Commission argues current payment model incentivizes capital spending
The Michigan Public Service Commission released recommendations this week calling on state lawmakers to end the cycle of yearly utility rate increases and rewrite how the state’s utilities earn profit, with Chair Dan Scripps arguing the changes would do more for household energy bills than the regulator can accomplish on its own.
Scripps sent the recommendations in a July 16 letter to Gov. Gretchen Whitmer, who asked the commission in June to identify legislative changes that would lower utility bills and improve reliability, along with ways to strengthen energy assistance. The commission released the letter publicly on Monday.
The core of the letter echoes an argument that ratepayer advocacy groups have made for years: Michigan’s regulatory model compensates utilities based on what they build, which the commission says pushes the companies toward expensive capital projects and away from cheaper options such as tree trimming, maintenance, or better use of existing infrastructure.
“The most impactful opportunity may be to counter the inherent bias for utilities to invest in capital projects,” the letter states.
The recommendations go beyond what the commission can implement under its existing authority. Scripps told lawmakers that legislative action ending the cycle of yearly rate increases and changing the way utilities earn profit would have a larger effect on household energy bills than anything the commission can do on its own.