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January 12, 2000 NEW YORK -- A Michigan lawmaker has delayed the introduction of an electric deregulation bill slated for the beginning of the legislative session Wednesday, citing the need to gain wider support from various stakeholders. Supporters of the bill, which include Consumers Energy (CMS), the Michigan Chamber of Commerce, the Michigan Manufacturers Association, and Columbus, Ohio-Based American Electric Power Co. (AEP), say it will give electricity customers the ability to choose a supplier, lower rates, and greater reliability. Detroit Edison Co. (DTE) didn't support a draft version of the bill unveiled in November. The utility said it will begin talks with state officials and stakeholders this week about provisions concerning market power issues and its claims of "stranded costs," or investments made under regulation that won't be recoverable under competition. State, industry and utility officials will spend the next few weeks hammering out a deal that will be acceptable to Detroit Edison, as well as environmental and labor groups, said a spokesman for state Sen. Mat Dunaskiss, who is sponsoring the bill. A revised bill could be introduced as soon as Jan. 25, but Dunaskiss has not given a new target date for introduction. Consumers Energy, the utility subsidiary of Jackson, Mich.-based CMS Energy Corp. which serves most of western Michigan, signed onto the draft version of the bill. Observers said Consumers Energy won more favorable stranded costs allowances than Detroit Edison, having lobbied aggressively during the drafting of the proposal while Detroit Edison didn't participate. But Detroit Edison, a unit of DTE Energy Corp., is now demanding changes to the plan in exchange for its support. In particular, it has objected to a requirement that incumbent utilities own no more than 25% each of the generating capacity in the state. The utility also seeks language in the proposal that would consider market power issues on a wider, regional basis. Currently, Consumers and Detroit Edison own about 90% of the state's generation capacity. The utilities could reduce their share of the power market by selling power plants or selling power supply contracts. "Some progress has been made on market power issues," said Detroit Edison spokeswoman Lisa Muschong, referring to negotiations on the proposal that have continued since November. "We're not opposed to divestiture, but it has to be our strategic choice," The draft bill also calls for full "netting" of utilities' stranded costs, requiring state regulators to take into account "stranded benefits," or ratepayer-funded assets that would fetch a premium under competition. "There has been some agreement on the concept of netting, but the mechanics have not been finalized yet," Muschong said. The draft version of the bill opens the state's electric industry for retail competition by Jan. 1, 2002. The plan calls for incumbent utilities to phase in customer choice, with 15% of each utilty's peak customer load freed up by June 1, 2000, and 20% freed up by Jan. 1, 2001, in anticipation of the deadline for full competition. Currently, electric deregulation in the state is being administered by the Michigan Public Service Commission. A pilot program for retail choice has begun, and is slated to free up for competition 12.5% of Consumers Energy and Detroit Edison's customers by November. The plan calls for utilities stranded costs to be recovered through a surcharge on customers' bills that would last through 2007. Rates would be frozen at Dec. 31, 1999, levels until the end of 2002. On Jan. 1, 2003, rates would be adjusted for the market by state regulators. Rates would be separated, or "unbundled," into generation, wires and other components by Jan. 1, 2001, and utilities would be required to separate their unregulated generation and regulated wires businesses into separate corporate entities by Jan. 1, 2002. The bill also calls for a 50% increase in the state's power import capacity, which would facilitate competition from out-of-state power suppliers.
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