- DTE Energy plans another rate hike after a recent $368 million increase, citing grid and renewable energy needs.
- Regular rate hikes burden consumers and challenge advocates, with infrastructure investments benefiting shareholders.
- Critics argue for fewer rate cases to ease advocacy group strain and slow rate increases, with new legislation proposed to help.
DTE Energy Chairman and CEO Jerry Norcia indicated on a recent earnings call that the company would pursue another electric rate case this spring, potentially hiking electric bills for customers just hit with a $368 million rate increase in December.
That increase added $6.51 to the average bill. DTE Energy took in $1.4 billion in earnings in 2023, an increase from $1.2 billion in 2023.
The quick turnaround fits a new pattern for the utility, which has been asking for almost yearly electric rate increases. A decade ago, utilities typically filed cases to change rates before the Michigan Public Service Commission about every three years.
Norcia has said on recent earnings calls that more funding is needed to harden the grid against extreme weather and transition to renewables.
Amy Bandyk, executive director of the Citizens Utility Board of Michigan, said the increasingly frequent rate cases could lead to more rapid rate increases and additional costs for ratepayer advocates.
Norcia said on the Feb. 8 earnings call that the company was looking to file a rate case at the end of the first fiscal quarter or beginning of the second, i.e. late March or early April.
“I would say that most of that filing will be about the capital investments we’re making to upgrade the grid and transition to cleaner energy,” Norcia said on the call.
Bandyk said these capital investments often make up much of what DTE Energy requests in a rate increase. And unlike spending on maintenance activities like tree-trimming, which the company has previously been criticized for underfunding, capital investments in infrastructure generate cash for stockholders.
Chris Bzdok, an environmental attorney representing groups like CUB, told Outlier in December that spending money on tree trimming, for example, only allows the utility to recoup the maintenance cost. However, if the utility spends the same amount of money on new equipment, it can be added to the company’s rate base, earning it their rate of return on investment, including 50% equity for stockholders.
These shareholders include DTE’s top management, who receive millions in stock options.
DTE spokesperson Peter J. Ternes defended the company’s tree-trimming efforts, saying the company “trimmed more than 25,000 miles of trees over the last five years” and “will maintain a routine trimming cycle to ensure that DTE continues to keep trees away from its equipment.”
On a November analyst call, Norcia said DTE Energy might also look to place a surcharge on ratepayers’ bills to fund a severe weather escrow account to help the company deal with events like the ice storm that hit Michigan last February and cut off power to over 700,000 statewide.
The cost of DTE Energy’s frequent rate cases
Any utility in Michigan can file a rate case every 12 months. A decade ago, DTE Energy filed a rate case roughly every three years, but these are now issued 15 months apart on average, according to Bandyk. However, the company did skip a year in 2020, at the beginning of the Covid pandemic.
Bandyk said increasingly frequent rate cases could make it more difficult for nonprofit consumer advocacy groups to intervene in rate hikes successfully, which requires substantial resources.
She added that rate cases require CUB and environmental groups to spend time and money putting together expert testimony, whereas utilities have dedicated staff to handle rate cases.
“Filing more frequently gives them more opportunities to win higher rates against a more stretched-thin opposition,” she said.
Bandyk added that this frequency can add costs for ratepayers while benefitting shareholders.
For example, utilities could cite high inflation and ask for a larger return on equity, giving their shareholders more profit sooner, she said.
However, DTE Energy’s 9.9% return on equity, slightly above the industry average of 9.71%, has remained consistent in rate cases since 2020.
DTE Energy didn’t respond directly to questions about a possible rate case in the spring, saying in a statement, “Michigan’s regulated, rate review process provides for Michigan utilities to file information about rates and investments regularly. At this time, we have not filed a request for an electric rate review.” The company declined to say whether it would seek an extreme weather surcharge in future rate cases.
CUB suggested in testimony that the MPSC could formally recommend extending the time between rate cases, which could push legislators to change the statute around how frequently utilities may file rate cases.
A bill introduced by Rep. Helena Scott (D-Detroit) in October, HB 5216, includes language about moving the state away from frequent rate hike requests.
Bandyk supported the move, saying the legislation could help limit the “revolving door rate increases” that “enrich utilities while continually squeezing customers.”