News Story

State Partially Rolls Back Utility’s Rate Increase, Company Heralds Declining Bills

DTE’s customers now pay more than they did in the fall, though not quite as much

In an April 24 post, DTE energy claims its residential electric customers are seeing their bills “decline while infrastructure investments are increasing.” In reality, customers of the electric and natural gas utility are paying higher electric rates now than they were last October.

In a blog post on its website, DTE claims the average residential customer should see his or her electric bill decrease by about 2 percent between April and May of this year. DTE also projects that the recent federal corporate tax cut will allow it to reduce customer gas and electric rates by about 3 percent in the fall.

The reason DTE can claim electric bills went down is that the state agency that regulates Michigan utilities trimmed the rate hike it requested last October, taking it from $125 million to $65 million. Under previous Michigan law, when DTE requested a rate hike, it could begin collecting the higher amount after six months. But if the Michigan Public Service Commission denies all or part of the increase, the company must give the money back through credits. Under new law, utilities are no longer allowed to self-implement.

That is what happened with DTE’s October 2017 request. Under the commission’s ruling, as of May 1, 2018, DTE was required to dial back the higher rates it had been collecting from November 2017 through the end of April and refund the excess to customers.

So while DTE’s residential electricity customers are paying higher rates than they were last October, the firm is claiming they got a rate cut.

Electricity “rates” and “bills” are not interchangeable terms. Rates refer to the price a customer pays for a kilowatt-hour of electricity. Bills, by contrast include the amount charged for the number of kilowatt hours used plus other costs, such as levies imposed by the state to subsidize electricty use by low-income people and promote energy efficiency and renewable sources.

According to a document sent to Michigan Capitol Confidential from DTE Energy, the average rate being charged for residential electricity was 16.3 cents per kilowatt-hour in January. Under the commission’s order, that rate was dropped back to 16.1 cents per kilowatt-hour in May.

The average rate paid by residential customers for a kilowatt-hour has increased from 12.5 cents in 2010 to 15.2 cents in 2016, according to data from the U.S. Energy Information Administration. Those numbers reflect the average of all the electricity prices charged to residential customers by all the state’s utilities.

Randi Berris, a corporate communications manager at DTE, defended the company’s blog post, saying the claim that bills went down on a month-to-month basis is factual.

“The Empowering Michigan blog’s purpose is to simply point out that bills are dropping while infrastructure upgrades are increasing,” Berris said in an email.

Jason Hayes, the director of environmental policy at the Mackinac Center for Public Policy, called DTE’s claim of lowering electricity bills a clever word game.

“These utilities expect that we will hear our bills are decreasing and feel good about saving money. But, the reality is that Michigan residents pay electric rates that are higher than any other Great Lakes state, and higher than the national average,” Hayes said. “So, how is it possible to pay higher rates, but have declining bills? Both DTE and Consumers Energy confuse the issue by saying that Michigan residents use less overall electricity each month than residents of other states, ergo our final bill is less.”

Correction: The story was updated to note that under old Michigan law, a utility had to wait six month before it could self-implement a rate increase.

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.