricity or gas supplier. But this freedom is limited, as only 10% of a Michigan utility company’s total yearly sales can be diverted to other providers. Once the 10% limit has been reached, other Michiganders must join a waiting list to switch to an alternative supplier according to the State of Michigan.
Where is This Taking Place?
Even though the ability to change providers is limited to 10% of an electric utility's retail sales, there are still six electric utilities which allow customers to choose. In addition to Michigan's two biggest providers, Consumers Edison and DTE Electric, other providers including Indiana Michigan Power (I&M), Upper Peninsula Power Company (UPPCO), Wisconsin Electric Power Company (WEPCo), and Wisconsin Public Service Corporation (WPSC) allow 10% of sales to be diverted to an alernative supplier.
|Consumers Energy||DTE Electric||Indiana Michigan Power||UPPCO||WEPCo||WPSC|
|Customers receiving service||1,069||5,521||0||
|Customers in Queue||6082||5261||0||13||2||0|
|Participation without 10% cap?||25.1%||22.09%||N/A||10.43%||85.31%||N/A|
Gas Market Liberalization
Unlike Michigan's electric utilites, specific natural gas service providers are required to allow all of their customers to choose providers. There is no cap for Michigan's Natural Gas Customer Choice Program.
Who Can Participate?
Customers within the service areas of Michigan Gas Utilities - MGU, Consumers Energy Company, DTE Gas Company or SEMCO Energy Gas Company (SEMCO) are all allowed to switch to an Alternative Gas Supplier if they desire.
How is Gas and Electricity Market Liberalization Received in Michigan?
Between 2000 and 2008, Michigan had liberalized gas and electricity retail markets, with no cap on the number of consumers that could enroll with alternative suppliers. During that period, use of an alternative energy provider reached rates of up to 20%, according to the State of Michigan.
However, due to concerns of price volatility, the 10% cap was instated in 2008. Since then, enrollment in alternative energy suppliers has been at capacity for both DTE Energy and Consumers Energy, and waiting lists have grown each year. Unfortunately in Michigan most of the allotment for alternative service providers has already been taken up by business and industrial customers. Residential paticipation is low.
Enrollment with Alternative Electric Suppliers (AES) in smaller providers has taken off a bit more slowly.
Initiatives for More Deregulation
Electricity prices have increased in recent years in Michigan, and they are now the highest of the local six-state Midwestern region. In addition, electricity rates in Michigan are high above the national average. In December 2013, Michigan lawmakers introduced House Bill 5184 to loosen regulations on electricity and gas competition. By opening up the market to more competition from alternative energy suppliers, they argue that Michigan consumers will benefit from lower prices. In addition, there are concerns that the high cost of electricity and gas in Michigan could be unattractive for businesses and harm the local economy.
The Future of Michigan’s Energy Market
Though the bill to deregulate Michigan’s energy market is still pending, utility companies are required by law to make investments in renewable energy sources. By 2015, Michigan suppliers must offer electricity and gas from at least 10% renewable sources. As a more stable long-term option for Michigan energy, energy prices are likely to be positively-effected in the long term.
While Michigan remains partially open to electricity and gas competition, other US states including Illinois and Texas, have taken liberal stances to electricity competition with great price reductions for consumers.
Michigan’s move toward energy competition has been well-received by Michigan residents, and coming developments suggest improvements in retail prices for Michiganders in the near future.