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Electric
Deregulation
Electric Deregulation: What it's all about
You may hear it referred to by several
different names: customer choice, deregulation, electric choice,
or electric utility restructuring. Whatever it's called, it's
a new way of deciding how customers get their energy supply.
Electricity is supplied through a system of
three separate activities. Traditionally, these services have
all been provided by your local utility. They include:
- Generation, where the electricity is produced
at a power plant;
- Transmission, which moves power at high
voltages from the power plant to the local distribution
system; and
- Distribution, where the electricity is
delivered to homes and businesses.
In several states across the country, state
legislatures have passed laws allowing customers to buy electricity
from suppliers other than their local utility. The power continues
to be delivered to the customer's home or business through
the local utility's distribution system. The theory behind
all this is that competition will drive down the price of
generation and the customer will end up with a lower bill.
Does customer choice work?
Electric customer choice has experienced
mixed success in states where it's been tried. In California
it turned out to be a disaster, partly because a shortage
of supply drove the price up. Some large customers have been
able to benefit from customer choice but generally, it has
not led to lower electric bills for residential or small commercial
customers. In states where it's been tried, most customers
who switched suppliers eventually returned to their local
utility.
It may be too early to tell whether customer
choice will work in the electric utility industry. The market
is new and may simply need time to develop. On the other hand,
the concept may simply be flawed. Time will tell.
Customer Choice in Michigan
In June 2000 Governor Engler signed
P.A. 141, also known as the Michigan Customer Choice and Electricity
Reliability Act. All customers of investor-owned utilities
and large rural electric cooperative customers became eligible
to choose their own electric suppliers as of January 1, 2002.
Small cooperative customers will have choice by January 1,
2005. The bill gives the governing boards of the state's 41
municipally-owned electric utilities the choice of opting
in or out of customer choice for their customers.
Customer Choice and the BWL
Under the new law, the governing boards
of Michigan's municipally owned utilities can decide whether
choice will be extended to customers of their utilities. Our
Board of Commissioners intends to wait and see if the market
works as intended before deciding this important question.
In February 1998 the Board of Commissioners
adopted a set of fundamental principles involving utility
restructuring. Before deciding whether to participate in customer
choice the BWL will closely monitor Michigan's restructured
retail scene to see if the market satisfies these principles,
which include the following requirements among others:
We support competition that encourages the
maximum number of competitors and protects the rights of
communities to form their own utilities.
The safety, integrity and reliability of
the electrical system must be preserved.
The new industry structure must not tolerate
market dominance by a limited number of competitors.
The Michigan electric utility industry must
maintain or enhance environmental performance.
CLICK
HERE FOR A FULL COPY OF THE RESTRUCTURING PRINCIPLES
For now, BWL customers continue to receive
their power supply from us. Current plans call for making
a recommendation to the Board of Commissioners in 2004 as
to whether to open the BWL's service territory to choice.
Meanwhile, our goal is to keep our cost of generation at or
below the costs of competitive providers. This is a commitment
we've been successfully meeting since we entered the electric
utility business in 1892.
FAQs Do you have a question? Feel free
to direct it to:
Mark Nixon, Director of Communications
phone:
517 702-6735 email:
MDN@LBWL.COM
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