Stabenow, Levin Call for a Delay of Increase in Electric Bills for Upper Peninsula Families, Small Businesses

U.S. Senators Debbie Stabenow and Carl Levin today urged the Federal Energy Regulatory Commission (FERC) to delay electric rate increases for families and businesses in the Upper Peninsula and act on the complaint filed by the Michigan Public Service Commission about these unjust and unreasonable rate hikes. The Upper Peninsula would have to pay nearly $100 million annually to operate the Presque Isle Power Plant, if the proposed electric rate increases are approved by FERC. This increase is scheduled to take place after December 1 and is the result of a regulatory decision made by the North American Electric Reliability Corporation (NERC) to force consumers in the Upper Peninsula to pay for 99 percent of the Presque Isle Power Plant's operating costs. This decision by NERC upended an earlier federal finding that UP customers should be responsible for just 14 percent of the power plant's operating costs. FERC shares oversight responsibilities and has a mandate to consider utility cost allocation issues. The Senators called for a moratorium on this decision while the agency considers the Michigan Public Service Commission's complaint that these rate increases are not just and reasonable. The letter also encourages the agency to work with local stakeholders on a long-term solution to the UP's power issues.

"It is totally unacceptable that seniors, small businesses, and families across the UP are forced to pay for unjust and unreasonable rate increases, while the benefits of this plant are being shared with communities in other states," said Stabenow. "Many families in the UP already struggle with high utility expenses and shouldn't have to decide between keeping the lights on and putting food on the table."

"Federal law requires that rate increases be reasonable and justifiable, and this proposed increase is neither," Levin said. "FERC should act promptly on Michigan's request to protect Upper Peninsula consumers and businesses from the damage this unjustified rate hike would cause."

The letter reads in part: "Residents and businesses in the region already pay extremely high energy costs because of the region's significant power transmission and supply challenges. When coupled with the Upper Peninsula's high unemployment, growing number of retirees, and an average median household income of only $39,400 - more than $13,000 lower than the national median - we are deeply concerned about the negative impact that these dramatic rate increases will have on seniors, the unemployed, small businesses, and others. Reports indicate that small businesses could be forced to shoulder annual increases of several hundred thousand dollars, which would create an unreasonable drag on the region's economy."

The full text of the letter can be found below:

October 17, 2014

The Honorable Cheryl A. LaFleur
Chairwoman
Federal Energy Regulatory Commission
888 First Street, N.E.
Washington, DC 204246

Dear Chairwoman LaFleur:

We are writing to express our serious concerns about the unjust and unreasonable electric rate increases in Michigan's Upper Peninsula that will take effect after December 1. These drastic increases in the cost allocations are expected to cost nearly $100 million as a result of the North American Electric Reliability Corporation's approval of a plan to arbitrarily split off Michigan's Upper Peninsula as a new local balancing authority.

Residents and businesses in the region already pay extremely high energy costs because of the region's significant power transmission and supply challenges. When coupled with the Upper Peninsula's high unemployment, growing number of retirees, and an average median household income of only $39,400 - more than $13,000 lower than the national median - we are deeply concerned about the negative impact that these dramatic rate increases will have on seniors, the unemployed, small businesses, and others. Reports indicate that small businesses could be forced to shoulder annual increases of several hundred thousand dollars, which would create an unreasonable drag on the region's economy.

The Michigan Public Service Commission and others have filed complaints with the FERC about this new cost allocation structure, specifically expressing concerns about the devastating effect it will have on the local economy and families. According to the Michigan Public Service Commission, splitting off a new local balancing authority for the Upper Peninsula does not improve the reliability of electric service in either Wisconsin or Michigan. Instead, the split will unfairly shift 99 percent of the costs of operating the Presque Isle Power Plant solely onto consumers in the Upper Peninsula despite some of the broader benefits that other areas receive from the plant's operations. This would be a drastic increase from the Midcontinent Independent System Operator's previous cost allocation formula for keeping the Presque Isle power plant operational to ensure the reliability of the power system.

Stakeholders in the region have been engaged in discussions regarding long-term energy options to address the area's future power needs. As the Michigan Public Service Commission has noted, allowing the new cost allocation system to proceed could discourage investment in more efficient long-term solutions for the region. We urge you to delay these rate increases while you give serious consideration to the Michigan Public Service Commission's complaint that these cost increases are neither just nor reasonable. We also encourage the FERC to work closely with residents, local businesses, state and local governments, and other stakeholders to find long-term solutions to the Upper Peninsula's future power issues.

Sincerely,