Given the market surge of air and ground source heat pumps, Michiganders have more options than ever to efficiently and affordably heat and cool their homes with electricity. Especially when paired with additional energy efficiency measures, load management, dynamic rates, and distributed energy resources (DERs), the savings can be significant. But until customers upgrade their appliances and ditch the fossil fuels, many remain at risk. In Michigan, gas utilities are rapidly spending on capital-intense pipeline replacement and modernization projects, leading to higher and higher delivery costs for their customers.
In 2023, Advanced Energy United published an analysis finding that Consumers Energy gas customers are likely to see bill increases of 49% by 2030 because of the utility’s own projected pipeline spending. This means the average monthly residential customer bill could increase to $131 by 2030, more than $55 per month higher than 2021 levels on average.
And in March of this year, Citizens Utility Board (CUB) of Michigan published a study that reinforced United’s finding that costs will continue rising for Consumers Energy customers through 2030. CUB’s report further projects rising costs through 2050 and looks at the state’s other two largest gas utilities’ infrastructure spending. It found that without policy intervention, Michigan gas customers will see a costly future.
Between 2025 and 2050, the report projects a 120% increase in gas delivery charges for DTE gas customers, a 158% increase for Consumers gas customers, and a 106% increase for SEMCO customers:
Even more alarming, CUB’s analysis is based on a “business-as-usual” scenario that assumes utilities maintain stable customer bases and gas sales. However, while gas utilities continue to increase pipeline infrastructure spending, the market is shifting toward electric alternatives, meaning it is likely more and customers over time will essentially cease needing gas utility service altogether. If gas utilities lose homeowners and businessowners opting for electric alternatives, rising gas delivery costs will be shared amongst a smaller number of customers, meaning bills will increase more than they would in a “business-as-usual” scenario. Projections of those increases in other states are startling: in Massachusetts, annual bill increases will reach $1,200 once half of customers have electrified; in Illinois, the per-customer revenue requirement in Peoples Gas’s territory will increase to $1,358 by 2030 and quadruple by 2050; in Maryland, Baltimore Gas & Electric customers’ winter bills will increase from around $220 today to $450 by 2035 and $580 by 2050. The customers left on the gas system, likely people with low income, renters, seniors, and other vulnerable populations, will likely be the ones shouldering these rising costs.
The Michigan numbers are consistent with trends we’re observing across the country. Between 2022 to 2023 alone, gas capital expenditures surged from $32.7 billion to $49.1 billion nationwide, and those numbers continue to rise. That’s $49.1 billion per year that is not being spent modernizing our electric grid, bringing on new electric generating resources, building new transmission, and supporting customer transitions to a lower-cost, clean energy future.
An unmanaged transition could be exorbitant for Michigan households, but there are several actions policymakers can take today to mitigate these risks. Those include:
- Requiring more planning for gas utilities: Michigan’s electric utilities are required to file distribution system plans that are reviewed by state regulators to make sure system spending is justified or minimized, but gas utilities are not given the same oversight. The Michigan Public Service Commission (MPSC) can create an equivalent process for all gas utilities that includes analysis that aligns with electrification trends and identifies the least costly non-infrastructure solutions (e.g. gas demand response, energy efficiency).
- Requiring more integration between gas and electric planning: Michigan’s electric grid is in dire need of modernization and upgrades. Every dollar spent on risky gas pipelines, which may go under- or un-utilized in the future, is a dollar that was not spent on helping consumers adopt more efficient technologies and build a more reliable and future-proof electric grid. Other states, such as Washington and Massachusetts are beginning to require their gas utilities and electric utilities to coordinate to optimize infrastructure build-out and avoid duplicative spending that continues to strain household budgets.
- Encouraging deployment of efficient technologies like ground source heat pumps (GSHPs): GSHPs provide extremely efficient heating and cooling to homes and businesses by transferring heat from underground pipes. Because the ground’s temperature below the surface is stable year-round, GSHPs provide reliable heat, even in extreme cold snaps, without overburdening the electric grid. Because of the energy savings and grid benefits GSHPs provide, the state’s utilities and MPSC should explore incentive programs and pathways to deploy GSHPs at scale, either in thermal energy networks or as standalone systems.
- Making home electrification upgrades more affordable through electrification rates: Innovative electric rate design is being explored in states like Massachusetts, California, Maine, Colorado, and others. Michigan’s cold climate and high electric rates can make electrification a challenge for some residents, but rate structure changes, paired with efficiency improvements, can keep electric bills down and help lower payback periods for those who adopt efficient electric technologies.
- Establishing a program to help consumers navigate electrification incentives: Even when helpful programs are offered to finance consumer electrification, weatherization, efficiency, appliance upgrades, and bill assistance, navigating those available funding opportunities can be challenging and time-consuming for customers. A statewide navigator program for Michigan could help point residents to the right set of solutions – saving consumers, contractors, and other program-implementers time and money.
Michigan gas utilities are driving consumers down a path of risky investments and increasingly unaffordable bills across the state. Decision-makers at the MPSC and state legislature can choose a different path, instead leading the state toward smarter, safer, and lower-cost advanced energy technologies to serve homes and businesses with affordable and reliable heat.