Up North Progressive

On February 21, 2019, the office of Attorney General Dana Nessel filed testimony with the Michigan Public Service Commission (MSPC) in Lansing opposing the Upper Peninsula Power Company’s (UPPCO) request for a $10 million raise in electricity rates for the service they provide their customers in the Western Upper Peninsula. Nessel’s filing requested the rate to not go above $3.5 million. UPPCO filed their request to increase rates for their 54,000 customers in 2018. The MSPC will make their determination in August of 2019.

The customers UPPCO provides service for live in Alger, Baraga, Delta, Houghton, Iron, Keweenaw, Marquette, Menominee, Ontonagon, and Schoolcraft Counties. They currently pay anywhere from 23 cents to 25 cents per kilowatt-hour, which is 67% higher than the rates paid by anyone else in the state of Michigan. The only other place in the United States that pays more for electricity is Hawaii.

Dana Nessel’s office recommends in the testimony provided to the MSPC that changes be made to their deferred tax liability, return annual revenue credit to $4.3 million instead of the lower amount of $2.6 million, adjusting and removing errors to estimates, and most importantly, reject UPPCO’s increase of customer service charges and moderate the charges for small businesses.

The hydroelectric power facility in Escanaba listed in UPPCO’s proposal only has one customer, Verso Corporation. The Escanaba facility is currently listed as a“non-utility asset” meaning it’s not part of the infrastructure used to provide electricity to the rest of their customers. UPPCO estimated that it would cost them $1.3 million to operate that one plant for Verso, but they would only generate $1.1 million in revenue. UPPCO’s plan to make up the difference was changing the status of the hydroelectric plant as a regulated utility and pass on the cost of providing electricity to Verso Corporation to the customers already paying a quarter per kilowatt hour. Why? Because shareholders and company executives don’t like it when one of their assets that only shareholders and company executives enjoy the benefits of stand to lose those benefits, as stated in Attorney General Dana Nessel’s testimony:

The Company has been operating this facility for several years as a non-utility investment with all benefits of operating the facility accruing solely to the Company and its shareholders. The facility is not connected to the Company power distribution system and the Company’s utility customers would gain no benefit from including this facility as a fully regulated utility asset. For utility customers, there would be no financial or operating benefits, but only the potential for significant financial risks and higher electric rates. It appears that the Company foresees difficulties in profitably operating the facility and is attempting to burden its utility customers with potentially significantly higher costs.

Is that the only problem? UPPCO also planned on raising service fees by 67 percent for residential customers and 194 percent (!!!) for small business customers. Reduced revenue credits, pension and retirement funding that only benefited the highest paid executives, delaying deferred taxes refunds, and more expenses that would have caused electricity in UPPCO’s service area to likely become difficult to afford for many customers.

UPPCO’s parent company, UPPHCO, had their bond rating lowered in September of 2018 from an investment grade to a non-investment grade. This means financing is even more difficult for UPPCO, and raising customer rates is one way to increase revenue.

The Attorney General’s office provided solutions to UPPCO’s financial difficulties that wouldn’t require raising rates on the most expensive electricity in the continental United States. UPPCO’s short-term solution would only cause more hardship for its customers. Attorney General Dana Nessel stepped in to protect UPPCO customers from paying astronomically higher rates for electricity.