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School districts say energy overhaul could cost them millions

Apr 13, 2015

The law that allows some Michigan school districts, businesses, and households to buy electricity from a competitor to their regional utility was the central issue in a state House hearing. It was part of the Legislature’s preparations to decide how to overhaul Michigan’s energy policies.

Credit user cgord / wikimedia commons

Michigan allows up to 10 percent of utility customers to defect from their incumbent utility and buy power through an alternative supplier. It’s used primarily by school districts and factories looking to shave their costs. They say choice has saved them millions of dollars through tough economic times.

“Electricity and gas use is one of the many areas where we’ve become more efficient,” Kalamazoo Public Schools Superintendent Michael Rice told the House Energy Policy Committee. Kalamazoo schools buy power through a multi-district consortium.

Rice says schools have used energy shopping to return money to classrooms while state aid has not kept pace with education costs, and the Legislature has encouraged school choice policies that have allowed students and their foundation grants to flee some districts.

“Please consider the financial needs of local school districts as you consider the fate of what you legislate,” he said.

But the flip side of electricity choice is utilities can’t plan for how many customers they might lose or who might choose to return. By law, the incumbent utilities have to accept customers who decide an alternative power supplier is no longer a bargain.

“The regulated system may not always lead to the lowest prices, but it keeps prices stable and predictable,” said David Mengebier, a senior vice president with Consumers Energy. He says utilities can live with the 10 percent cap on losing customers, but it would be a mistake to expand the choice program.

He says that’s because utilities have to make multi-million- or billion-dollar decisions on building power plants that will take decades to fully pay off while keeping rates affordable. Utilities also say challengers in the marketplace should be required to prove they can meet their obligations,

How to update marketplace choice is just one of the issues the Legislature and Governor Rick Snyder must deal with as they make decisions on how to update Michigan’s energy policies to address an anticipated spike in demand for power in the future.