State Faces Decision in Electricity Grid Upgrade

Gov. Rick Snyder and the Michigan Legislature believe the state is being required to pay more than its fair share for regional power grid upgrades. The state’s two major utilities, along with the governor and Legislature, have taken the unusual step of appealing to the federal government to overturn the cost allocation scheme that the state had previously agreed to.

A study titled “Michigan Unplugged? The Case for Shared Investment in Regional Transmission Projects,” just released by the Anderson Economic Group, indicates that in fact the state would receive benefits commensurate with cost for the proposed regional power grid upgrades. The study finds that Michigan would pay 20 percent of the cost of the upgrades, has about 21 percent of the population in the region and uses about 19 percent of the electricity.

Critics of the regional cost sharing agreement maintain that Michigan is being required to bear costs to upgrade the power grid system to support the ability of wind power generators in the western states to send their electricity back to Midwestern markets. Proponents of the cost sharing agreement argue that DTE and Consumers Energy are against the plan because they do not want low-cost electricity to come to Michigan because the state has on average the most expensive electricity in the Midwest region. It seems there is some truth on both sides of the argument.

An upgraded regional power grid has advantages for Michigan, not the least of which is improved reliability. If electricity can more easily be transported to Michigan at a lower cost, as the Anderson study seems to indicate, the expense seems to be justified. High electricity rates hurt job creation in Michigan, where manufacturing is a significant component of the state’s economy. On the other hand, if electricity consumers in the state are going to have to pay higher energy bills just to facilitate wind power, then it’s a bad deal. Wind power for the foreseeable future will remain both expensive and unreliable.

Backing out of the regional cost allocation agreement may not be in the best interest of Michigan, but repealing the 10 percent renewable portfolio standard for generating electricity is.

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