Consumers Energy Gets Much Smaller Rate Increase Than Requested, While Inequitable Treatment of Residential Customers Remains

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The Michigan Public Service Commission (MPSC) on Dec. 17 ordered that Consumers Energy can raise rates on its electric customers by around $100 million for 2021, representing a nearly 60% cut of the utility’s original rate hike request. The MPSC’s order is broadly in line with a proposed decision by an administrative law judge that we blogged about in October.

The commission also significantly moderated Consumers Energy’s proposal to enact what would have been one of the biggest rate hikes on residential customers in years. The utility’s proposed 14% increase would have been historically high even in normal economic times. In the midst of a pandemic and recession, it seemed particularly excessive. The MPSC instead ordered an 8.3% residential rate increase. After factoring in some complicated accounting measures, the increase comes out to an additional $9.17 for a residential customer 500 kWh of electricity per month, or an 11.93% increase.

Unfortunately the order did little to address the inequitable treatment residential customers have been receiving, a problem that the Citizens Utility Board (CUB) of Michigan has been highlighting in recent rate cases for both DTE and Consumers Energy. The overall rate increase approved by the MPSC is still heavily skewed so the burden falls the hardest on residential customers. Meanwhile, industrial customers will actually receive a rate decrease of 7.2% as approved by the MPSC, even higher than the 6.7% decrease originally proposed by the utility.

The commission’s decision is still a vast improvement over what could have happened. We give a big “thank you” to other groups that intervened in this case and pushed for better results for customers, including the Michigan Environmental Council, the Natural Resources Defense Council and the Sierra Club.

But the decision shows that the issue of equity among customer classes is still not close to being resolved. Residential customers are already taking the brunt of the economic recession. Upcoming rate cases need to break this trend of rate increases that disproportionately come down on one group.

Speaking of the recession, the order also contained a very important provision for low-income households who need help with utility bills. The MPSC ordered its staff to work with Consumers Energy on a low-income workgroup in 2021 with specific instructions to develop a percentage-of-income pilot program. CUB had advocated that the utility improve its offerings for low-income customers with a percentage-of-income payment plans (PIPPs), which have been successfully used in several other states. Under a PIPP, the low-income household is able to pay a percentage of their utility bill in line with what is considered broadly “affordable” (such as less than 3% of household income, for example). The advantage is that the assistance for the customer is responsive to the customer’s specific needs based on income, rather than one-size-fits-all.