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ELECTRIC CUSTOMER CHOICE
FREQUENTLY ASKED QUESTIONS

FOR CUSTOMERS

July 2002
from MPSC

The following questions and answers were prepared based on the current status of electric customer choice in Michigan. Answers are subject to change based on future MPSC orders and any new state and/or federal legislation.

FAQ's for SUPPLIERS glossary of terms

If you have any additional questions or need more clarification, contact MPSC Staff.

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General (for All Customers)

What is electric restructuring or electric customer choice?

Today your local electric company makes or purchases electricity and delivers it to your home or business. Electric restructuring is the process which permits customers to select providers of electric supply and distribution. Electric service is being unbundled into three components: (1) generation (electric supply -- the production or purchase of electricity), (2) transmission (moving the electricity over power lines from the generation source to a local distribution system, also a supply component), and (3) distribution (the delivery of electricity to individual customers). Customers may elect to stay with their current electric company under rates regulated by the MPSC or move to alternate suppliers whose rates are determined by market forces.


What will change under electric choice?

The existing utility company will continue to provide regulated distribution services for customers who choose an alternative electric supplier. These customers will continue to pay their existing utility a distribution charge set in an MPSC-approved tariff. The cost of electric supply, generation & transmission, will be determined by a contract between the customer and the alternative electric supplier. A transition charge would also be paid to the local utility company to cover any stranded assets which exist and costs to implementation the choice program. The charge could be paid by either the customer or the retailer, depending upon details of the contract between those parties.


Why is electric restructuring, or choice, taking place?

Restructuring, or choice, is part of a transition from a totally price regulated market to one which permits efficiencies and market forces to set electric prices. The results of this change are expected to lead to the reduction of electricity prices and the development of new technologies and services.


When will I be eligible to participate in electric choice?

The answer is different for these three different types of utilities in Michigan:

  • Investor Owned Utilities: All customers of Michigan's investor owned utilities are eligible to participate, starting January 1, 2002.

  • Cooperatives: Only the largest customers of the electric cooperatives will be eligible to participate starting January 1, 2002. That is the starting date for customers of the cooperatives who have maximum demands equal to or greater than 1 MW (1,000 kW). Smaller retail customers will have choice not later than January 1, 2005 (see MCL 460.10x at http://www.michiganlegislature.org).

  • Municipal Utilities: Michigan is also home to 41 different municipal electric utility companies that are regulated by local governments and local boards of directors, not by the Michigan PSC. Customers of those utilities may become eligible for electric choice based on decisions of local governing boards. For a directory of Michigan municipal electricity companies, see http://www.cis.state.mi.us/mpsc/electric/address.htm#MunicipalUtilities. You can also check the Web site for the Michigan Public Power Agency at http://www.mpower.org. The schedule for municipal utility implementation of electric customer choice is addressed by MCL 460.10y (at http://www.michiganlegislature.org).

Will certain customers get electric choice before others?

All customer groups will become eligible to participate at the same time, but the ability to participate also depends in part on the interest of Alternative Electric Suppliers to serve different customers. You can contact suppliers directly to find out about their offerings. For a current list of suppliers, see the MPSC web site about Alternative Electric Suppliers.


Will customers have to participate in electric choice?

No. A customer can remain with their current electric company and will continue to receive electric service at MPSC-regulated rates from the utility.


Can a customer switch suppliers anytime and how much will it cost?

A customer may switch from one supplier to another, and they can switch to electric choice service for a period of time and then return to service from the regulated utility company. Details about switching will be included in the utility's retail open access service tariff (rate). The customer's contract with an Alternative Electric Supplier (AES) may include terms and conditions covering the duration of the contract term, termination of the contract and requirements for switching to another AES. There may be a regulated utility company fee, if approved by the MPSC, to switch a customer from one electric supplier to another. Details will be included in the utility's retail open access service tariff. Customers may find, however, that some AESs will pay the fee in order to encourage switching to their service.


I have already been approached by a company offering to become my Alternative Electric Supplier (AES). How do I know whether they are eligible to offer this service in Michigan?

A current directory of all Licensed Alternative Electric Suppliers is available on the MPSC Internet site, at: http://cis.state.mi.us/mpsc/electric/restruct/esp/aeslist.htm. Under state law (Public Act 141 of 2000; MCL 460.10 through MCL 460.10bb), any company that wants to sell retail electricity in Michigan must obtain a license from the MPSC before they can begin providing service to customers. In addition, depending upon how the companies are organized and the services they provide, they may need to receive certain approvals from the Federal Energy Regulatory Commission (FERC). Information about FERC Power Marketers is available on the FERC Internet site, at: http://www.ferc.gov/industries/electric/gen-info/pm-over.asp.

In addition, however, Aggregators or Brokers may be contacting customers to solicit participation in Retail Access Service, where the Aggregator or Broker may represent a specific AES or more than one. In those cases, the Broker or Aggregator is not required to be licensed by the MPSC, but the AES is. The terms "Aggregator" and "Broker" are defined in the glossary of terms that is available for viewing on the MPSC Web site, at http://cis.state.mi.us/mpsc/electric/restruct/glossary.htm. The AES is the legal entity that is licensed to sell electric generation service to retail customers in Michigan.


What is needed to get a License from the MPSC to be an Alternative Electric Supplier (AES) in Michigan?

Information about the License Application and Reporting Forms is available on the MPSC Internet site, at: http://www.cis.state.mi.us/mpsc/electric/restruct/esp/app-rep.htm.


Will other states be providing Customer Choice?

At least 24 states have already established schedules for electric choice. Federal legislation for restructuring the electric utility industry has been proposed, but not passed. Many other states are working toward restructuring at varying rates and with varying rules about phase-in periods and the like. For status reports on electric customer choice in various states, follow that link to "More Information" on the MPSC Electric Customer Choice Web Page http://www.michigan.gov/electricchoice, then see the links under "Other States."

If utilities from other states wish to supply power to customers in Michigan, they must provide reciprocity. That means any utility that wants to serve customers in Michigan's electric choice programs -- either directly or through affiliated companies -- must be subject to a similar level of competition from Michigan utilities or affiliates who might offer competitive services to customers in the competing utility's service territory. .

 

Residential/Small Business Customers

Will electric choice allow customers to shop around for an alternative electric supplier?

Yes. Electric choice is intended to bring competition to the supply and related customer services portions of the electric utility industry. The underlying theory is that competition can do a better job than government regulation in setting prices and promoting efficiency and innovation in electricity supply. If that theory holds true, then costs and prices may decline for all customer groups.

Generally speaking, from the early 1900's until today, electric utilities have been operated as monopolies whereby a single company had an exclusive right to provide electric supply, transmission, distribution, and customer service functions (metering, billing, etc.). In a restructured electric utility industry, supply and possibly some portions of the customer service functions will be open to competition; distribution will remain regulated.

What are some of the benefits of electric choice to consumers?

  • Increased competition, which may drive down electricity supply costs and therefore prices.
  • Improved efficiency of electric supply, which may also stimulate market innovations and new energy products.

Comparison Shopping

What questions should consumers ask potential electric suppliers?

After noting the exact monthly and yearly costs of your current electricity service, prepare to comparison shop by asking questions such as the following:

  • Has this company received all of the necessary approvals to sell power in Michigan?
  • When will this power be available?
  • How will billing and payments be arranged? Will I have one bill that covers everything, or separate bills for different portions of my energy service?
  • Where are the company offices located, and do they have a toll-free telephone number if I need to contact them?
    • Note that under Public Act 141 of 2000, an AES must maintain an office within Michigan and be accessible to consumers.
  • What will be the total monthly and total annual cost (including taxes) for electricity delivered to my home or business?
    • Be certain to compare the total costs for the same set of services from each company you investigate. Be very careful to understand clearly any claims of savings expressed in percentages. Make certain to identify the percentage of what total. For example, a 10% savings on only the generation portion of your electric bill might equate to only a few percent of your total electric bill.
  • Do I have to sign a contract to buy electric service from the company? If so, what are the terms and conditions? How do I end the contract? If I am ever dissatisfied with the services, can I switch to another electric retailer? What are the charges for switching?
  • If the company is promoting some sort of monetary incentive, free gift, prize, or rebate in exchange for signing up or remaining a customer for a certain length of time, how does that factor into savings?
  • Is the price subject to an increase or decrease? If so, how will future prices be determined?

Who do I call if I have a service problem, outage, or emergency?

You will call your utility company, just as you do now.

Will I still get the same, reliability of electric service to my home or small business?

Yes. It's important to know your current electric company will still deliver the electricity to your home or business. Neither power lines nor maintenance will change. Existing power lines will stay in place and continue to be maintained by your existing electric company. You will pay a Retail Access Service "distribution charge" for using them.

Will my electric bill change?

You will continue to receive a bill from your existing utility company for the services they provide. Bills for alternative electric supply could be included with the utility bill, or sent separately by the supplier.

How can I avoid telephone calls at my home from companies trying to sell me electricity?

You have the right to ask any telemarketer to place your name on its Do Not Call list. See the brochure Michigan’s “Do Not Call” List available at http://www.cis.state.mi.us/mpsc/execsec/alerts/donotcalllist.pdf.

What is a "time of use" (TOU) or interval meter and will I need one in order to participate in the customer choice program?

A TOU or interval meter is used for customers larger than most residential customers. The meter records how much power is being used at any given time (in kilowatts [kW], usually at 15-minute or half-hour intervals), as opposed to an energy use meter or kilowatt-hour (kWh) meter that measures how much energy has been used over a longer duration.

What is "load profiling" and how will load profiles be used in Michigan electric choice programs?

A load profile is an average load shape for a specific type of customer. Since most small customers do not have TOU or interval meters, the utility and retailer can agree to use an average load shape to estimate energy use, depending on factors such as the weather, time of day, and day of week. The AES will aggregate many small customers together. The load profiles for those kinds of customers, added together, indicate how much capacity the group requires during each hour of the year. The AES will schedule and supply enough power to match the sum of the load profiles.

In the situation of a rental property, who gets customer choice -- the tenant (who pays the utility bill) or the landlord?

It is the person who is a customer of the utility company that is eligible for customer choice. That most often is the tenant.
 

Large Business Customers

Some customers of DTE Electric Company and Consumers Energy are served under contracts or tariffs (rates) that have a minimum contract term. Will these customers be able to stop taking service under those tariffs ahead of schedule in order to start participating in electric choice?

Generally, the answer depends upon the schedule established in the tariff or contract between the utility and the customer. Customers should read the tariff or contract to determine the provisions for contract termination.

Will joining a buying group lower my rates even more than trying to get electric choice service on my own?

No one knows exactly how prices and innovations in aggregation will develop once electric choice service begins. Like other consumer goods, one might expect that purchasing power and large quantity purchases could be instrumental in helping to keep prices to a minimum, but we'll have to wait to see how this new competitive marketplace develops.

 

Restructuring News

How can I keep up with news about Customer Choice in Michigan?

See http://www.michigan.gov/mpsc/0,1607,7-159-16377_17111---,00.html. Also, you can subscribe via e-mail or U.S. postal service mail to MPSC press releases. To subscribe via e-mail, simply fill out the subscription form on the MPSC Web site at http://cis.state.mi.us/mpsc/maillist.htm. To receive copies by mail, write to: MPSC - Press Release Subscriptions, P.O. Box 30221, Lansing, MI 48909, or go to http://www.cis.state.mi.us/mpsc/execsec/msubform.htm and ask to be put on the mailing list.

Also, contact Michigan utility companies directly at http://www.cis.state.mi.us/mpsc/electric/address.htm to see if particular Michigan electric utility companies have Web sites.

Where can I learn more about Customer Choice?

See the MPSC's Web site section on Electric Customer Choice at http://www.michigan.gov/electricchoice, which has links to many MPSC documents and other important Internet sources.


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