|John G. Strand, Chairman || Dorothy Wideman|
|John C. Shea || Mary Jo Kunkle|
|David A. Svanda || (517)334-6983|
MPSC Issues Order Opening Electric Competition
LANSING, June 5. In an historic move, the Michigan Public
Service Commission today approved an order opening the state's electric
utility market to competition. The order phases in competition beginning
this year through 2002, when full choice of electric providers will be made
available to all.
The plan opens 2.5 percent of each utility's load to competition this
year and another 2.5 percent every year through 2002. It also ensures that
all classes of customers (industrial, commercial, and residential) will have
the opportunity to receive competitively-bid electricity.
"Today, Michigan has taken a giant step forward as a leader in
electric competition," said John Strand, Chairman of the MPSC. "With
this plan, we're changing the landscape so that customers will no longer be
subject to a monopoly, but are free to buy from the cheapest provider. In
doing so, we have also ensured that rates won't rise for anyone, and will
very likely decrease."
"Throughout this process, we sat face to face with 116 different
people to hear their concerns," Strand said. "And we read the comments
of over 130. This plan takes into account those varied concerns and the end
result is a solid, balanced plan to move Michigan into a new era of
consumer choice. We look forward to working with the legislature on this
The plan incorporates some important components:
* All customers have the opportunity to choose, through a competitive
bidding process, to receive electricity from outside providers.
* Transition charges, which are charged by utilities to those who opt
out of the current system, must be verified regularly to ensure they
reflect actual market costs.
* Final rates will be determined by a hearing, to take place in the next
90 days. In the meantime, tariffs filed by utilities earlier this
year will serve as interim rates.
* By 2002, when full competition begins, only those states that allow
Michigan utilities to compete in their states on a level playing field
will be allowed to provide power in Michigan.
The final MPSC order does not approve an automatic rate increase,
based on the rate of inflation, that was suggested in a Staff Report released
in December 1996. The removal of that piece guarantees that customers
will not experience rate increases as a result of competition.
"We wanted to make sure that small customers, the ones who don't
know what stranded costs are, or how many kilowatts they use a month,
don't suddenly find their rates going up while the big corporations benefit,"
said Commissioner David Svanda. "The plan protects everyone and lets
deregulation proceed in a steady rational way."
The MPSC also requested today that the legislature consider
bonding authority to help pay for costs associated with converting to the
new, market-driven system. That bonding authority could reduce rates by
as much as nine percent.
"We've already made sure that no one pays more," Strand said.
"Now if we can get this part, too, we'll have lower rates for everyone,
even for people who don't change a thing."
Commissioner John Shea filed a dissenting opinion, indicating a
preference for the Staff Report. "I have significant doubts whether the
Commission has statutory authority to issue today's order," he said, "and
would commend the matter to close legislative scrutiny."
The MPSC order is binding as law unless challenged in court or
overridden by state or federal legislation.
The MPSC is an agency within the Department of Consumer and
Case No. U-11290
June 5, 1997
(MPSC Order Opening Electric Competition)