Michigan regulators ask lawmakers to end annual rate hikes, change how DTE, Consumers make money

Michigan’s utility regulator told state lawmakers this week that legislation ending the cycle of yearly rate increases and rewriting the way utilities earn profit would do more for household energy bills than anything the commission can do on its own.

The Michigan Public Service Commission (MPSC) released recommendations Monday that were detailed in a letter Chair Dan Scripps sent to Gov. Gretchen Whitmer July 16.

Whitmer asked the commission in June to identify legislative changes that would lower utility bills and improve reliability, along with ways to strengthen energy assistance.

The core of the letter is an argument that many ratepayer advocacy groups have been making for years: that Michigan’s regulatory model pays utilities a return on what they build, which pushes them toward expensive capital projects and away from cheaper options like tree trimming, maintenance, or better use of existing infrastructure.

“The most impactful opportunity may be to counter the inherent bias for utilities to invest in capital projects,” the letter says.

What the commission is asking for

Michigan law lets utilities file for a rate increase every 12 months, and the state’s largest utilities, DTE Electric and Consumers Energy, have effectively done so. The commission wants authority to set multiyear rate plans tied to performance on reliability and affordability metrics.

Other recommendations include:

1. Requiring utilities to show they are getting more out of existing transmission and distribution lines, including advanced conductors and grid-enhancing technologies, before building new ones. The commission cites Brattle Group estimates that a 10% increase in grid utilization could cut rates 3.4% nationally.

2. Cutting back a bonus utilities collect for buying power. Utilities make their money by building things, so state law pays them an extra fee when they buy power from an outside developer instead, and customers cover that fee. The commission says utilities often get paid for nothing: they’ve collected about $868 million since 2019, and $121.7 million of that went to deals federal law already required them to make.

3. Changing how utilities get paid back for closed power plants. When a plant shuts down before customers have finished paying it off, the utility can refinance what’s left using a low-interest bond, which costs customers less. That’s optional today, and utilities have sometimes negotiated deals that let them keep collecting a profit on plants that no longer run. The commission wants the cheaper route to be required.

4. Writing the data center rules into law. The commission has already imposed terms on Consumers and DTE meant to keep data centers from shifting their costs onto everyone else, and it wants those locked into statute so a future commission can’t undo them. It also wants to close a gap: state law currently exempts data centers from paying for the high-voltage lines needed to serve them.

5. Opening the door to virtual power plants. Rooftop solar, home batteries, and smart thermostats can be bundled together and sold to the grid as if they were a small power plant, with participating customers paying for it. Michigan bars residential customers from doing this because the commission has no authority to vet the companies that would do the bundling. It’s asking for that authority.

6. Letting the commission require utilities to take bids. Utilities currently follow competitive bidding guidelines voluntarily. The commission says its own reports on renewable projects showed that ones built by outside developers cost less than ones the utilities built themselves.

On the utility assistance front, the commission recommends aligning low-income rate eligibility and LIHEAP-funded programs with the Michigan Energy Assistance Program (MEAP) threshold of 60% of state median income.

The MPSC also recommends redesigning the Home Heating Credit so it stops arriving through tax forms months after the heating season, as well as moving MEAP administration to the commission, and creating a tax credit covering up to half the cost of home weatherization work.

The recommendations follow a June 11 commission order setting a goal that no Michigan household spend more than 6% of its income on energy.

Small solar, big power lines, and funding for Michigan’s ‘green bank’

Balcony solar. he letter takes up plug-in solar: small panel-and-inverter systems that hang on a railing and plug into a standard outlet. The commission says while these are technically already allowed under utilities’ existing distributed generation programs, forcing them through the same interconnection studies as rooftop arrays could make them too expensive to bother with.

The MPSC staff plans to take up the question in the commission’s interconnection technical workgroup, but the letter says legislation may ultimately be needed.

Rep. Will Snyder, D-Muskegon, introduced House Bill 5764 in March, which would let customers install systems up to 1,200 watts without an interconnection agreement or utility approval. It was referred to the House Energy Committee.

The Sierra Club is also pushing companion Senate bills 731 and 732.

Who gets to build power lines. A 2021 state law gives Michigan’s existing transmission companies first claim on building certain big power lines, so those jobs never go out to bid. The lines are ones ordered by MISO, the not-for-profit that runs the electric grid across Michigan and 14 other states and decides what new transmission the region needs.

Its costs get spread across the region, so Michigan customers help pay for these lines even when they’re built in other states. Critics say competitive bidding would make them cheaper. The commission doesn’t take a side, but wants lawmakers to require MISO to issue a report every three years examining whether the 2021 law is doing what it was supposed to.

Novi-based ITC Holdings, which owns most of the transmission lines in Michigan’s Lower Peninsula, is meanwhile asking federal regulators to shield these projects from competitive bidding everywhere MISO operates, not just in states that have passed their own laws. Consumer groups and large industrial customers oppose it.

Funding for Michigan Saves. The commission asks lawmakers to create a permanent funding source for Michigan Saves, the nonprofit green bank the MPSC seeded in 2009.

The letter credits it with supporting more than $800 million in financing for over 60,000 homeowners for energy efficiency and clean energy projects, with participating residential customers saving an average of $360 a year. State support has come as one-time grants of varying size with no line in the budget, which the commission says makes long-term program design difficult. A $5-million earmark for the coming fiscal year was requested by Rep. Timothy Beson, R-Bay City.

Michigan households hit with DTE, Consumers electric rate hikes

The MPSC approved a $242.4-million electric rate hike for DTE in February and $276.6 million for Consumers in March. DTE came back in April asking for $474 million more, which would raise residential rates about 9.7%. Consumers asked for $456 million in June.

The letter argues Michigan is faring relatively well, pointing out that the state’s average monthly electric bill of $119.31 in 2024 was the 15th lowest in the country.

That number reflects how much power Michigan homes use, which is less than most states, but more than what they pay for each unit. By the price of a kilowatt-hour, Michigan is among the highest in the Midwest, according to the Energy Information Administration.

Clean energy business groups Advanced Energy United and the Michigan Energy Innovation Business Council welcomed the recommendations. Michigan EIBC President Laura Sherman said her group has pushed similar legislation for years.

Consumers Energy spokesperson Matt Johnson expressed concern about unintended consequences arising from the recommendations.

“Some of these recommendations … could unintentionally undermine efforts” that the company is now taking on affordability and the grid, Johnson said.

DTE would not discuss specific recommendations, and said it is still reviewing the letter. The company said it shares the commission’s goals, that its customers’ bills stay below regional and national averages, and that outage times improved 90% from 2023 to 2025.

Michigan customers had among the longest total outage times in the country in 2023, ranking 50th out of the states and District of Columbia, Planet Detroit reported last year.

DTE’s 90% improvement figure excludes major storm days, the measure the MPSC uses; the ratepayer advocacy group Citizens Utility Board (CUB) argues that leaving storms out understates what customers actually experience.

Attorney General Dana Nessel, who fights rate increases on customers’ behalf, has been harder on the system itself. She called the process “both unfair and unsustainable” after the March increase and asked lawmakers in both parties to rethink it.

The CUB likes multiyear rate plans, with conditions. Interim Executive Director Michael Larson said they could break the yearly cycle, but should “not merely lead to larger rate increases spread over longer periods.” He wants regular public review, no automatic increases, and utility profits tied to how well the companies actually serve customers.

What the commission could do tomorrow

Legislation is required to advance most of these items; the commission can’t create multiyear rate plans, change the bonus system, or widen assistance eligibility on its own. The DTE and Consumers cases now pending will be decided under current rules.

CUB’s Larson said there is one lever the commission already controls: the profit rate built into customer bills for utility shareholders, known as return on equity. The MPSC has kept it at 9.9% for both companies in recent cases, slightly above the national average of 9.7% to 9.8%.

CUB’s expert in DTE’s last electric rate case calculated that 8.91%, instead of the 10.75% DTE wanted, would save customers about $200 million a year.

Utilities say cutting that rate would make it harder to raise money for grid work. Larson said he “does not believe a reasonable reduction would produce that result,” giving the example of utilities in other states that borrow at lower returns with a better track record of keeping the lights on.

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This story was originally published by Planet Detroit and distributed through a partnership with The Associated Press.