Businesses take on overcharging by Detroit Edison – how many 
other utilities are doing the same thing? 

Ralph Nader/In the Public Interest

Jan 10, 2000
 
 [http://www.sfbg.com] 

Corrupt power


By Ralph Nader 

UNLIKE THE SLEAZY headlines in some tabloid newspapers, the 
Detroit News often has sensational headlines on page one that 
reflect important, substantive stories. This certainly was the 
case Jan. 4, 2000, with the lead story blazing the headline 
"Report: Edison overbills $248M." 

The "Report" refers to a study done by Moody's Investors Service 
for a Detroit-area business group, which includes the major auto 
companies and is called Associate of Businesses Advocating Tariff 
Equity. These companies don't like being overcharged for 
electricity any more than residential customers, and they 
complained to the Michigan Public Service Commission. Moody's 
analysis took the commission to task for allowing Detroit Edison 
to collect too much for the "stranded costs" of its Fermi II 
nuclear plant in anticipation of the coming of electricity 
competition. Broken down, Moody's put the annual average 
overcharge at $43 a year for residential customers, $456 a year 
for commercial customers, and $82,600 for industrial users. 

The business group is demanding a rollback in electric rates for 
Edison's two million customers whose rates are already among the 
highest in the Midwest. Michigan has not yet joined the nearly 
two dozen states that have passed so-called full electricity 
deregulation laws opening up the markets to "supposed" 
competition. I say "supposed" because in California there has 
been very little competition to the erstwhile electric utility 
monopolies due to the huge "stranded cost" subsidies and other 
advantages exacted from the state legislature in return for 
giving up their monopolies. 

Enron, a large energy company, was planning to compete with 
Pacific Gas and Electric and California Edison, but it dropped 
out because of this unlevel playing field. Nearly two years into 
California's electricity deregulation, only 1.7 percent of 
households have switched to what competition exists. The looming 
question arising out of the Moody's report is this: Are other 
electricity companies overcharging in other states under the 
nonwatchful coziness of their state regulators? If so, then 
billions of dollars are being taken from customers under the 
accounting formulae applied to the "stranded costs" doctrine – 
i.e., making consumers pay again for the uneconomic investments 
in nuclear and other inefficient plants as a condition for open 
competition. 

A clue to the likelihood that Detroit Edison may not be the only 
utility overcharging on this basis was contained in the Moody's 
study, which noted that similar conditions in other states may be 
allowing the electric utilities "to charge ratepayers for costs 
they don't need help covering," according to the Detroit News. 

When the 23 states passed their electricity deregulation laws in 
the past three years, there was very little reporting on these 
topics and very little knowledge among the legislators whose 
votes were whisked through their chambers by electric industry 
lobbyists. The large industrial electricity users supported 
deregulation because they could more easily bargain for 
big-volume discounts. 

Now, it seems, one utility's gouging behavior is too much for one 
group of businesses in Michigan. Will other business associations 
in other states also commission studies similar to Moody's in 
order to find out if and how electricity customers are being 
overcharged in their states? 

Why not ask your state chamber of commerce? 
____________________________ 

In the Public Interest publishes each Monday on sfbg.com.