Michigan Fights the Federal Government to Protect Electric Monopolies

Ten years after federal regulators decided to allow competition for the development of large transmission projects, a number of states, at the behest of incumbent utility companies, are attempting to slam the door shut.

When Gov. Gretchen Whitmer signed S.B. 103 into law in December 2021, Michigan became the latest state grant monopoly utilities within the state’s borders the power to suggest where new transmission lines within the state are located, and to have the right of first refusal (ROFR) to erect new transmission lines.

Iowa, Minnesota, and the Dakotas had each previously passed similar legislation.

The new law grants large monopoly transmission companies like ITC Michigan and American Transmission Company the right to build any new large transmission line in their service area rather than having to compete for the job.

The Federal Energy Regulatory Commission had encouraged coordination of transmission line construction between states within regional transmission areas, and allowed competition for new transmission construction believing it would result in lower costs.

‘Abdicating Their Duties’

Because those who fought Michigan ROFR laws were unsuccessful getting it stopped, Michigan residents will experience higher electric prices for years to come, says Jason Hayes, the director of Environmental Policy for the Mackinac Center for Public Policy.

“Since the Michigan Legislature stifled competition in electricity generation markets in 2008, our electricity rates have jumped by 39 percent, resulting in residents now paying 16 percent more for electricity than the national average,” Hayes said. “Right of first refusal laws reinforce the monopoly mindset in electricity markets, shield transmission companies from competition, and leave residents to foot the growing bill.

“Free market competition is the best way to help reign in the costs of building new infrastructure,” said Hayes. “State governments and public utility commissions rushing to pass ROFR laws are abdicating their duties to ensure residents have access to affordable, reliable electricity by allowing government-protected utilities to further monopolize electricity services.”

‘Womb to Tomb’ Responsibilities

When Federal regulators opened the door to competition for development of large transmission projects, they overlooked the fact that existing utilities will be responsible for maintaining a system they may not have built, says Ronald Stein, co-author of the newly released book, “Energy Made Easy.”

“Contractors may come and go, but utility companies are there forever and legally bear the responsibility for system integrity and are the recipient of potential lawsuits for failure to maintain integrity of the electrical grid,” Stein said. “The maintenance of transmission lines has been historically been the responsibility of the utility companies within each state, as they have ‘womb to tomb’ responsibilities for the generation and delivery of electricity to commercial and residential users.”

Kenneth Artz (KApublishing@gmx.com) writes from Dallas, Texas.