Paying more for the juice

Michigan State Roundup

Published March 1, 2007  | March 2007 issue

Higher electricity bills are not a big surprise anymore, but some of the rate hikes in the Upper Peninsula still manage to raise eyebrows. That's because some 10-year contracts with locked-in prices have recently expired, and electricity providers are looking for better returns for their power.

For example, in 1996, the city of Negaunee signed a 10-year contract that held power rates steady. That's now expired, and residents are facing a 63 percent increase; the average monthly residential bill will rise from $51 to $83.

Some major industrial power users face a potentially bigger problem. In January, the 10-year power contract expired for Cleveland Cliffs, a major mining company with two iron ore mines in the U.P. and total employment there of 1,500. WE Energies proposed a rate increase of 43 percent.

Cleveland Cliffs has said it can't afford that kind of rate increase—somewhat ironically because it consumes too much electricity. Officials have said the rate hike would add about $36 million in higher energy bills and likely close one mine and reduce the life span of another. The company has filed a petition with the Michigan Public Service Commission for a transitional rate increase of 14.3 percent. The matter is not expected to be resolved until this summer.

Ronald A. Wirtz