Peak rates: Why daytime A/C will cost many Michigan homes more this summer

This weekend is set to be the hottest of the season thus far, with temperatures in lower Michigan approaching 90 beginning Saturday. And just in time for you to crank the air conditioning, Consumers Energy, the public utility company that provides electricity to 6.6 million Michiganders, is raising electricity rates during the hottest hours of the day.

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The model, which will be in effect from June through September, will charge customers more for electricity during the peak daylight hours of 2 p.m. to 7 p.m. on weekdays. What’s the reason? And how will it impact you?

Why the change?

During peak summer hours, electricity demand statewide is at its highest point of the year, which increases the cost to utilities of providing electricity and requires additional power sources to be brought online. By reducing demand on the state’s power grid during peak hours, there will be less of a need to build more seasonal power sources, which in turn will decrease carbon dioxide emissions. 

A June 2 press release from the Michigan Public Service Commission characterizes the change as “a new approach to pricing that better reflects the cost to produce electricity at different times of the day and year,” saying that the shift will provide consumers more control over their bills.

Does energy use really increase that much in the summer?

Yes. According to Matt Helms, spokesperson for the Michigan Public Service Commission, air conditioning is largely responsible for the summer increase in electricity use and corresponding increased costs to power companies. Cold winter months don’t spike electricity use as much, because the majority of homes are heated by gas rather than electricity. 

How much will this raise my power bill?

The rate change sounds scary – a 50-percent gap between off-peak rates (about 10 cents per kilowatt hour) and peak rates between 2-7 p.m. (about 15 cents). But the change in your bill likely will be a lot smaller than that. 

Helms said actual electrical usage is only part of a consumer power bill. In a Consumers Energy pilot program of peak pricing in 2019, the average residential customer who made no changes to their electrical-use behavior saw their bill rise just $2 a month.

My power is supplied by DTE. Are my summer daytime rates going up, too?

DTE Energy, which provides most of metro Detroit with electricity, is running a pilot program with about 14,000 customers now, using a model similar to that of Consumers. The MPSC has given DTE until the summer of 2023 to roll a pricing structure out to its broader customer base.

Do programs like this actually lower power use?

They have elsewhere. Data from locations where similar programs have been used found that, on average, residential customers reduce their on-peak usage by 6.5 percent for every 10 percent increase in the peak-to-off-peak price ratio.

Do other states do this, or just Michigan?

Voluntary programs for peak/nonpeak electrical rates are fairly common. Most California residents are now on time-of-use plans.

What can I do to keep my power bill low?

Timing, timing, timing! This summer, it’ll be all about managing electricity use so more of it falls outside the peak hours. The public service commission recommends doing laundry and running the dishwasher before 2 p.m. or after 7 p.m., as those appliances are among the most energy-intensive in a household. You can also optimize your home cooling system by replacing dirty air filters and installing a programmable thermostat, both of which should boost efficiency. 

And consider turning off or raising the temperature on the A/C during peak hours. Ceiling fans can help mitigate the summer heat, and visiting an ice cream truck or taking a dip in a lake are always good ideas on those peak Pure Michigan summer days.