Cutting electric rates in Michigan

1. Cutting electric rates in Michigan Conservation and Competition September 2011

2. Today’s agenda • Welcome • Andy Johnston, Grand Rapids Chamber • Opening remarks • Wayne Kuipers, ECN, and Jeff Clark, CCC • Smart energy conservation tactics • Eric Van Dellen, Amway • Competition as a cost reduction tool • Wayne Kuipers/Jeff Clark • Eric Schneidewind, Varnum • Legislative update • Bill Lievense • What next? • Wayne Kuipers

3. How did we get here? • Wayne Kuipers, ECN • Former state Senator • Choice supporter • Jeff Clark, CCC • Summit Energy • Engaged advocate since 2005

4. Why should free markets stop… At the light switch?

5. Competition works • Airlines • Trucking • Telecommunications • Natural gas

6. How Power Moves Without Competition Generator MISO Utility Utility Power Produced Power transmission Power Procurement Power distribution 6

7. How Power Moves With Competition Pick One Utility Power Generators MISO Supplier A Utility Supplier B Power Produced Power Procurement Power distribution Power transmission 7

8. It worked in Michigan from 2000-2008 • Michigan electric markets opened in 2000 • Our electric rates were way higher than regional averages • Gov. John Engler identified it as a key business disincentive • North Star Steel Plant located in Ohio, not Michigan • Last major auto plant in Michigan in Lansing, where muni rates lower

9. Closing the gap, 2000-2008 Michigan rates were above national average – until competition started in 2000

10. Closing the gap, 2000-2008 • Utilities got smarter • Utilities improved customer service • Companies received regular calls from representatives seeking improved relations • It’s not all price…but without price, less incentive for utilities to care about customers

11. 2007-08: Utilities lobbied for remonopolization • Major campaign by utilities • Spent millions (of your dollars) on ad campaigns • Major campaign contributions • Raised specter of “dark Michigan” • Promised new (construction) jobs with new plants

12. 2007-08: Utilities lobbied for remonopolization • Created alliance with environmentalists • 10 percent renewable goal by 2015 • Even though the legislation ended ability of renewable entrepreneurs to sell power directly to customers

13. 2008 Electric Remonopolization Act • Limited competition to just 10 percent of load • Instituted renewable mandate – but limited ability for companies to buy from others • Reduced rate regulation on the companies • MPSC has to approve almost all rate hikes • MPSC has only 180 days to approve a hike, or utility can “self-implement” • Called for rate parity, aimed at reducing manufacturer rates – and increasing residential

14. What’s happened since 2008? • Eric Schneidewind • Varnum • Energy Michigan

15. New generation under 2000 law • From 2000-2008, independent power producers built 4,000 megawatts of new power • Plants in Dearborn, Zeeland, Covert, Carson City and Jackson built at shareholder expense and risk • Increased reliability in Michigan • Proof that new generation can be built under competition – without mandates that customers pay for utility mistakes

16. Bill passed in June 2008 • Utilities hailed passage • Said cleared way for new plants • Said would lower rates for factories • Said would provide greater “predictability” • Reality • No new plants – none needed! • Industrial rates increase despite demand reduction • Twice a year, predictably, they raise their rates.

17. What’s happened to Consumers Energy rates since 2008 *Date of automatic increase per 2008 PA 286

18. What’s happened to Consumers Energy rates since 2008

19. Results since implementation in October 2008 All sector increases, comparing cents per kWh Source: US Energy Information Agency

20. Results since implementation in October 2008 In cents/kWh Source: US Energy Information Agency

21. Once competition killed, Michigan electric rates increase above national rates

22. Results since October 2008 • Gap between Michigan and other states grows • Especially Illinois and Ohio, who have used competition to lower rates • Michigan rates now above national average • Utilities decide they don’t need additional power, drop plans for new plants

23. Results since October 2008 • One year from passage of new law, 10 percent competition cap hit • Those able to escape utilities get lower rates • Now 5,000 companies on waiting list to get out • Government is picking winners – those who were lucky enough to leave utilities – and losers – those forced to stay

24. Where do we go now? • Bill Lievense, Capitol Group Governmental Consultants

25. A new way forward • Time to raise the competition cap • CCC, ECN working to raise cap • Will encourage utilities to hold down rates • Will help bring rates to regional average • Will improve Michigan’s business competiveness • Need legislative support

26. Utilities don’t like competition Myth: Those who leave will mean rate hikes for those who stay • Fact: When customers leave, utilities have to buy less power from outside of state, saving them • Fact: When customers leave, utilities have a reason to tighten their belt, provide better service • Fact: When customers leave, utilities have less reason to build expensive new plants

27. It’s time to lower electric bills! • We need electric competition more today than ever • Business leaders for Michigan benchmark: Michigan’s electric rates higher than competitor states • MMA survey: Electric rates third in importance in business costs in Michigan, behind only health care and labor costs • Electric rates only one of those three set by government!

28. It’s time to lower electric bills! August statewide phone poll 800 likely voters: Would you favor a change in state law that would allow all customers to purchase their electric service from any supplier that is able to provide reliable electric service to their area and compete for customers by offering electric service at a lower price? 74% TOTAL FAVOR 18% TOTAL OPPOSE 8% Undecided/Refused Do you think that having competition among companies that provide electric service, like it has been done in the natural gas and telecommunications industries, is a good way or a bad way to control energy costs? 75% TOTAL GOOD 13% TOTAL BAD 12% Undecided/Refused

29. Bottom line Increasing the cap on electric competition will ultimately improve utility efficiencies and improve customer service Just as competition does for every other Michigan business!

30. What can you do? Wayne Kuipers • Get involved: Join Energy Choice Now or Customer Choice Coalition • Learn more: Read up, visit the web pages • Customerchoicecoalition.com • ECNmichigan.com • Talk with other business groups • GR Chamber a leader • Others need to become supporters of free markets, not government-set price controls

31. What can you do? • Talk to your lawmakers: • Tell them this is unfair. • No more government picking winners and losers. • Competition and free markets work! • Talk to Snyder administration • Write, call, talk to the governor • Let MEDC know you want lower rates through competition

32. It’s time to turn on the lights and bring competition to electricity