Ohio builds on record of having cheaper electricity

A new Ohio law governing the electric industry could put pressure on Michigan to be a more attractive place for business and households, says an expert on regulated industries. Ohio House Bill 15, which takes effect Aug. 14, makes several significant changes to how the utility industry operates in the Buckeye State.

The law makes it easier for utilities to acquire the permits required to establish a generating plant, as noted by observers as diverse as The Nature Conservancy and the State Policy Network.

“Even before Ohio implements these policies, Michigan is at a competitive disadvantage,” Ted Bolema wrote in an email to Michigan Capitol Confidential. Bolema is a senior fellow at the Mackinac Center for Public Policy and a fellow with the Innovators Network Foundation, focusing on innovation and competition.

Michigan’s residential electricity rates are 20% higher than Ohio’s, Bolema said, and Michigan’s industrial rates are more than 10% higher than those in Ohio.

”This gap will grow even wider as Ohio goes forward with its new policies, while Michigan regulators keep allowing rate increases by its monopoly utilities,” Bolema added.

Michigan had some of the best electricity industry policies in the country around 20 years ago, Bolema said, and its electricity rates were about the same as those of its neighbors.

“But Michigan legislators gave in to the demands of its big utilities to gut its electricity competition program, and today Michigan’s rates across the board are higher than in Ohio, Indiana, Wisconsin and Illinois.”

The commercial electricity rate in Michigan was 14.05 cents per kilowatt hour as of February, according to the U.S. Energy Information Administration. Ohio’s rate during the same month was 11.19 cents per kilowatt hour. The national commercial average was 13.08 cents per kilowatt hour.

The regulatory environment in Michigan and Ohio vary in significant ways.

Ohio has energy choice. Michigan has a strictly limited choice program that is out of reach for most customers.

Ohio’s law, in the words of that state’s regulators, lets households and large industrial companies alike “shop for energy options from a diverse group of competitive suppliers.” In Michigan, most customers have no choice in the company that generates or supplies electricity to them. Rates are set by the Michigan Public Service Commission, whose members are appointed by the governor. Regulators have approved rate increases each year in the current decade.

CapCon asked Rep. Pauline Wendzel, R-Watervliet, and Rep. Joe Tate, D-Detroit, for comment. They are chair and vice chair of the Michigan House Energy Committee, respectively. Neither responded to a request for comment. The Michigan Department of Environment, Great Lakes, and Energy did not respond to an email seeking comment.