Electric Prices: Who determines what you pay for electricity?

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Part 2 of our series on electric prices and how they are set. If you missed Part 1, catch up here.

When it comes to setting the price customers pay for electricity, it’s a lot different than your local grocery store setting the price you pay for a loaf of bread – or your favorite clothing store setting the price for this year’s most popular jeans.  Regulated energy companies such as DTE Energy work closely with the Michigan Public Service Commission (MPSC), an independent state government agency. DTE makes recommendations to the MPSC based on the costs of fuel, the anticipated electricity demand, the need for investments to maintain and upgrade the energy grid and other factors. Ultimately, the MPSC decides what prices residential, industrial and business consumers can reasonably be charged for electricity.

The MPSC is composed of three members who are appointed by the governor and approved by the Michigan Senate. The MPSC investigates and determines appropriate electric prices that will keep energy safe, reliable, and affordable – while also helping Michigan make progress toward clean energy goals and other shared energy priorities for our state.

BUYING POWER AND SUPPORTING INFRASTRUCTURE

What do your electric fees pay for? They pay for the electricity you actually use. They pay for the cost of the fuel and the processes and equipment required to transform that fuel—whether it’s coal, natural gas, nuclear, wind, solar, or water power—into electricity. And they pay for the cost of maintaining, repairing, and continually upgrading the infrastructure that moves the electricity from its high-voltage source and safely steps it down until it enters your home or business at a much lower voltage.  Check out this video to help you understand the various factors that go into setting electricity prices.

Michigan is a big state, geographically speaking, and our state’s electricity infrastructure is accordingly immense. It also is aging and needs upgrades to best serve the energy needs of the 21st century economy.

Just like our bridges and roads, our energy infrastructure experiences wear and tear over the years.  Much of our current infrastructure is nearly half a century old. Some of it is even older. Regularly reviewing and updating our electric prices ensures we have the resources we need to keep our energy infrastructure strong, secure, and able to withstand fluctuations in demand, severe weather and the many other external factors that impact the energy grid day in and day out.

INVESTING IN TECHNOLOGY

DTE Energy isn’t just replacing older infrastructure – we are integrating new, smart technology to support renewable energy, achieve greater energy efficiency and improve electric reliability. As older coal plants continue to be retired, they are being replaced by wind turbines, solar panels and modern natural gas generation. In addition, new technologies such as smart meters and grid sensors allow us to know the health of the electric system in real time, flag and correct equipment problems before an outage occurs and learn about outages instantaneously. Over the next decade and beyond, DTE will continue to invest in our plants and energy grid in a way that makes sense for our customers, bringing them more reliable power while keeping rates below the national average.

 

A version of this post first appeared on the Alliance for Michigan Power blog.