Runestad Detroit News op-ed: Michigan needs commonsense utility rate increases

Runestad Detroit News op-ed: Michigan needs commonsense utility rate increases

By Sen. Jim Runestad
23rd Senate District

In December, the Michigan Public Service Commission (MPSC) gave DTE Energy a Christmas gift of a $368 million rate increase on homes, businesses, schools and everyone in between.

But this rate hike was based on DTE’s projection of what their future costs would be — not the actual costs.

Rather than base a multi-million-dollar rate increase on their actual costs, they decided to use an arbitrary number of estimated future costs. But at the same time, DTE filed information showing that when based on actual costs, DTE had already received $93.6 million more in revenue than necessary to earn its authorized level of profit.

During that time, Michigan’s residential utility customers were also paying the 11th highest electricity rates in the nation, according to December 2023 data from the U.S. Energy Information Administration.

Wouldn’t it be great if we could all demand a paycheck based on what we guessed we might need for the next month? Yet for the utilities, this is all legal because of the energy laws in Michigan.

When a utility provider seeks a rate increase, it files an application with the MPSC, including a list of all costs and revenues over a 12-month period to support the move to increase rates. That 12-month window is called the “test period” or the “test year” and is critical in terms of setting rates.

For many years, utilities in Michigan were required to use a historical test year, based on actual costs and revenues, and only adjusted for known and measurable changes. However, changes to energy laws in 2008 authorized utilities to use a future test year based on projected costs and revenues to seek rate increases.

Just months after a major rate increase, DTE is asking for another increase — which will be buffered by the new energy laws passed last year.

The California-style Green New Deal energy overhauls forced through by the Democratic majority in the Legislature will only make things more expensive for consumers. At no point during this ram-it-through session was there any real discussion about affordability for residential and small business customers or reliability for those families and job providers dealing with yet another power outage.

These new laws will force electrical generation units to retire early, which will in turn make it possible for the utilities to hike rates even more to pay for new facilities — after years of not properly maintaining existing facilities.

When you get to collect money from customers based on projected costs, then don’t have to spend it, that money can go to shareholders. At a recent investor presentation, DTE reported full-year 2023 GAAP earnings of $1.4 billion, compared with $1.08 billion in 2022.

This madness of seemingly endless sky-is-the-limit rate hikes must be stopped.

If, like me, you are tired of the nonstop rate increases by the utilities, or if you are tired of trying to figure out how you will pay your electricity bill every month, then it’s time for commonsense energy policy.

Responsibly adding clean energy is a commonsense energy policy. Requiring utilities to refund excess profits back to customers if they fail to meet even minimum reliability standards is another, as is ensuring proper upkeep on facilities and equipment designed to last longer. And simply requiring utilities to only collect actual costs from customers isn’t complicated; it’s just common sense.

That’s why I have introduced legislation that would prevent utilities from using made-up and arbitrary numbers to dictate how much they can charge Michiganians. Senate Bill 812 would require any rate increases be based on actual costs, not estimated costs from the utilities.

Now is the time to put the people of Michigan first through energy reforms that make sense.

This op-ed appeared in the April 10, 2024 edition of The Detroit News. State Sen. Jim Runestad, R-White Lake, represents Michigan’s 23rd District.

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