Bad policy ideas in Michigan
Environmental pressures and economic slowdowns are admittedly hard for state governors to tackle. Even still, Michigan’s latest is a lousy idea.
As noted here, the state legislature has just passed a bill which Gov. Granholm has promised to sign that would:
- Strengthen the utility monopolies, guaranteeing DTE and Consumer’s Energy at least 90% of the electric market in the state.
- Reduce electric rates for businesses and raise them for consumers.
- Allow the utilities to raise rates without any regulatory oversight until after the fact.
- Mandate an increased commitment to renewables by the state’s regulated utilities.
Sadly — if predictably — the last point is getting the headline, with comments like this one:
“Overall, this is a good deal for the environment,” said James Clift, spokesman for the Michigan Environmental Council. “This is taking real important steps toward cleaner energy in Michigan.”
In spite of the fact that:
The action came on the same day that DTE Energy proposed the first new nuclear plant in Michigan in 20 years — a $10-billion new reactor that would be built next to the existing Fermi 2 nuclear plant near Monroe.
Note to the environmental community: utilities don’t make money by saving fuel or lowering power costs. You can mandate all you want, but so long as we remain wedded to a model that places the good of the ratepayer and the environment at odds with the interests of regulated utility shareholders, financial pressure will continue to work against us.
Regulated electric utilities in the U.S. are only half as efficient as they were in 1910, in no small part because they are not allowed to make money off of conservation … and because no matter how many philosophers may dream otherwise, five smart dudes sitting in a room making forecasts of supply and demand to set price are never as efficient as a competitive market.
As a result, the money we can force utilities to spend on renewables or energy efficiency inevitably pales next to the ~$30 billion or so they spend on fuel. The problem isn’t our lack of utility mandates — it is our century-long love affair with socialist planning in the electric sector.
But regardless of where one comes on the pro-market/pro-government divide, here’s the painful truth: By mandating both increased renewable use and rate increases, this law will further cement the idea that environmental stewardship is incompatible with economic growth. Worse, it will do so in a way that ensures those two motivations remain in conflict.