Michigan regulators release plan to link utility profits with performance

DTE and Consumers would pay more for lengthy and frequent outages, but critics say proposed disincentives are too weak to be effective.

Michigan utility regulators introduced a proposal this week that would penalize utilities for frequent outages and long restoration times.

The move comes a week after powerful storms and tornadoes knocked out power to around 500,000 customers in southern Michigan. This followed February’s ice storm, which led to prolonged outages for around 700,000 DTE Energy and Consumers Energy customers, prompting calls for accountability from lawmakers and public officials.

The Michigan Public Service Commission’s proposal would establish penalties for utilities where more than 6% of customers experience more than four outages in a year, with that number falling to 5% in 2030. Additional penalties could be leveled when customers experience seven or more disconnections or for utilities with poor-performing circuits or long restoration times.

In 2022, more than 337,000 DTE and Consumers Energy customers experienced four or more sustained outages, which Michigan defines as a full or partial loss of power lasting longer than 5 minutes.

In addition to the new proposal, the MPSC announced it awarded a $1.76 million contract for an audit of Consumers and DTE to assess the companies’ electric distribution operations to reduce the number and duration of outages and increase safety.

“We share the public’s frustration with the number and duration of power outages, and particularly those who experience outages over and over again,” MPSC Chair Dan Scripps said in a statement. “By focusing on the places where improvement is needed most, we’re working to better connect the financial performance of the utilities with the experience of their customers.”

Amy Bandyk, executive director of the nonprofit Citizens Utility Board of Michigan, has previously expressed support for “performance-based rate making,” which could include disincentives as the MPSC proposes. However, she believes penalties shouldn’t focus as narrowly on those experiencing repeated outages.

“We favor minutes of outage per customer as a better metric,” Bandyk told Planet Detroit. In other words, penalties would be based on the number of customers losing power multiplied by the duration of outages.

“It captures the scale of the problem better and would provide a bigger disincentive,” Bandyk said. She added that, for the sake of fairness, penalties should be paid to the customers experiencing frequent and prolonged outages rather than the entire customer base.

In the past, CUB has proposed the MPSC provide a bill credit of $2 an hour for all outages. A 2022 bill introduced by former State Rep. Yousef Rabhi (D-Ann Arbor) and Rep. Abraha Aiyash (D-Hamtramck) would have gone even further, crediting ratepayers between $5 for a one-hour outage up to $25 per hour for disconnections lasting longer than 72 hours.

Matt Helms, spokesperson for the MPSC, said the agency can issue hourly penalties, but this would have to occur through the formal rulemaking process with input from utilities and other stakeholders. He said the commission previously declined to adopt the practice because of concerns over feasibility and associated costs.

In March, the MPSC increased outage credits for ratepayers to $35 per day. But these only kick in after 96 hours during catastrophic conditions, when 10% or more of customers are without power, with credits given after shorter periods when fewer lose power.

Greg Woodring, president of Ann Arbor for Public Power, a group pushing for a municipally owned utility, said basing penalties on 6% of customers experiencing multiple sustained outages seemed “a pretty light standard.”

He said rules need to be structured so that, “it’s more financially beneficial for them to do the investment (in the grid) rather than just to eat the cost” of penalties.

Woodring added that DTE and Consumers might respond to financial penalties by investing more in the political process and pushing lawmakers to rein in the MPSC’s ability to issue powerful disincentives.

In the past five years, Michigan lawmakers received more than $2 million from PACs associated with DTE and Consumers, with 102 of 148 currently serving legislators accepting these donations. However, Woodring said recent outages had likely made it harder for utilities to influence the political system.

Representatives for Consumers and DTE said they were currently reviewing the MPSC’s proposal.

“Consumers Energy shares the commission’s commitment to improving the reliability and resiliency of our system,” said Consumers Energy spokesperson Brian Wheeler.

Peter J. Ternes, corporate communications manager for DTE, said the company was working on its “four-point plan” for improving service, which includes investing in tree trimming, updating infrastructure, rebuilding portions of the grid and installing new technology to isolate outages. “We are laser-focused on delivering for our customers,” he said.

Those wishing to comment on the proposal can email the MPSC at mpscedockets@michigan.gov before 5:00 p.m. Sept. 22.


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