Consumers Energy may raise electric rates $154M in Michigan, regulators say

Nearly 2 million Michigan customers who get their power from Consumers Energy will see their electric rates jump in early April.

On Friday, March 21, state regulators granted the large, for-profit utility permission to hike rates by a total of $153.8 million, less than half what Consumers initially sought.

The typical residential customer should expect to see a monthly bill increase of $2.78, or 2.79%, according to the Michigan Public Service Commission, the three-member panel that oversees power companies in the state.

Regulators said large portions of the money generated by the rate increase will help better prepare Consumers' grid to weather severe storms and boost reliability for the utility that has struggled with keeping the lights on consistently in recent years.

“The goal here, and I think it’s a goal that we share, is to get the most improvement the most cost-effectively,” said commission Chair Dan Scripps.

Still, regulators urged Consumers to go further with certain strategies proven to reduce outages, like trimming trees back from power lines. Trees and limbs falling on lines are the top cause of outages.

The company is working to trim each segment of its more than 90,000 miles of lines on average once every seven years, and the Public Service Commission granted the full $125 million Consumers requested to continue the work as part of the rate hike. It plans to clear 8,000 miles this year, the utility said.

But regulators noted an internal study Consumers conducted found a shorter, four-year cycle was optimal for customers, mirroring a major finding of an independent audit into Consumers and DTE Energy’s outage problems released in 2024.

“I expect to see a better plan in their next rate case that reflects these findings,” said Public Service Commissioner Katherine Peretick.

Consumers continues to invest its “highest ever” level of spending in tree clearing, and achieving a seven-year cycle is “a step on the journey to shorter trim cycles,” said spokesperson Brian Wheeler in a statement.

In a news release, the utility said the rate hike will support its “reliability roadmap” aimed at cutting outages and restoring power more quickly in the coming years. It has touted success so far, though watchdogs say progress is less clear when factoring in severe storms causing mass blackouts.

“We plan to roll up our sleeves and accelerate building the electric grid for the next generation,” said Greg Salisbury, Consumers vice president of electric grid design. “We want our neighbors to know we will be working every day to make our system more reliable and more resilient to keep the lights on, even after the worst storms.”

The rate hike is the product of a 10-month legal process that drew scrutiny from 25 environmental groups, consumers watchdogs, business organizations and large power customers, like Walmart and The Kroger Co.

Consumers filed paperwork to raise rates $303 million, plus a separate $22 million in a 12-month surcharge, in May 2024, just three months after winning its last rate increase of $92 million. Big Michigan utilities can seek to hike rates once a year, and both Consumers and DTE have nearly kept up that pace in recent years.

“Consumers Energy and DTE keep coming back to the trough, and over and over again Michiganders are forced to pay higher and higher bills just to keep the lights on,” said Michigan Attorney General Dana Nessel in a statement.

Nessel’s office was one of the organizations that sought to axe large portions of Consumers rate ask. “Fighting these constant rate hikes is unending, year-round work in my office, and we’ll continue to stand on guard for Michigan utility customers,” she said.

The increased rates will also fund Consumers programs targeted at reducing the number of customers who experience frequent outages, regulators said. In 2023, 10.7% saw four or more outages, while Michigan standards aim for that figure to be under 6%.

Millions will also flow to pole and power line inspections and replacements, substation maintenance and projects bringing grid-sized batteries that can help store energy and meet demand. Other investments will allow the utility to quickly locate faults and reroute power, minimizing disruptions, regulators said.

Some ratepayer advocates said it will take time to review the 525-page order granting the rate increase to analyze what was cut from the utility’s initial ask.

But regulators still appear to be “deferential” to Consumers on approving capital spending that watchdogs say the company has failed to justify as effective or cost-effective for reliability, said Amy Bandyk, executive director of the nonprofit Citizens Utility Board of Michigan, in an email.

The utility defends the spending as part of a multi-pronged approach at improving performance, but groups like Bandyk’s have been critical, noting it also offers company shareholders a means to boost earnings.

Regulators said on Friday they intend to announce new steps soon to evaluate utilities' capitalization procedures.

The rate hike will allow the expansion of Consumers' electric vehicle charging system rebates for residential customers who qualify based on income. It also provides funding for reliability work targeted at disadvantaged communities, while requiring Consumers to do more to evaluate its impact in future cases.

Some advocates had requested Consumers be required to implement a ban on power shut-offs during periods of extreme summer heat, akin to existing wintertime protections. Regulators didn’t order such a step be implemented but directed the company to explore the possibility in the future.

During the rate case, Consumers and watchdog groups haggled over tens of millions in costs related to safety projects at its hydroelectric dams, particularly the Hardy Dam on the Muskegon River. The utility is considering whether to sell, remove or relicense its 13 dams this year, and some argued the project costs shouldn’t be included in rates while that decision is uncertain.

But Consumers said the investments were critical to keeping the dams compliant with federal standards meant to avoid catastrophic failures and would be necessary regardless of the sale decision.

Regulators ultimately granted the company the ability to defer accounting for the investments until its next rate ask, where the actual costs of the projects can be reviewed for inclusion in rates.

Consumers Energy is simultaneously seeking a natural gas rate increase of $248 million, with a decision expected later this year.

The new electric rates are slated to go into effect April 4.