Rates – and Demand – Rising: Electricity costs bumping up for residential, commercial users

REGION – Like many other commodities, the cost of electricity across the Grand Traverse region has either risen or will rise for most customers in the coming year.

Cherryland Electric Cooperative increased rates in July and Consumers Energy will be hiking rates this month. Traverse City Light and Power, which notes that it has not raised its base rate since 2006, has a power cost charge that is currently capped, but that cap expires in August.

For many, the shock will come this month when Consumers Energy implements a monthly increase of roughly $7.75 for its 40,200 residential electric customers in the five-county Grand Traverse region. The utility also serves some 8,100 commercial and industrial customers. Its largest customers in the region include Munson Medical Center and the Grand Traverse Resort and Spa.

Jeff Holyfield, a Consumers spokesman, said the rate change is in part because of $1.6 billion it has invested to maintain and improve services to customers and to reduce emissions from coal-fired plants.

The 2008 energy legislation requires all Michigan utility companies to have 10 percent of their energy come from renewable sources by 2015. By the end of 2012, Consumers Energy expects to launch Lake Winds Energy Park, a 56-turbine site in Mason County. Already the state's largest provider of alternative energy, when Lake Winds is up and running Consumers Energy will get eight percent of its energy output from renewable sources, up from five percent.

While some business owners and managers received a bit of a jolt when they opened their electric bill, others were not surprised. "We had a 13 percent increase," says Terry Marchand, general manager of Centre Ice Arena. "As an example, this year our September bill was $17,211. Last year it was $15,127 with about the usage and hours of activity pretty much the same. That's about 13 percent."

In order to keep its two ice surfaces cold, Centre Ice runs compressors 24 hours a day, seven days a week. That keeps the electric meters spinning. But Marchand was not surprised by the $2,000 hike in Centre Ice's monthly bill because officials from Cherryland came out and told him about the rate hike before it was implemented in July. "I was really impressed that they came out and explained the situation of why rates were going up," he says.

"We contacted our commercial key accounts and most didn't like it, but they were resigned to rates going up," explains Cherryland's general manager Tony Anderson. "They understood when we told them that 70 cents out of every dollar I spend goes to (buy) power supply."

Cherryland instituted rate hikes of 10 to 15 percent to its 33,000 members in parts of the six counties it serves. About 95 percent of the co-op's members are residential customers. It provides power through 2,600 miles of lines – enough to run from Baltimore Md. to San Francisco, Calif. "Our members range from Manistee's airport, up to Cathead Bay (in Leelanau County)," says Anderson. "That's 1,400 square miles, a pretty large area for a staff of only 50."

The hike can be linked to the rising cost of power and the mandate for environmental protection, says Anderson. The utility buys its electricity from Wolverine Power Supply Cooperative, based in Cadillac. Wolverine is jointly owned by Cherryland, Great Lakes Energy of Boyne City, Presque Isle Electric and Gas in Onaway, and Tri-County in Portland. Basically, Wolverine generates and sells power and these other agencies are the distributors. Wolverine is in the process of planning and building a clean-burning coal-fired plant in Rogers City. But energy from that plant is still years away.

Despite the lagging economy, the need for energy continues to grow. Cherryland's power usage was up about two percent last year, a reflection of rising use by customers, according to Anderson.

"Nearly a third of all U.S. households have four electronic devices, such as cell phones, plugged in and charging, according to a federal survey," he notes. "In the past 30 years, the amount of residential electricity used by appliances and electronics has increased from 17 to 31 percent. More homes than ever use major appliances and central air conditioning. Digital video recorders, computers and multiple TVs are commonplace. Clearly our appetite for energy shows no signs of slowing down."

Anderson says that Michigan's energy supply depends mainly on aging coal-fired plants. The cost of maintaining and refitting those plants to meet environmental standards will be significant. "The last 20 years have been probably the best we've had as far as stability in supply and costs," he says. "The next 20 years won't be as stable or as low [in costs]. That's where we are right now. If we want to keep the power on 24/7, you need to talk coal."

Anderson says despite rate increases, electricity remains relatively a great value. "Over the past 10 years, gasoline has shot up 10.9 percent on average every single year, according to the U.S. Bureau of Labor Statistics," he notes. "A loaf of white bread has increased 4.2 percent annually and a dozen eggs 6.5 percent a year."

Even with the 2011 rate increase, electricity for an average Cherryland residential user (of about 700 kilowatt hours) has increased 3.7 percent a year over the past decade, according to Anderson.

Traverse City Light & Power serves roughly 3,000 commercial and 8,000 residential customers in the city proper and parts of Blair, East Bay, Elmwood, Garfield, Peninsula and Paradise townships. Light & Power is guided by a seven-member board of directors. Its energy generation capacity comes from a combustion turbine power plant in Kalkaska and shared ownership of the Campbell Power Plant near Grand Haven, the Belle River Power Plant on the St. Clair River and the wind generator on M-72.

In 1996, Light & Power became the first Michigan municipal electric utility to install a utility scale wind turbine. At the time of construction, with a blade diameter of 144 feet on a 160-foot tower, the windmill was the largest operating wind turbine in the country. It produces enough energy to meets the electricity needs of 125 residential and business customers.

"Light and Power is unique in that we're a not-for-profit and rates are typically the lowest around," says Jessica Wheaton, marketing and community relations coordinator.

Meanwhile, members of the Retail Energy Supply Association (RESA), a trade association of retail energy suppliers committed to competitive energy markets, recently participated in an Energy Choice Now panel before the Michigan Senate Energy and Technology Committee.

The committee is reviewing a 2008 law that imposed a 10 percent cap on customers who can exercise electric supplier choice. Between 2000 and 2008, electric customers were able to choose their own electric supplier, and Michigan businesses saved more than $400 million in energy costs through participation in the electric choice program. Since enactment of the 2008 law, utility-bundled electric rates have increased in Michigan instead of following the national downward trend. "Michigan is in a situation where a significant portion of its commercial and industrial customer base is 'locked out' from the benefits and savings from competitively priced electricity," says David Fein, president of RESA.

According to data from the Michigan Public Service Commission, DTE has raised residential rates by 10 percent annually since 2008, a whopping 29.9 percent increase. Consumer Energy rates increased, on average, by 25 percent with commercial rates at 26 to 31 percent and industrial rates soaring at 34 to 38 percent, the data shows.

Data from the U.S. Energy Information Administration show that Michigan's major utilities drag down the state's economy by charging more than surrounding states for electricity. Data from May, the most recent available, shows that overall Michigan paid 14.5 percent more than the regional average for electricity, and 5.8 percent more than the national average.

Industrial customers suffer the biggest differential, with Michigan factories paying 19.6 percent more than the regional average – a critical price differential in the industrial segment. Illinois and Ohio have among the lowest rates for factories. Michigan families also face the highest rates in the Midwest, paying 9.6 percent more than the regional average, and 10.1 percent more than the national average. BN