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Plugged In: Prop. 3 and the True Meaning of ‘Skyrocket’

Rates are going up, but it's got nothing to do with renewables

Plugged In, Proposal 3, Power to Change | October 17, 2012 | By Jim Dulzo

Plugged In


Jim DulzoPlugged In is the energy-related blog of Jim Dulzo, MLUI's senior energy policy specialist. You can harass him at jimdulzo@mlui.org.
 

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Still mulling over whether Proposal 3, the renewable energy standard ballot initiative, will skyrocket your electric bill as utility ads claim?

Alrighty, then: Here’s a true story:

Back in 2008, when then-Gov. Granholm pushed state lawmakers to pass an RES so we could start catching up to other Midwestern states that already had strong standards, people were getting a bad case of the vapors over the cost of renewables.

The ruckus continued after lawmakers approved a mild-mannered RES—10 percent by 2015—significantly weaker than Minnesota’s and Illinois’ “25 x “25” standards. Utilities were allowed to put a little extra on customers’ bills to pay for renewables, which they had almost no experience with.

Consumers Energy proposed a $2.50 monthly surcharge for residential customers. It was a good number: Polls showed most people willing to pay a little more for renewables, seeing it as a good trade for cleaner air, non-exportable jobs, and a toehold for Michigan in the global renewables-manufacturing juggernaut.

About 18 months later, on a conference call with other clean energy activists, Consumers’ renewables surcharge came up. Our group’s regulatory expert, who tracks utility rate cases, laughed about the $2.50 charge.

“That’s really high!” he chuckled. He predicted regulators would lower it after the utility discovered how inexpensive its first renewables projects would turn out to be.

Consumers proved him right: First, the company cut its surcharge by more than three-quarters, from $2.50 to 65 cents. Then, with several new wind farms either under contract or under construction, Consumers looked at its numbers and cut the surcharge again to…Tah DAH!...52 cents!

Now, I get that a big utility would approach a scary, new thang like renewables cautiously. But I’m dumbfounded when, given their own experience with renewables costs—and the experiences of other states with five years of 25 x 25 renewables standards—they spend nearly $6 million of their customers’ money on ads pounding away at their evidence-free claim that Prop. 3 would cost ratepayers an extra $12 billion.

Here’s the kicker: Even as these same utilities put out cheery press releases about how wonderful things are with their renewables, their rates for commercial users—the ones they say they simply must protect, ’cuz, you know: jobs, jobs, jobs!—have risen more in Michigan than anywhere else in the U.S., according to the federal Energy Information Agency.

Yet, renewables, according to these companies’ regulatory filings, have nothing to do with their big price jumps. As we do-gooders routinely predicted over the years, it is mostly due to the rising cost of digging up and transporting coal.

And, as we do-gooders also routinely predicted, renewables’ costs continue to plummet.

So…one more story and I’ll let ya go: Three years ago, Traverse City Light & Power signed a contract with Stony Corners Wind Farm in McBain, Mich., for power at 11 cents per kilowatt-hour—a darn good price back then.

Well, recently, Wyandotte Public Services, that town’s publicly owned utility, signed a contract with an Ohio wind farm. WPS manager Jim French couldn’t reveal the proprietary price, but he did say “it is essentially at current market costs for electricity, so that is not costing us any rate increases.”

And just last week, Holland’s utility signed a windpower agreement at 4.57 cents per kilowatt-hour. There’s an escalator in the contract, but officials bet—very smartly—that fossil fuel costs are going up much more quickly.

It looks like they’re right: Consumers now wants to raise residential electric rates by an average of more than $11 per month, and it has nothing to do with renewables. And, in the year ending in July, DTE Energy raised residential rates by an average of 11 percent—largely due to the rising cost of coal.

Now, that’s skyrocketing!

Jim Dulzo is the Michigan Land Use Institute’s senior energy policy specialist. Reach him at jimdulzo@mlui.org

4 Comments

1507 days ago, 2:06pm | by alta frerrs | Report Comment

Granted... I scanned the above information.... so what does MLUI recommend on Prop 3?

Thanks.

1502 days ago, 11:40am | by Jim Dulzo | Report Comment

Alta: We strongly endorse Prop 3. It will, over time, help hold electricity prices down, help Michigan grow its renewables manufacturing sector, and lead to cuts in harmful air emissions. This is so important for the state's economic future that it deserves to be a constitutional amendment, so that lobbyists can't mess with it. And that's no paranoia: There's already a push in the state Legislature to repeal our current, quite modest renewables standard.

1499 days ago, 8:10pm | by Bryan | Report Comment

I'm an trying desperately to find the calculations that compute to $12 billion dollars. What does that $12 billion pay for, exactly? Where did the number come from? As far as I can tell, it is just a made-up number.

You've said here it's an "evidence-free claim" -- is there really no effort being made by the opponents of Prop 3 to explain this number?

1498 days ago, 12:02am | by Dr. Todd | Report Comment

You have got to be kidding???? A supposedly enviro-friendly group supporting windmills?? Really?? Can you not do math?? Do you not see that these things are an eyesore on the landscape of our beautiful state? How many square miles have to be covered with these things to produce an acceptable amount of power. My electric bill has nearly doubled in the last 5 years despite my attempts to improve efficiency in my home. Vote NO on 3!!!! Vote NO on covering our state with windmills!!!

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