Editor’s note: BridgeDetroit published this report in partnership with Planet Detroit.
Juanita Gray has lived in her Detroit home for more than four decades. In recent years, she said she’s been paying higher electricity bills while service has deteriorated. She’s experienced several multi-day power outages that caused her to lose groceries.
“Power goes out, stays out for a long time; when you try and call DTE to get information, you get referred to another number and another number,” Gray told Planet Detroit. ”And then you find out these people you’re talking to live in Utah, and you cannot get answers.”
That’s why Gray decided to attend Monday’s public hearing held by the Michigan Public Service Commission at Wayne County Community College. The purpose of the hearing was to receive public comment on DTE Energy’s proposed rate increase, which will be decided by the MPSC in October. DTE is asking the Michigan Public Service Commission to approve its proposal by November to increase rates on residential customers by 8.8%, yielding $388 million per year in additional revenue.
Also attending the meeting were dozens of residents and activists who staged a protest before the meeting. A report released Friday by activists charges that DTE extracts high profits from ratepayers, damages public health, and funds politicians who support voter suppression while providing unreliable service.
Gray had never attended a meeting of the Michigan Public Service Commission before. Indeed, this was the first time the MPSC had ever held a public hearing for a rate case.
“The Commission has been exploring ways of increasing public outreach and involvement in utility matters and, given strong interest expressed by organizations in Detroit, decided to hold this meeting to give folks a chance to provide input directly to Commissioners,” MPSC spokesperson Matt Helms told Planet Detroit in a statement. “As far as anyone at the MPSC remembers, the Commission hasn’t held public hearings on rate cases in the past.”
The decision came on the heels of the MPSC’s July 27 regular meeting, held in Detroit, which also was the first time in memory that the Commission held a regular meeting outside of Lansing, Helms said. At that meeting, activists called on Commissioners to hold a public hearing in the case.
As a private investor-owned utility company, DTE is regulated by the MPSC, a three-member body appointed by the governor. It is charged with serving the public by “ensuring safe, reliable, accessible energy and telecommunications services at a reasonable rate.”
Gray said she came hoping MPSC would be forced to give her some answers. The utility has asked for and received rate increases in 2015, 2017, 2018, and 2019.
“I just wish that DTE would listen to the people and stop worrying about the profits,” Gray said. “And I wish the public service commission would stop just rubber stamping every time they request an increase in the rates.”
High profits through big spending
Michigan Attorney General Dana Nessel has intervened in this latest request, saying in a statement that “DTE shows it is completely unconcerned about the savings accounts of its consumers.”
Independent consultant Sebastian Coppola, testifying on behalf of Nessel, pointed out that DTE reported a revenue excess of $111.7 million and a return on common equity – the amount of revenue it can pay to shareholders as profit – of 10.1% in 2020, which exceeded its authorized rate of 9.9%. DTE’s stock price has increased by nearly 40% in the last five years. Coppola’s analysis show’s DTE needs much less money than it claims in its proposal. Coppola estimates the company needs only $59.8 million, which would justify a residential rate increase of 1.3%.
Coppola provided data showing that DTE has steadily increased its rate base by increasing its capital expenditures since 2009. Basically, the utility is building new infrastructure and passing the costs to ratepayers – along with an additional cost to ensure the company makes a profit.
“For utility companies, earnings growth is directly related to rate base growth,” Coppola testified. “Large increases in capital expenditures result in double-digit increases in rate base, which in turn fuels earnings growth, dividend growth and stock price appreciation for shareholders.”
Coppola further testified that DTE has been “quite clear and aggressive” in communicating to investors its goal of increasing operating earnings through increased capital spending.
“Investors and shareholders have been well rewarded,” Coppola testified. “For a utility such as DTE with limited sales and revenue growth, the increase in earnings comes almost entirely from the increase in capital expenditures and rate base.”
DTE is requesting accounting changes that its centerpiece “grid hardening” measure – tree trimming – be treated as a capital expense instead of an operating expense – thereby allowing it to capitalize on that spending and grow its rate base.
Jackson Koeppel, an independent consultant who testified in the case on behalf of interveners Soulardarity and We Want Green Too, questions how much of this rate increase would be needed were DTE not trying to deliver so much additional profit to shareholders.
DTE is requesting an increase in its approved equity return from 9.9% to 10.25% while at the same time substantially increasing its rate base size. According to Koeppel’s analysis, that means the utility could send as much as $283 million to investors if its proposal is approved.
“So they’re asking for $388 million to give $283 million back to shareholders,” Koeppel said.
Inequitable infrastructure investments
DTE said it needs the extra money to overcome a projected revenue shortfall and to underwrite its efforts to shore up grid infrastructure to withstand severe weather and upgrade portions of its older grid to a more modern one.
“This rate case represents a major commitment to reliability and innovation,” DTE states in its testimony. “These investments will not only reduce how often and how long customers experience power outages but will also enable the Company to support greater optionality for customers in adopting new technologies such as batteries, solar, and electric vehicles (EVs).”
But activists say DTE’s infrastructure investment plans deprioritize low-income communities of color in favor of wealthier areas primed for new development, like Midtown and Downtown.
DTE plans to upgrade its grid from an older 4.8 kilovolts infrastructure to a more modern 13.2 kV infrastructure, primarily in the Downtown and Midtown areas, while prioritizing grid hardening efforts like tree trimming and wire replacement in lower-income areas elsewhere in the city.
Koeppel said the company’s infrastructure plans would keep low-income neighborhoods on an antiquated grid already past its life expectancy – leaving those communities with less capacity to host distributed energy like solar power, more vulnerable to power outages, and with a higher risk of ungrounded infrastructure, leading to death by electrocution, as has been the subject of investigation.
“[DTE’s] infrastructure plan has no equity screens, which it promised to do in its distribution plan,” Koeppel said. “This is a huge amount of money for infrastructure investments that are still fundamentally going to leave Detroiters at a massive equity deficit.”
Koeppel and We The People Research Director Alex B. Hill co-authored a policy brief they released Monday outlining what they call “utility redlining” – arguing that DTE’s hardening schedule and its modernization plan “favors wealthier areas of Detroit as opposed to lower-income areas.”
“All these investments are cost-effective in terms of the reliability benefits achieved per dollar spent,” Koeppel said. “And our point is, cost-effectiveness has nothing to do with whether you’re giving equal treatment to ratepayers. You’re still saying, ‘we’re going to give people who live in this area worse service for a decade.’”
In addition to getting less reliable service, Koeppel said, the amount of solar and clean tech that Detroiters can develop will be heavily capped by the infrastructure itself.
Koeppel said he spoke with MPSC commissioners last week to ensure they are aware that “there is a racism and infrastructure spending problem that is active here and [they] have a responsibility to deal with that.”
DTE’s 2021 Distribution Plan filed with the MPSC states that the company aims to “incorporate more equity considerations in our grid modernization and clean energy efforts” and that it will develop an environmental justice plan.
In a statement to Planet Detroit, DTE said it is developing a strategy to use electric reliability data paired with the recently developed MiEJScreen data to identify areas that the state tool identifies as highly impacted communities.
“We are reviewing our planned reliability investments in those communities,” the statement read. “We will also apply an equity lens into our long-term grid modernization efforts. While we are developing our overall Environmental Justice plan, we have programs targeting our most vulnerable customers today. This includes our work to harden the City of Detroit infrastructure, including replacing poles and pole top equipment to a higher standard to be more resilient in the face of storms.”
‘Poison pill’ for rooftop solar
In addition to the overall rate increase on residential customers, DTE is asking for a reduction in the credit (known as a distributed generation tariff) it gives customers who install rooftop solar and send excess electricity back to the grid – while also asking for permission to charge an additional fee to such customers.
The company is asking for the MPSC to reduce the amount it pays solar owners from approximately 7.5 cents/kWh to a “locational marginal price” which is the wholesale rate that one utility buys electricity from another utility – about 3.5 cents/kWh. DTE then sells that electricity to other customers for the retail rate of approximately 16 cents/kWh.
In addition, the utility is asking permission to charge residential customers a “demand charge” based on the maximum amount of electricity a solar owner would purchase during the year, assessed during the cloudy winter months. Industrial customers with solar panels currently pay these demand charges.
If both of these conditions are met, DTE stated in the case that it would voluntarily increase the cap on the amount of solar generation required under law to connect to the grid from 1% to 3%. Under a law passed by the Michigan Legislature in 2008, utilities must connect distributed generation resources such as solar panels to the grid up to 1% percent of their peak load. DTE is expected to exceed the cap sometime in 2023.
John Freeman, executive director of the Great Lakes Renewable Energy Association, said these proposals would have a devastating effect on the local solar industry, making it uneconomical for any but the most wealthy to afford to install solar panels.
“That is like the fox in the hen house because if they get what they’re asking for, no one will ever want to install solar,” Freeman said. “So raising the cap to 3% is meaningless.”
Freeman said his organization has lobbied the Michigan Legislature to raise the distributed generation cap since 2008 to no avail. His organization wants the MPSC to keep the distributed generation tariff the same as it is now and wants DTE to voluntarily raise the cap. In lieu of that, GLREA wants the MPSC to use its basic authority under state law to develop rates for buying electricity once the cap is met.
“That will compensate all solar owners and future solar owners for the extra electricity they’re putting back on the grid,” Freeman said.
Residents can still submit written comments online. Under state law, the MPSC must issue a final decision by Nov. 21.