Thanksgiving Dinner More Expensive for Michiganders Than Surrounding States

Because of higher electricity prices

Using electricity to cook a traditional Thanksgiving dinner was more expensive in Michigan this year than it was in surrounding states. Beginning in 2008, when Michigan limited competition to 10 percent of the electricity market, its electricity rates have increased and are now the highest in the region.

In 2000, under former Gov. John Engler, Michigan’s electricity market was opened up to competition. A competitive market of this type is called full “electric choice” because it allows ratepayers to choose the companies from which they purchase electricity. During the period in which Michigan had a fully competitive electricity market, its electricity prices were among the lowest, and at times were the lowest, in the region.

When it imposed the 10 percent limit in 2008, Michigan returned the state’s two huge electric utilities, Consumers Energy and Detroit Edison, to a quasi-monopolistic status. As a result, the big utilities are currently the default electricity providers for most of the state’s ratepayers. And now there is a measure in the Legislature (House Bill 4298) that competitive market advocates say would ultimately eliminate that last 10 percent.

Consumers Energy issued a news release on Nov. 20 in which it said the cost of cooking a traditional Thanksgiving dinner this year was less than what it was a year ago.

"It costs 43 cents to cook an entire Thanksgiving meal for 12 guests using a natural gas oven and stove, or $1.70 using an electric oven and stove," the company said in a news release. "That’s 4 percent less to cook with electricity than last year, and a savings of 25 percent to cook with natural gas."

The news release did not provide cost comparisons of using electricity in Michigan versus neighboring states. The fact is, it would have cost more in Michigan to cook a traditional Thanksgiving meal with electricity than in any other state in the region. But the cost differences between Michigan and the two states that have fully competitive electric choice markets, Illinois and Ohio, could be the most revealing.

The average price of electricity service to a residence in Michigan through August of this year, as reported by the U.S. Energy Information Administration, is 14.38 cents per kilowatt hour. That's 16 percent higher than the price in Illinois (12.37 cents) and 14 percent higher than the price in Ohio (12.61 cents).

That would mean that using an electric stove or oven to cook a traditional Thanksgiving meal would cost $1.70 in Michigan but only $1.46 in Ohio or $1.43 in Illinois. The cost of keeping the leftovers cool in an electric refrigerator during the days following Thanksgiving would also cost 16 percent more in Michigan than in Illinois and 14 percent more than in Ohio.

Consumers Energy and Detroit Edison were just recently granted permission to increase their electricity rates by an average of $1.25 per month for residential customers. This increase was not included in the comparisons above. If the increase had been included it would have erased the 4 percent drop that Consumers Energy mentioned in its Thanksgiving Day-themed news release.

The 25 percent drop in the cost of cooking with natural gas, also mentioned in the news release, is worth noting. The big utilities only deliver gas and are not allowed to make money on the gas supply itself. They purchase it from a market that is ruled by competition.

Meanwhile, the price of electricity, which is largely the result of the utilities’ near-monopoly on generation, has barely budged from last year. This true even though one of the major fuels used for the generation of electricity (and backing up wind energy) is natural gas.

When asked for a response, Consumers Energy provided a link to an article that focused on the falling price of natural gas.

Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.