The History of Natural Gas Deregulation in Michigan

>Natural gas deregulation in Michigan lets you shop around to find the best price on natural gas supply in your area. Overseen by the Michigan Public Service Commission (MPSC), Michigan's Natural Gas Customer Choice program gives consumers the choice between purchasing their natural gas supply from their local gas utility or from an Alternative Gas Supplier (AGS).

In the past, your local gas utility (MGU, Consumers Energy Company, DTE Gas Company or SEMCO Energy Gas Company) held a monopoly on both supplied and delivery service for your natural gas. Now, you can choose to buy natural gas at competitive market rates from a licensed AGS or continue to buy it at the state-regulated rate from the local utility. Either way, your local utility will continue delivering natural gas through its local distribution pipeline at the standard transmission price set by the MPSC for both AGS and utility customers.

While the natural gas choice program in Michigan has been a success for the past 15 years, it didn't leap into existence fully formed and flawless. Along the way, it has undergone a process of evaluation, rule changing, and fine tuning that now benefits almost half-a-million Michigan residents.

History of Michigan's Natural Gas Energy Choice

The Federal Energy Regulatory Commission (FERC) Order No. 636 of April 1992 was designed to foster competition in the national natural gas market and to avoid shortages that closed schools and factories throughout Michigan in the mid 1970's. Before, pipelines bought gas from suppliers, and sold the gas bundled with pipeline transport costs to local gas utilities (known in the business as "local distribution companies" or LDCs). Now, pipeline companies are required to transport gas in a non-discriminatory fashion, leaving natural gas suppliers to compete for gas purchasers throughout the country.

In 1996, the MPSC "initiated a legislative hearing to explore a time frame for moving the state's natural gas utility system towards a competitive market" and to determine whether it was in the public interest and added additional costs or other disadvantages. The idea required LDCs to likewise limit their involvement to transporting natural gas to (mostly) industrial customers. This allowed these customers "to purchase their own gas supplies and to have those supplies transported to them by the interstate pipeline and local distribution companies." Upon success, the program could be expanded to residential consumers, as well.

Results were so encouraging that on August 4, 2000, the MPSC issued an order to expand gas customer choice to all customers within the state and began developing uniform terms and conditions service to all gas customers in the state. The four local gas utilities subsequently developed their own expanded gas customer choice programs and filed their plans with MPSC for approval. The first to be approved, Consumers Energy's program, began April 1, 2001. DTE Gas Company (then DBA "Michigan Consolidated Gas Company") began its program on April 1, 2002 followed by Michigan Gas Utilities (MGU) which started June 1, 2002. SEMCO was the final one, its program started October 1, 2002.

All programs initially offered choice to a limited number of customers. The number of participants was then gradually increased. By June, 2005, all customers of Consumers Energy Company, DTE, MGU, and SEMCO Energy Gas Company could participate in choice programs.

Changes and Challenges

As mentioned, the program wasn't completely perfect at the outset. Over the years, several rule changes and fine tuning were required to work out problems and make the program fair to both consumers and businesses:

• In March, 2003, the PSC established licensing procedures for marketers participating in customer choice programs. This required companies to demonstrate sufficient financial, technical, and managerial capabilities to provide reliable gas service in Michigan.
• In October, 2007, MPSC revised its residential consumer standards and billing practices to provide customers with more service shut-off protections by clarifying responsibility for bills. This eliminated estimated meter reading, lowered deposit requirements during the winter, and gave customers more time to pay their bills.
• In October 2009, new consumer protection measures were devised following investigations into marketing practices. Choice customers can now cancel marketer service unconditionally up to 10 days beyond the due date of the first bill with a new marketer (the previous time limit was 30 day). Marketers must execute cancellation requests without delay, even if an early termination fee or other penalty is owed. Contracts can only written and only be signed by the customer account holder.
• Since February, 2015, the MPSC is working on a comprehensive revision of the Commission's Consumer Standards and Billing Practices for Residential Electric and Gas Service following a tragic death in Hazel Park. Current billing rules have provisions concerning service shutoff procedures, medical emergencies, and winter protection plans. Under the Winter Protection Plan, utility companies are prohibited from shutting off heat in homes that have residents aged 65 and older from Nov. 1 to March 31.

Michigan Gas Customer Choice Is Working

Michigan's deregulated market is providing its customers with lower prices, better reliability, and above all —Choice. Local gas utility companies deliver natural gas to all customers whether they have switched to a competing AGS or are keeping their old local utility. All the same, competition is growing and gas rates are lowering. In December 2009, 20 marketers were licensed as alternative gas suppliers in the State's choice program. Now, in March 2015, there are 30 marketers competing to serve nearly half a million customers statewide. Not only is Energy Choice catching on, it's taking off. Ten years ago, there were about 229,000 people signed up for energy choice. Now, there's over twice that number — nearly half a million.

While still receiving the same reliable service from their local utility, Michigan's natural gas customers are getting more by choosing their own supplier. They're no longer trapped with the one-size fits all approach by the old regulated utilities. Now they can shop for and choose a supplier that wants to meet their lifestyle needs.