Michigans Electricity Market Time For Gardening

October 15, 2012

Agenda
1) Is the 2008 Energy Legislation Benefiting Customers? - Paul Bedich, Vice-Chairman of ABATE 2) Michigans Electricity Market: We had competition and it worked! - Diane Katz, Heritage Foundation 3) Michigans Electricity Rates: How the 2008 law raised our rates - Bob Strong, Clark Hill PLC Attorneys at Law - Dr. Jonathan Lesser, Continental Economics 4) Electric Choice: How it works to encourage utilities to cut their costs and customers rates! - Alex Zakem - Rick Coy, Clark Hill PLC Attorneys at Law Lunch

Agenda
5) Competition Works: Whats going on in other states - Dr. Phil OConnor, COMPETE - Bill Massey, COMPETE 6) Customers Want Electric Choice - Jennifer Steiner-Burner, Marathon Petroleum - Gerhard Goss, J. Rettenmaier USA LP - Paul Bedich, Chrysler - Jim Hallan, Michigan Retailers Association 7) Michigans Electricity Market: A Path Forward - Paul Bedich, Vice-Chairman of ABATE

2012 Michigan Energy Symposium

ABATEs Purpose To represent the industrial viewpoint on energy and utility issues before all appropriate governmental bodies and other pertinent organizations which affect energy pricing, reliability and terms and conditions of service in Michigan. www.abate-energy.org

2012 Michigan Energy Symposium

Customer Choice Coalition Since 2005, advocating for increased competition among electric providers in Michigan.

www.customerchoicecoalition.com

2012 Michigan Energy Symposium

Energy Choice Now Energy Choice Now is a coalition of businesses, consumers, suppliers, trade associations, and other interested stakeholders that are committed to passing legislation that will raise the current cap on Michigan`s electric suppliers, increase competition, and lower energy costs. www.ecnmichigan.com

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Is the 2008 Energy Legislation Benefiting Customers?

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Source: EIA

- For the energy supply, each state has the ability to establish a competitive market where end users can choose from multiple suppliers, utilize a regulated utility or some combination -Regulated utilities have specific service territories and are governed by a state public utility commission (PUC) - For the transmission, there are Regional Transmission Organizations (RTOs) that coordinate the delivery across broad regions and there are utilities. Transmission is governed by the Federal Energy Regulatory Commission (FERC) - For the distribution, there are local utilities, cooperatives and municipalities that deliver to the end users.
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Source: EIA

Regulated model forces customers to buy electricity from a specific utility at rates approved by the public service commission. Retail Choice allows customers to choose the supplier of their electricity!

2012 Michigan Energy Symposium

What has the 2008 Energy Legislation done?
- Utility electricity rates are being set based on ESTIMATED COSTS, WHICH MAY NEVER BE SPENT, not ACTUAL COSTS - Utilities are allowed to self-implement rate increases before a complete public service commission ANALYSIS FOR REASONABLENESS - Utilities are filing for and receiving continuous rate increases
Cos t of Ser v ic e / Rate Des ign
Fu n cti o n al Assi g n men t
Generation Plant & Costs

Cl assi fi cati o n
Demand Energy Demand

Al l o cati o n
Residential

Transmission Plant & Costs All Plant & Costs Distribution Plant & Costs

Commercial Demand Customer Industrial

Other Customer Plant & Costs

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What has the 2008 Energy Legislation done?
Electricity supply competition limited to 10% = no market competition to help control regulated utility cost Michigan rates compared to national rates, 1990 to present
Once competition eliminated, MI electric rates increase above national rates again
0.46 0.41 0.24 0.22 0.19 0.19 0.16 0.36 0.49 0.29 0.37

0.97

0.53

Competition

0.15

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Feb. -0.11 2012

Michigan rates were above national average until competition started in 2000

-0.32 -0.58 -0.67 -0.91 -0.60 -0.76 -0.80

-0.42

Data from U.S. Energy Information Agency

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All of which has now resulted in:
Michigans regulated electricity rates being the highest in the mid-west And increasing at a rate almost 5 times higher than the national average!

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At this point Michigan has: (a) changed the regulatory model where now it has failed to ensure we have competitively priced electricity rates, and (b) LIMITED ANY ALTERNATIVES BY CAPPING the market competition AT 10% of a utilitys customer purchases of electricity.

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We must have an energy policy that supports excellent reliability, at a competitive price, while protecting the environment. Above all, our policies must ensure adaptability to a variety of futures. Governor Snyder
MOTION TO INTERVENE AND PROTEST OF THE GOVERNOR OF THE STATE OF MICHIGAN , FERC Docket No. CP12-491-000

Source: EIA

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