Michigan Grid Regulator Sets Sight on Operator Profits over Outages

Michigan's public utility regulator is proposing to take electricity operators to account for prolonged outages through their earnings.

The plan is part of a proposal for "incentive and disincentive mechanisms" to improve power reliability, according to a press release this week by the Michigan Public Service Commission (MPSC) seeking comments on the package of mechanisms. The agency, which oversees energy and telecom companies, cited recent storms that have left over 500,000 customers without electricity.

The MPSC is "considering financial mechanisms connected to the time it takes utilities to restore power, including a particular focus on restoration timelines during major storms", the media statement said.

This mechanism would "connect utility earnings with reducing duration and frequency of electric outages", the statement said.

"We share the public’s frustration with the number and duration of power outages, and particularly those who experience outages over and over again,” MPSC Chair Dan Scripps said in a statement. "By focusing on the places where improvement is needed most, we’re working to better connect the financial performance of the utilities with the experience of their customers. Today’s actions of offering a straw proposal that ties financial metrics to the duration of outages and the number of customers experiencing multiple outages each year is a significant step towards that goal.”

Other proposed mechanisms include imposing penalties on power providers that record four or more instances of "sustained power interruptions" in a year. "Current service quality standards require that, through December 2029, not more than 6 percent of a utility’s customers may experience more than 4 sustained outages, and no more than 5 percent of customers after Jan. 1, 2030", the regulator noted.

Michigan's two biggest utilities, Consumers Energy Co. and DTE Electric, had over 335,000 such customers last year, according to the MPSC.

It added, "Utilities would be penalized further for having customers experience 7 or more sustained power interruptions. Annual reports filed by the utilities indicate DTE Electric had 16,262 such customers, and Consumers Energy 19,821 in 2022.".

Companies listed among those with the 10 worst-performing circuits for three or more years in the last five years would also be penalized if the proposal is approved.

The MPSC is seeking comments until September 2022.

Audit

It simultaneously announced it has contracted an auditor to review the distribution systems of Consumers Energy and DTE Electric. "The focus of the audit is on reducing the number and duration of outages and identifying improvements needed to increase safety, particularly concerning the risk of public contact with downed power lines", the MPSC said.

The audit contract of nearly $1.76 million was awarded July to Liberty Consulting Group, according to the announcement.

“Through the audit, the MPSC looks forward to gaining a deeper understanding of the challenges that DTE Electric and Consumers face as we continue to experience increasingly frequent and severe storms so we can develop effective solutions”, Commissioner Katherine Peretick said in a statement.

Gas Price Increases

Meanwhile the MPSC approved Wednesday requests by Consumers Energy and Michigan Gas Utilities Corp. to raise rates for natural gas.

"The Commission approved a settlement agreement permitting Consumers Energy to raise rates by $95 million, a more than 55 percent reduction from the initial $212 million increase the Jackson-based utility had sought, to address capital infrastructure improvements, investment in technology and operational efficiency, and increased financing costs", it said in a separate news release.

"A typical residential customer using 100 ccf of natural gas monthly will see an increase of $4.20 on their bill, a 4.2 percent increase", the MPSC said.

The new rate takes effect October 1.

Michigan Gas Utilities has also got approval to increase its total natural gas base rate collection to $9.9 million. "That amount is more than 48 percent lower than the $19.1 million increase sought by the utility to fund safety and reliability upgrades and cover increasing costs for materials and labor and the impact of higher interest rates and inflation", the MPSC said.

"A typical residential customer using 100 ccf of natural gas monthly will see an increase of $5.10 on their bill, a 6.6 percent increase", it said.

The new rate applies January 1, 2024.

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