Published July 26, 2004
Exercising electric choice
By Susan Stock
Lansing State Journal
Like many small- business owners, Tony Burkholder is faced with the rising costs of supplies and double-digit increases in health-care costs for his 18 employees.
But one monthly bill is dropping - his electricity bill.
He estimates it's plunged 30 percent in the last year, down from $1,000 a month to $700 or $800.
"We've always paid top dollar for electricity," said Burkholder, owner of Blue Pencil Creative Group, a design, publishing and advertising firm in Holt.
"We're saving conservatively 30 percent. I actually believe it may be more than that."
Burkholder achieved this by switching electricity suppliers - something made possible by a 2000 regulatory change allowing alternative suppliers to compete with giants such as Consumers Energy.
There are 18 alternative suppliers active in Michigan. Since 2000, 18,500 customers have chosen one of them.
"Overall, it's been a big success for businesses in our state," said Bob Nelson, commissioner for the state Public Service Commission, which regulates such utilities.
But a six-bill package introduced in the state Senate earlier this month may change the rules on deregulation. Supporters say the new legislation will level the playing field for all suppliers, while critics maintain it will wipe out the competition.
Friday in Mt. Pleasant, in his first public statement on the new legislation PSC Chairman J. Peter Lark outlined three concerns: the bills would eliminate assistance for low-income residents and senior citizens; the bills would make it more difficult for consumers to switch back if they want; and the bills would eliminate the PSC's watchdog role.
"This is of particular concern to the Commission since one of our obligations is to ensure that customers receive reliable energy at the lowest possible rates," he stated.
However, Consumers Energy President and Chief Operating Officer Dave Joos said the current setup is unfair to his company, which has 1.7 million electric customers in Michigan.
His two main complaints:
Large PSC-regulated utilities are required to have a 15 percent reserve of energy, which costs money and puts such companies at a competitive disadvantage.
"I think it can work, but some of these issues need to be addressed, or it won't work," he said.
Electric choice has had the biggest impact on Detroit Edison, which has lost nearly 17,000 customers and 20 percent of its load to alternative suppliers. For Consumers Energy, more than 1,500 customers have switched, accounting for roughly 10 percent of the utility's load.
Because Consumers is locked into certain rates for its long-term contracts, the remaining customers either end up paying more or the utility has to absorb the extra cost, Joos said.
"We manage the best we can," he said. "But the question becomes who do those costs get shifted to?"
Still, supporters of deregulation say Consumers and Detroit Edison have a regulated monopoly and maintain that competition is working.
"Energy is a commodity," said Trevor Lauer, executive vice president of sales and marketing for Pittsburgh-based Strategic Energy, which entered the Michigan market last year.
"DTE and Consumers generate it through their own energy plants. We are able to go out and find multiple sources."
Strategic has 4,000 customers in Michigan, including many through a program with the Small Business Association of Michigan.
"Our program began in 2000, but it wasn't successful until about a year ago," said Barry Cargill, SBAM vice president of government relations. "After a couple of years, finally small businesses started feeling it was less risky."
Contact Susan Stock at 377-1015 or sstock@lsj.com.
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