LANSING, Mich. — State Sen. Jim Runestad on Tuesday introduced legislation to slow rising utility rates by requiring companies to adhere to actual cost data instead of anecdotal future projections when seeking rate increase approval from the Michigan Public Service Commission (MPSC).
As of December 2023, Michigan’s residential utility customers were paying the 11th highest electricity rates in the nation, according to data from the U.S. Energy Information Administration. That same month, the MPSC approved a $368 million rate increase for DTE Electric Co. customers.
“Under Michigan’s unfair system, the customer is always the loser — always paying more while these companies rake in profits,” said Runestad, R-White Lake. “This madness must be stopped, and my bill will put an end to seemingly endless sky-is-the-limit rate hikes.”
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 notion that a rate increase is necessary. That 12-month window is called the “test period” or the “test year” and its 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 utilize a future test year based on projected costs and revenues to seek rate increases.
“Utility companies have been allowed to propose rate increases on best guesses instead of actual data and it’s no surprise that this make-believe system has resulted in higher bills for customers,” Runestad said. “A utility has nothing to lose by overestimating its costs and everything to gain because projected test years shift business risks away from utilities to the bank accounts of ratepayers. When actual costs are lower than predicted, it’s the utility company — not the customers — who receives the benefit.”
Runestad said Senate Bill 812 would require utility companies to once again rely on actual costs when requesting rate increase approval from the MPSC instead of future projections that have been allowed since 2008.
Last year, he introduced several other bills to curb of the ever-increasing electricity costs and help Michigan’s consumers. SB 296 would establish reporting requirements for utility providers to make their lobbying efforts more transparent. Additionally, SBs 297 and 298 would require MPSC members to be elected by statewide vote rather than be appointed by the governor.
“By answering directly to voters, these bureaucrats will be more motivated to hold the state’s utility providers accountable,” Runestad said. “Accountability inspires accountability. Legislators must be willing to step up to help protect consumers against what are essentially the utility pseudo-monopolies of our state. Michigan residents deserve affordable and reliable energy.”
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