[Around the country, corporate utility giants like DTE in Michigan
are leaving communities vulnerable while impeding progress on
decarbonization—and that’s exactly why a transition to
community-owned utilities must happen.]
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UTILITY COMPANIES’ CONSISTENT FAILURES AND SHADY PRACTICES SHOW WHY
WE NEED ENERGY DEMOCRACY  
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Lauren Schandevel
February 2, 2023
The Real News Network
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_ Around the country, corporate utility giants like DTE in Michigan
are leaving communities vulnerable while impeding progress on
decarbonization—and that’s exactly why a transition to
community-owned utilities must happen. _

,

 

n June of 2021, torrential rains flooded the City of Detroit and
surrounding areas, causing over $100 million in damages
[[link removed]],
mostly in poor, Black, and Brown neighborhoods
[[link removed]].
Kamau Clark, an organizer for the nonprofit We The People Michigan
[[link removed]], moved into his apartment in Detroit’s
West Village neighborhood just two days before the storm. “I came
home at 2AM and the apartment was flooded,” he recalls.

Overwhelmed and unsure of where to turn, Clark went to a town hall on
the city’s east side, where representatives from water and sewage
authorities tried to explain the situation to him and a crowd of angry
residents. According to officials, the city’s infrastructure was not
fit to handle the unprecedented volume of rain. However, there was
another problem — the storm had also caused a power outage
[[link removed]] at
the city’s wastewater facilities, rendering some of their pumps only
partially operational. At the time, city officials told residents that
it was these outages, combined with the heavy rain, that caused the
record flooding.

“They basically told us their power provider lost power at the pump
station,” and that, Clark said, “is when folks got angry.”

At the insistence of the crowd, authorities finally revealed the name
of their power provider: DTE
[[link removed]].

THE LOCAL MENACE

DTE is a Detroit-based energy company that provides electricity to
Southeast Michigan through its subsidiary utility company, DTE
Electric. Notably, DTE does not stand for anything — the company’s
namesake is its stock ticker_. _Throughout the region, DTE has a
reputation for being unreliable, especially among lower-income
customers who are disproportionately burdened by poor service and high
prices.

For many of these customers, the June 2021 flood outage was just
another letdown in the utility company’s long track record of
failures. Since 2000, Michigan has reported more weather-related
power outages
[[link removed]] than
almost any other state, second only to Texas. One of the
state’s largest outages
[[link removed]] in
recent years took place just two months after the June 2021 flood,
when another massive storm left over 1 million residents without
power, some for up to seven days. About half of those residents were
customers of DTE.

These extreme weather events have been particularly devastating for
Michigan’s energy grid, which ranks among the bottom ten states
[[link removed]] for
overall utility performance. In its most recent report card, the
American Society of Civil Engineers gave Michigan’s energy
infrastructure a grade of C-
[[link removed]], noting a
“lack of investment to preserve function, exposure to physical and
cyber threats, congestion, and dependence on externally sourced fossil
and nuclear fuels.”

Historically, DTE has exacerbated problems with Michigan’s energy
infrastructure by failing to maintain the sections of the grid it
owns. For example, until regulators intervened
[[link removed]] in
2021, DTE trimmed tree branches around its power lines only once
every nine years
[[link removed]] —
the industry standard is every five. Activists argue that the
company’s business model gives it no incentive to perform required
preventative maintenance. “When a utility is driven by a profit
motive and not driven by making sure people have stable access to
energy, then these things are going to happen more frequently,” Art
Reyes, executive director of We The People Michigan, told Planet
Detroit
[[link removed]] in
2021.

But the problem with DTE’s business practices extends far beyond
accidental outages and delayed maintenance. A recent ProPublica
investigation
[[link removed]] found
that DTE cuts service to its customers at a rate higher than any other
investor-owned utility company in Michigan. In 2021 alone, amidst the
ongoing pandemic, the company disconnected accounts 178,200 times
[[link removed]] for
nonpayment, on top of the 1.2 million shut-offs conducted from 2013 to
2019. 

While most people impacted by these shut-offs were low-income, this
alone does not explain the disproportionately high number of
disconnections. ProPublica’s analysis demonstrates that Consumers
Energy, Michigan’s second-largest utility company, services a
comparable population while shutting off accounts at half the rate of
DTE. 

A more likely explanation is that DTE’s high prices and frequent
rate hikes in particular are rendering its essential services
unaffordable to growing numbers of Metro Detroiters. Between 2015 and
2019, the company generated $774 million in revenue
[[link removed]] from
rate hikes alone, the second-fastest residential rate increase in the
country during that period.

Though industry representatives may argue otherwise, these rate hikes
were likely not due to inflation or dire economic straits for the
energy company, which received $268 million in CARES Act funding in
2020
[[link removed]] while
increasing payouts to its shareholders and giving its new CEO a $2.3
million raise. Rather, they are products of an energy market that
underwent decades of sustained deregulation at the hands of lawmakers
and business leaders — not just in Michigan, but all over the
country.

THE PROBLEM WITH MONOPOLY BUSTING

During most of the 20th century, big utility companies managed every
aspect of the electricity production and distribution process. They
owned the infrastructure, generated the power, and delivered it to
customers. For all intents and purposes, they were regional
monopolies, and as a check on their monopoly status, they were subject
to strict regulation
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the federal government.

The energy crisis of the 1970s completely upended this arrangement. To
decrease America’s reliance on foreign oil, which had skyrocketed in
price, lawmakers and industry leaders worked together to incentivize
companies to build power plants at home. As a way to prevent companies
charging monopoly prices, Congress broke the utility companies in
half: one side of the industry would be managed by an independent
power producer, which generated and sold energy on a wholesale market.
On the other side were the old utility companies, who bought that
energy at prices set by this new energy market, and sold it retail to
the public.

Unfortunately, destroyed in this monopoly-busting campaign was the
power of regulators to protect consumers across the whole market.
While states could still set cost-of-service limits on retail
electricity sold directly to consumers, they had no authority over the
wholesale-priced transfer of energy from producers to utility
companies.

Severing energy supply from its distribution took prices out of the
control of a highly-regulated monopoly and surrendered them to an
unregulatable market of middlemen, too numerous for state governments
to control. By the 1990s, the regulators in charge of these markets
were so overwhelmed by a new spate of power producers and power
transporters that many states gave up on regulating energy production
altogether, relying instead on the energy market to set its own
prices.

In 1999, the federal government exacerbated the problem by delegating
many of its regulatory powers to regional transmission organizations
[[link removed]]. Regional
transmission organizations are not government agencies; they are
voluntary membership organizations created to distribute parts of the
power grid between competing companies. Because of a critical lack of
oversight and questionable governance structures, these
organizations tend to issue guidance that favors corporate
stakeholders
[[link removed]] over
consumers.

The final nail in the coffin for utility regulation came in 2005 with
the passage of the Energy Policy Act, which repealed key regulations
preventing utility companies from merging. Like most deregulatory
policy, the bill’s stated purpose was to promote competition and
drive down prices. In effect, it created a new market dominated by
massive utility conglomerates. Neither restrained by competition nor
regulated by the monopoly-busting rules of the energy crisis,
corporate utilities in many states emerged less regulated and more
powerful than ever.

UTILITIES TODAY

Today, 17 states and the District of Columbia
[[link removed]] have
deregulated wholesale electricity markets. Like many deregulated
industries, there is no longer a uniform structure or procedure
governing the market. Some states have more oversight than others,
some allow more public participation than others, and every government
has different priorities depending on the political party in power. 

One stakeholder in the utility industry whose priorities do not change
are its corporate investors. About three out of four customers
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the US get their electricity from investor-owned utilities
[[link removed]] (IOUs) —
for-profit companies with a primary goal of delivering returns for
their shareholders
[[link removed]].

These investor-owned utilities are often owned by energy companies,
which serve as their parent or holding companies. In deregulated
states, energy companies often handle the generation side of the
utility market (like running power plants), while the IOU subsidiary
manages its distribution along power lines.

In theory, investor-owned utilities are regulated
[[link removed]] by states or by
independent oversight bodies, which determine the rate they can charge
customers. As an incentive to continue providing an essential service
to the public, utilities are guaranteed a certain amount of profit by
regulators. This reliable rate of return makes utilities, and the
energy companies that own them, a safe bet for wealthy investors.
Crucially, some of the top investors
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the energy industry are massive private equity firms like Vanguard and
BlackRock.

State(s)
Utility Companies
Parent Company
Top Investors

Michigan
DTE Electric
DTE Energy
Vanguard, Capital Group, BlackRock
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Texas
TXU Energy, Luminant, Dynegy, Ambit
Vistra Energy
Vanguard, OakTree, Fidelity
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California
Pacific Gas & Electric Company
PG&E Corporation (Holding)
Vanguard, Capital, Fidelity
[[link removed]]

New York
Consolidated Edison Company of New York, Inc.
Consolidated Edison
Vanguard, State Street, BlackRock
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North Carolina, Ohio, Kentucky, Indiana, Florida
Duke Energy Carolinas, Duke Energy Ohio, Duke Energy Kentucky, Duke
Energy Indiana, Duke Energy Florida
Duke Energy (Holding)
Vanguard, State Street, BlackRock
[[link removed]]

Oregon, Washington, California, Utah, Idaho, Wyoming, Iowa, Illinois,
South Dakota, Nebraska, Nevada
Pacificorp, MidAmerican Energy Company, NV Energy
Berkshire Hathaway Energy (Holding)
Vanguard, BlackRock, State Street
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Ohio, Texas, West Virginia, Kentucky
AEP Ohio, AEP Texas, Appalachian Power, Kentucky Power, etc.
American Electric Power
Vanguard, BlackRock, State Street
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Alabama, Georgia, Mississippi
Alabama Power, Georgia Power, Mississippi Power
Southern Company (Holding)
Vanguard, State Street,
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T. Rowe Price
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Top investors in energy utility companies by state

As a means of funneling more money to these corporate shareholders,
investor-owned utilities have found ways to manipulate regulators into
letting them rake in more profits. They do this by making unnecessary
investments (particularly in large infrastructure projects) to inflate
their return on equity, as well as by funneling millions
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lobbying efforts and political candidates. Last year, 93% of the
state legislature
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Michigan had taken donations from DTE at some point in their careers.
Michigan’s governor, Gretchen Whitmer, was also criticized
for receiving $100,000
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the DTE Energy Company PAC and from executives for her re-election
campaign.

UTILITIES AND CLIMATE CHANGE

Price-gouging and buying off politicians is bad enough, but the
environmental devastation wrought by this web of corporate polluters
is especially heinous. Put simply, investment firms, energy companies,
and utility companies have a symbiotic financial relationship that is
both maintained and enriched by planetary destruction.

Last year, 93% of the state legislature
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Michigan had taken donations from DTE at some point in their careers.

Currently, over 60%
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the energy generated in the US for utility-scale electricity comes
from fossil fuels. Though many utility companies in recent years have
pledged to build more clean energy infrastructure, both their plans
and their actions fall short of what is necessary to avert a climate
catastrophe. In 2022, the Sierra Club’s annual Dirty Truth
[[link removed]] report
analyzed 77 utility companies based on their progress towards retiring
coal, halting new gas infrastructure, and building or purchasing clean
energy by 2030. These companies received an aggregate score of 21 out
of 100, with the report concluding that “utilities are not following
up on their climate goals with sufficiently ambitious action plans.”

One key factor in the industry’s atrocious environmental record is
its commitment to natural gas, which is cheaper to produce and a
supposedly “cleaner” alternative to coal. While it is true that
gas production releases less CO2
[[link removed]] than
coal, the process also releases methane, which has a long-term global
warming effect 80 to 90 times more powerful
[[link removed]] than
CO2. According to a recent NPR article
[[link removed]-],
the US is projected to build about 17 gigawatts worth of gas plants
over the next few years, enough to power 12.8 million homes.

Accidents that occur during production — such as leaks, explosions,
spills, and fires — also threaten to negate these companies’
already insufficient progress towards achieving global climate goals.
California-based utility company Pacific Gas and Electric (PG&E) is a
particularly heinous offender. Between 2017 and 2022, while
on probation
[[link removed]] for
its role in a 2010 pipeline explosion that killed eight people, the
company’s equipment caused 31 wildfires, killing 113 people and
razing nearly 1.5 million acres of land. PG&E is so notorious for
causing environmental damage, its Wikipedia page
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two thoroughly populated sections labeled “Disasters” and
“Controversies.”

In addition to actively polluting the environment, utility companies
frequently block laws that would usher in a quicker clean energy
transition. For example, at the federal level and in many states,
residents receive a tax credit
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they install solar panels — and, in a process known as net-metering
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users can also lower their electric bill by selling the excess
electricity they generate from their panels. As solar technology
becomes more affordable, utility companies across the country have
stepped in
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successfully curb these subsidies, which eat into their profits and
threaten their control of the energy grid. Michigan, in particular,
has some of the strictest limits
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rooftop solar panels in the country, with a 1% cap on the amount of
energy that can come from customer-generated sources.

Even though renewables are now the cheapest option
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energy generation, a full transition to clean energy would require
utility companies to completely overhaul their current business model,
which runs the risk of diverting profits from their shareholders. So
long as utilities remain privatized, investor interests will always
come before the interests of the public, and a timely Green New Deal
will be nearly impossible.

ENERGY DEMOCRACY IS THE ANSWER

Most private utility companies are owned by energy companies, which
are some of the largest greenhouse gas emitters
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the country, and most energy companies are funded by investment firms,
which are notorious financiers
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the fossil fuel industry. Because of these specific connections,
private utility companies often act as regional gateways into a
national network of corporate polluters.

This means that activism at the local level, as tedious and difficult
as it may sometimes seem, can meaningfully change a local piece of a
much larger global structure, and help the country transition more
quickly and safely to clean energy.

For many activists, the transition to clean energy starts with
transferring ownership of the existing dirty infrastructure from
private companies to city, county, or state governments. With
publicly-owned utilities, citizens and their elected representatives
can have a greater say in how their electricity is generated, and
prioritize cleaner sources like wind and solar. This movement towards
greener, community-owned utilities is known as energy democracy.

Over the last decade, energy democracy groups have sprung up all over
the country, particularly in states hardest hit by failed deregulatory
policy. In California, the coalition group Reclaim Our Power
[[link removed]] frequently intervenes in the
regulatory process to hold the massively powerful PG&E accountable; in
Minnesota, Community Power [[link removed]] helps
finance and build cooperative solar projects in low-income
communities; and DSA chapters in Chicago
[[link removed]] and New
York City [[link removed]] have both
launched campaigns to democratize their regional utility, ConEd.

Back in Michigan, energy democracy activists are also building toward
a different future for their state. Because of the size and scope of
their corporate targets, these activists often attempt to whittle down
DTE’s profits and diminish its political power with a
death-by-a-thousand-cuts approach
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Welfare groups demand affordable payment plans for low-income DTE
customers, while legal groups challenge the company’s requests for
new polluting permits. In Highland Park, an enclave city surrounded by
Detroit, the nonprofit group Soulardarity
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municipal solar projects for its neighbors after DTE repossessed the
city’s streetlights in a 2011 bankruptcy agreement.

These activists have found formidable allies within higher education.
In 2019, the Michigan Environmental Justice Coalition
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of Michigan to produce a health impact assessment
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results of which forced regulators to add new dimensions measuring
public health and equity to their evaluation of DTE.

“We must pay attention to the behavior of the utilities,” explains
Michelle Martinez, director of the Tishman Center for Social Justice
and the Environment at the University of Michigan. “Communities are
being directly impacted by high costs of energy, lack of access to
solar energy, and the impacts of climate change associated with the
burning of fossil fuels.”

Activist groups [[link removed]] in Ann Arbor, some
of which are affiliated with the university, are leading their own
campaign for public utilities. In January 2022, at the insistence of
energy democracy advocates, the city agreed to conduct a feasibility
study on the process of buying back their energy grid from DTE. Local
advocates believe this is the quickest and most affordable way for the
city to meet its stated goal of 100% renewable power by 2030.

“We basically have two paths in front of us,” says Greg Woodring,
president of Ann Arbor for Public Power. “The first is radically
changing the way we do our energy system. The second is extinction.”

Most recently, in late 2022, energy democracy activists came together
to demand a public hearing
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DTE petitioned state regulators for a rate increase of $388 million
[[link removed]].
Over 200 people showed up in protest, including Clark, who started
organizing around energy democracy soon after the 2021 flood that
damaged his apartment. 

“You could tell that folks had reached out to their people,” he
said. “It was an incredible example of strong organizing across
organizations and communities.”

It paid off in the end. In a stunning upset, DTE was only approved
for $30.5 million — about 8% of what they asked for. With a win
under their belt, local activists are now shifting their focus to
education and organizing. They acknowledge that the energy democracy
movement can only succeed with the community behind it.

However, while the road ahead may be long, the barrier to
participation is low. Anyone who pays for utilities, public and
private alike, already has tremendous leverage over the energy
industry by virtue of fronting the bill; these corporations may seem
untouchable now, but their entire business model is vulnerable to a
critical mass of angry ratepayers just waiting to realize their own
power.

“[Everyone] must talk to their state legislators, join advocacy
groups that organize affordable rate structures, more rooftop solar,
and less political spending from DTE and other fossil fuel
companies,” urges Martinez. “At the base of it, the utility model
is broken, and it’s breaking the planet. We must use all of our
power and imagination to change it, fast.”

_Lauren Schandevel is a Michigan native currently living in New York
City. Her professional background is in public policy and community
organizing. When Lauren isn't highlighting the work of her amazing
activist friends, she's writing a newsletter about self-help and
capitalism called Tension Headaches. You can follow her on
Twitter @elleschand [[link removed]]._

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