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Michigan OKs electricity rate cut to attract automotive battery factories

December 23, 2021
Bridge Michigan 
Dec. 22, 2021
Paula Gardner

Michigan’s two largest utility companies now can offer large-scale industrial customers lower rates, a move that proponents say will boost the state’s chances to attract billions of dollars in advanced manufacturing investments.

Members of the Michigan Public Service Commission on Wednesday voted unanimously to approve requests that DTE Energy and Consumers Energy made in November.

At that time, Consumers said, at least 10 high-tech projects — including electric vehicle battery plants and semiconductor factories that use massive amounts of power — were considering Michigan for about $64.8 billion in investment that would generate about 21,000 jobs.

The utilities said they needed the ability to offer the lower rates to those customers for the state to be competitive: Existing industrial rates in Michigan are about 21 percent more expensive than in states — mostly in the South — that also are vying for the investment and jobs.

The vote could mean tens of millions in electricity savings to a place like a large electric vehicle battery plant.

Dan Scripps, chair of the commission, said he was excited by the approval, which comes two days after Gov. Gretchen Whitmer signed a $1 billion incentive package to attract the same types of businesses.

“Michigan is firmly in the game for attracting that investment and those jobs,” Scripps said just before casting his vote with the two other commissioners. All spoke in favor and did not address the written comments received before the meeting.

Whitmer, speaking to reporters at a year-end event, said this week’s economic development accomplishments are important to the state.

“We’ve got to make sure that as battery plants, as the future mobility investments (and)  decisions are made,  that Michigan is at the top of the list and that we’re winning them,” Whitmer said.

But some critics are skeptical that costs associated with the new rates will be fully borne by the companies signing deals for them. Both utilities stated that is the case in their petitions, and a reason why the commission could act outside of normal rate-setting procedures.

Tim Lundgren, attorney with Potomac Law Group in Lansing, told Bridge Michigan he was disappointed by the commission’s order. He had sought a full hearing before the vote to determine whether the pricing scenarios protected other customers.

“There are significant reasons to doubt (the) assertions,” wrote Lundgren in his petition representing the Energy Michigan Inc. coalition of energy customers.

Amy Bandyk, executive director of the nonprofit Citizens Utility Board of Michigan, also sought more scrutiny ahead of the vote.

She questioned the commission about whether safeguards could be added to protect existing customers, including making the initial approval part of a pilot program or restricting eligibility to only new businesses receiving state support.

While industrial electricity rates should not affect residential customers, Bandyk also questioned disparities between customers who power their homes versus industrial businesses.

Also on Wednesday, the commission approved a rate increase of $27,118,000 for Consumers, nearly 88 percent less than the utility had originally requested. The MPSC says it means an increase of about 59 cents per month on an average residential bill. The state’s 12-month average electricity bill is $109.86.

“There is a long-term and troubling trend of Michigan residential customers frequently having to deal with long power outages due to poor utility service and still getting hit with rate increase after rate increase while industrial rates have stayed flat,” Bandyk told Bridge.

Consumers, which covers 62 Lower Peninsula counties including Kent, Kalamazoo and Midland, will be able to award the new economic development rate to companies that use 35 megawatts at a single moment — the equivalent of about 38 times what a typical Michigan house uses in a month.

If eligible companies sign a 15-year contract, Consumers would cut rates to 4 cents to 5 cents per kilowatt hour from the average 8.28 cents it charges industrial customers.

DTE would require its customers in much of eastern Michigan and parts of northern Michigan to use 50 megawatts at any moment to be eligible for the rate. In exchange, those customers would pay 4.3 cents per kilowatt hour as opposed to 5.5 cents to 7 cents per kilowatt hour.

“The new rate will address the anticipated needs for more electrification of large business operations, including EV and EV battery manufacturing as well as data center facilities,” said Peter Ternes, DTE spokesperson.

Michigan learned how electricity rates impact corporate decisions when Ford Motor Co. chose Tennessee for its new Blue Oval City, which will house an EV battery plant among other advanced manufacturing operations.

The average industrial electricity rate paid in Michigan is 7.85 cents per kilowatt, while it’s 5.86 cents in Tennessee  — and that state is one of nine that offers “economic development” rate incentives.

Electrical vehicle battery plants can use five times more electricity than typical factories, and their size — GM is building one in Spring Hill, Tennessee that is 2.8 million square feet — means they’ll buy more electricity than most other customers.

The state now is courting GM for its third large U.S.-based plant, after the automaker expressed interest in a 590-acre site in Delta Township, west of Lansing.

The Lansing Board of Water and Light this month approved negotiations for a special industrial rate if GM chooses the site, where it would need access to 100 megawatts at a time. In comparison, the utility said, the manufacturer over a full year would use 25 percent more power than the public utility’s full portfolio of 50,000 residential customers.

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