Overview:
- A report by the Energy and Policy Institute uncovers that DTE and other utilities aim to recover millions via rate hikes for executive perks, lobbying, and ads, which often harm customers.
- The report highlights the burden on advocates and officials to find inappropriate spending in rate hike requests.
=It recommends states ban salary recovery for employees involved in rate cases, define lobbying for compliance, and mandate detailed annual lobbying expense disclosures.
A report released Wednesday reveals how DTE and other energy utilities seek to recover millions through rate hikes for executive perks, lobbying efforts and advertising meant to generate goodwill for the companies
Karlee Weinmann and Itai Vardi, who authored the report for the Energy and Policy Institute, an industry watchdog group, argue these expenses “do not benefit customers and often work against their interests.” They add that the current system places a heavy burden on advocates and public officials who must search for inappropriate spending buried in rate hike requests.
This includes what they refer to as “extravagant expenses” like DTE’s effort to charge customers for $236,000 for private jet travel in recent rate hike requests, which Michigan Attorney General Dana Nessel called “downright insulting to customers.”
Other inappropriate spending passed onto ratepayers may be more difficult to discern, including employee salaries and dues for trade organizations that support the companies’ lobbying efforts.
Meanwhile, DTE residential customers have seen their bills rise significantly in recent years, with those using 1000 kilowatt-hours a month paying 18.93 cents per kWh versus 14.68 cents in 2014, a 29% percent increase.
The EPI report comes as Michigan lawmakers and labor unions push for the Taking Back Our Power legislation that would prevent monopoly utilities and companies seeking government contracts from making political donations.
Although blocking political donations from utilities wouldn’t stop lobbying, Rep. Dylan Wegela (D-Garden City), who sponsored the bills, said it could help rein in utilities’ influence operations.
“One of the things that makes a lobbying effort successful is the amount of money that is backing it,” he said.
This spending has been massive in recent election cycles, with one DTE-tied nonprofit giving $2 million to Michigan Democrats in 2022.
The bills haven’t passed out of committee and Wegela doubted the legislation will be taken up during the legislature’s lame duck period. He said the legislation will likely set up a petition drive to put the issue on the ballot and let Michigan voters decide whether to block utility political spending.
Representatives for DTE declined to comment on the EPI report. But the company says on its website that its political activity is intended to support “public policies that promote its commitment to sustainable, reliable, affordable and safe energy.”
The ‘double whammy’ of utility lobbying
Advocates say that without strong disclosure rules, ratepayers may be paying for utilities’ influence efforts either by covering lobbyists’ salaries or paying dues for organizations that push company interests.
“This activity is a double-whammy cost for ratepayers: first, they pay for the employees’ time spent lobbying in their bills, then they’re forced to deal with policies and regulatory outcomes that may not align with their interests (and may cost them more),” Weinmann and Vardi write.
DTE’s 2023 electric rate increase included $2.5 million for membership in the Edison Electric Institute, which has lobbied against rooftop solar. And its 2023 gas rate case included $730,000 for membership in the American Gas Association, an organization that critics say has pushed to weaken energy efficiency rules and downplay the climate and health risks of natural gas.
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DTE spokesperson Jill M. Wilmot defended the company’s participation in the AGA in a statement to Planet Detroit in May: “DTE engages with these organizations to share best practices, help meet regulations and improve operations to better serve our customers.”
She said the company excluded $36,000 from its gas rate case that went toward AGA’s lobbying. But Amy Bandyk, executive director for the Citizens Utility Board of Michigan, said “it is difficult to check exactly how much of the dues are political” because even non-political spending could indirectly support lobbying efforts.
In 2021, the Kentucky Public Service Commission blocked state utilities from recovering $400,000 in dues paid to EEI after companies failed to detail how the trade association funds were spent.
Ratepayers may also cover lobbying done by utilities’ in-house staff. The EPI report says utilities’ influence efforts can be supported by “community relations staffers” who may spend part of their time lobbying.
In testimony to the Michigan Public Service Commission concerning DTE’s 2023 gas rate case, Missy Stults, director of Ann Arbor’s sustainability office, said the commission should “require DTE to keep records of the amount of time employees spend lobbying local officials so it can ensure such amounts are not included in rates.”
In a rebuttal, Theresa M. Uzenski, manager for regulatory strategy and accounting for DTE, said the utility had removed $220,000 for “Regional Relations Expenses Political Advocacy.” However, DTE did not provide an itemized list of these expenses.
“Absent such record keeping, it is virtually impossible to ensure none of these costs are falling to customers,” Weinmann and Vardi write.
To address these issues, the report recommends states ban the recovery of salaries for employees that engage in rate cases, define lobbying to ensure compliance and require detailed annual disclosures of lobbying expenses.
States including Colorado, Connecticut and Maine have blocked utilities from passing on lobbying costs to customers, which could save ratepayers hundreds of thousands of dollars annually.
Advertising expenses show the difficulty of holding utilities accountable
Advertising is another area where ratepayers may be paying to advance utilities’ interests, even if the advertisements are supposed to be purely informational.
“Utilities also regularly inserted self-promoting messages in informational advertising, commingling them with messages that might be legitimate for recovery, such as educating customers about energy efficiency or safety measures,” Weinmann and Vardi write.
DTE spent $51 million on advertising between 2014 and 2023, the fifth largest expenditure for companies listed in the report. The company’s current electric rate case includes advertising expenses related to “public safety, conservation, and billing practices.” This comes out to about $5.7 million of a total of $11.39 million in advertising expenses.
Yet, Bandyk says this shows how difficult it can be to hold DTE accountable.
“How do we verify what amount of advertising is related only to ‘public safety, conservation and billing practices’?” she said.
EPI recommends that states allow for rates to only cover purely informational advertising that clearly serves the public interest. It further recommends mandating detailed disclosures of utilities’ advertising and marketing expenses and requiring companies to prominently display on advertisements if they were paid for by customers or shareholders.
Regulatory process ‘exacerbates risk to customers,’ advocates say
Absent detailed disclosure requirements and strong rules barring lobbying, travel or advertising from recovery in rate hike requests, the EPI report says advocacy organizations and regulators are forced to comb through rate cases to find improper charges.
“It’s not a foolproof way to protect customers from picking up the tab for unreasonable costs,” Weinmann and Vardi write. “To the contrary, it exacerbates the risk that customers’ utility bills will include at least some such costs.”
Bandyk previously told Planet Detroit that the increasing frequency of DTE’s rate hike requests also makes it difficult for advocacy groups to find the time and money to put together expert testimony to challenge the utility. She said these frequent filings give utilities “more opportunities to win higher rates against a more stretched-thin opposition.”
She emphasized that better disclosure rules alone might not be enough to hold utilities accountable because advocates would still be forced to rely on the company’s information.
“A much simpler system would be to disallow all advertising or all membership dues rather than engaging in this picking and choosing process that can’t be verified,” she said.