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Michigan Attorney General Dana Nessel challenged DTE Energy’s $9 billion, five-year distribution plan last month, saying it fails to identify specific problem areas needing upgrades and would increase costs by $4350 for the average customer. She said these costs would appear in future rate cases.

“DTE needs to refile its distribution plan to address affordability concerns and to tell their customers they will see noticeable reliability improvements, coupled with consequences for failing to meet those goals,” Nessel said in a statement.

A week later, the attorney general called the latest $450 million DTE rate hike request “absurd,” noting that it came four months after the company secured a $368 million rate increase.

DTE says its reliability plan delivers the upgrades needed to make the grid more reliable and help transition to cleaner energy. However,  Nessel says the company needs a more targeted approach and commitments to improving reliability and accountability measures like refunds for customers experiencing poor service.

She said the Michigan Public Service Commission “should be demanding more of Michigan utilities in these filings.”

The MPSC, which regulates investor-owned energy utilities, began requiring distribution plans in 2017 to evaluate grid upgrades that could improve safety, reliability and affordability.

Since then, reliability has continued to suffer, with DTE and Consumers Energy ranking as some of the worst-performing utilities in the nation and DTE taking longer to restore power than any other investor-owned utility in the state. Meanwhile, DTE reported $1.4 billion in profits in 2023, a 15% increase over the previous year.

‘Gold plating’ the system: DTE rate hikes pass on the cost for shareholder profits

Amy Bandyk, executive director of the Citizens Utility Board of Michigan, told Planet Detroit that with its latest distribution plan, DTE is doubling down on its strategy of using reliability as a basis for raising rates. She said the utility is “gold plating” the system by replacing equipment that isn’t at the end of its lifespan and that the plan fails to show why these replacements are necessary. 

“A proper accounting of that sort would show further evidence that DTE’s priorities are out of whack,” she said. “For example, we know that trees falling on lines, and not aging equipment, is the biggest cause of outages. But DTE’s (distribution plan) is actually proposing to decrease annual spending on tree trimming from 2024 to 2028.”

Critics of past DTE rate hikes have pointed out that by spending money on equipment, the company can add these costs to their rate base, earning its rate of return on investment, including 50% equity for stockholders. If the utility were to spend the same amount of money on tree trimming, it could only charge ratepayers for the cost of the maintenance, earning no return for shareholders. DTE projects continued profit growth in 2024 based partly on increased electric rates.

Nessel criticized the plan for its lack of detail and failure to include alternatives that could save ratepayers money.

“(T)he plan would be more effective and informative if the company were willing to clearly identify specific problem areas, causes for power outages, and other deficiencies, and then present specific solutions to resolve those problems,” the attorney general’s statement said.

DTE spokesperson Ryan R. Lowry defended the utility’s distribution plan in a statement to Planet Detroit, saying it would create a more resilient power grid.

“The plan requires a significant amount of investment over the next five years but also maintains customer bills below the national average and delivers on our goals of providing cleaner, more reliable, and affordable energy,” he said.

Bandyk said that national comparisons of customer bills were not especially helpful. She said the state performs relatively well on affordability compared to Southern states, where natural gas is less common, and customers rely on electricity for heating and cooling. According to CUB’s 2023 Utility Performance Report, Michigan has some of the highest energy costs in the Midwest, with only Indiana and South Dakota having higher bills.  

Nessel says reliability goals and accountability are needed
 

The attorney general said DTE provided some metrics for improving reliability over the next five years but hasn’t committed to specific goals or offered accountability mechanisms like penalties or refunds for customers.

The MPSC is currently considering some accountability measures through its incentives and disincentives workgroup. However, a proposal to add a $10 customer charge to create a fund for this program prompted outrage among residents, ratepayer advocates, businesses and cities.

Bandyk previously praised legislation introduced in 2022 that could have encouraged better reliability by adding costs for poor performance. This included bills to increase outage credits for customers and prohibit utilities from recovering the cost of these credits in rate cases. Those bills did not advance and have not been re-introduced.CUB has also called on the MPSC to make these distribution plans “contested cases” in the same manner as rate cases. Bandyk said this would bring greater scrutiny to utilities’ plans for updating grid infrastructure and allow ratepayer advocates to file expert testimony. The MPSC did not accept this recommendation.