Electricity Restructuring in Michigan
The Effects to Date of Public Act 141 and Potential Future Challenges

November 2006

A report released today by Public Sector Consultants Inc. of Lansing concludes that Michigan’s electric market restructuring laws (enacted in 2000) are a flawed attempt at restructuring Michigan’s electric market. Challenges created in the original legislation—coupled with the initial implementation decisions of the Michigan Public Service Commission—have created an economically unsustainable system for both producers and consumers of electricity in Michigan.

Artificial incentives to encourage consumers to move to competitive electric producers, combined with Michigan’s continued price distortion (with higher commercial and industrial rates supporting lower residential rates) have exacerbated the situation.

The study—commissioned by the Michigan Municipal Electric Association (MMEA) and Protect Michigan—was aimed at an economic and policy analysis of PA 141 of 2000 (Michigan’s primary electric industry restructuring law, along with PA 142 of 2000). The report

• looks back at the successes and failures of electric restructuring in Michigan,
• reviews the lessons learned from the implementation of PA 141 by the Michigan Public Service Commission, and
• analyzes the emerging and significant challenges facing Michigan’s electric market over the next decade.

“It is clear that residential electric rates were lowered by PA 141,” says Jeff Williams, Senior Vice President at Public Sector Consultants. “However, these rates were not lowered by competitive market forces; instead, they were decreased by a price cap on Michigan’s two major electric producers, which expired at the end of 2005.”

“It is evident that alternative energy suppliers are not interested in serving Michigan’s residential customers,” states Jim Weeks of MMEA. “The savings that were seen by business customers appear to have been more an effect of artificial incentives or Michigan’s skewed rates, instead of a truly competitive market with a number of suppliers.”

“With skewed rates and different obligations on incumbent versus competitive utilities to serve customers, Michigan will have a tough time meeting the increased future electricity demands outlined in the capacity study written by the Public Service Commission,” says Jim Beaubien of Protect Michigan.

Available downloads: (Adobe^® Acrobat format)

• Press Release
• Executive Summary
• Final Report
• View the 2007 report: Market Structures and the 21st Century Energy Plan