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Report: DTE peak-hour rates hurt the poor

Poorer customers suffer ‘greater discomfort indoors,’ Detroit News reports, as summer A/C costs approach California levels

When families cook and eat dinner this June in an air-conditioned home, they will pay California-level prices as a result of DTE Energy’s move in March to peak-hour pricing.

The Detroit News reports on the disparate impact peak-hour rates are having on the poor in Michigan, who can least afford such a change.

Peak hours are weekdays between 3 p.m. and 7 p.m. Off-peak hours are charged at 15.45 cents per kilowatt hour. Between October and May, the peak-hour pricing increase is modest, up to 16.75 cents per kWh.

But from June to September, peak-hour rates spike by almost 5.5 cents per kWh above off-peak rates, at 20.98 cents per kWh.

The News interviewed Symone Wilkes, 29, a mother in Detroit, about the challenges of peak-hour rates even in the cooler months of the year.

“It's not during school hours,” Wilkes told the News. “It's during when the kids are going to be at home when they’re going to be wanting to eat and wanting to stay warm.”

“It's still putting a damper in our lives,” Wilkes added.

Related reading: DTE, Consumers’ peak-hour pricing plans have it all backward

The News reports:

Michigan has become one of the first states to require peak-hour pricing as the default rate mechanism. With no ability to opt out of the new program, households wishing to keep their bills down will now be responsible for shifting their electricity use to less expensive times of day.

Experts say the program has seen mixed results elsewhere, and a University of Michigan researcher said it can put vulnerable customers at risk. In some cases, a customer could experience an unexpected and unaffordable jump in their energy bills. Others, like those requiring medical equipment, may have little flexibility to alter their electricity use during peak hours.

“Research shows that higher prices can also lead to disproportionate harm among households that already struggle paying electricity bills, and that time-of-use rates are associated with greater discomfort indoors due to less AC use in warm climates,” Claire McKenna, a doctoral researcher with a focus on natural resources policy, told The News.

Michigan’s energy regulator, the Michigan Public Service Commission, directed DTE to make peak-hour pricing mandatory. Before March, the utility had an opt-in program.

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.