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Profitable Utility Company Shut Off Electricity To Homes During Pandemic

Above photo: Rebecca Mock.

Three months into the pandemic, Michigan’s largest power company, DTE Energy, began ramping up power shut-offs for customers behind on their bills.

A regulatory system built to prioritize investors, not affordability, let it happen.

During the early stages of the pandemic, Michigan’s largest power company leaned in to a chance to show its charitable side, helping buy laptops for Detroit’s public school children and publicizing that it would not disconnect the gas and electric service of people who could not pay their bills. DTE Energy said it was on “high alert to help those customers whose lives are being disrupted.”

But the relief from the threat of a shut-off ended quickly for DTE’s customers, who pay some of the highest electricity rates in the country. DTE’s moratorium on disconnections lasted just over three months.

An analysis by ProPublica and Outlier Media shows the extent to which one of the nation’s poorest cities and other communities across Southeast Michigan have been impacted by electric service disconnections since the COVID-19 pandemic began. DTE disconnected customers 80,600 times in 2020 and more than doubled that number in 2021. Its 178,200 disconnections for nonpayment last year were its highest annual total since 2016.

The shut-offs reflect an unrelenting reality in Detroit and surrounding areas, where low-income residents have long struggled to keep their lights on while avoiding crushing debt tied to a basic service. It’s a problem rarely discussed except among activists and advocates, as regulators and legislators have focused on other issues, like reliability of service.

DTE has more than 2 million customers, but size alone does not explain its shut-off numbers, nor does the level of poverty within the company’s service area. The analysis by ProPublica and Outlier is the first to examine DTE’s disconnections and compare them to shut-offs by other Michigan utilities.

During the pandemic, DTE’s rate of electricity shut-offs — disconnections as a proportion of customers — outpaced the six other utilities in Michigan that are owned by private investors and have their prices regulated by the state. DTE’s rate was twice as high as the state’s second largest utility, Consumers Energy, which serves areas with a similar share of low-income residents, according to an analysis of U.S. Census Bureau data.

Prior to the COVID-19 emergency, from 2013 — the earliest year for which data was available — through 2019, DTE disconnected electric accounts 1.2 million times. That represented 47% more shut-offs than Consumers during those years, adjusted for the number of customers each utility had. (Both utilities also provide gas service and combine those costs into one bill for many customers, but electricity is the more expensive of the two.)

DTE responded to the findings of Outlier and ProPublica in interviews and through email. The utility said that in most cases, customers have service restored within 48 hours. DTE spokesman Christopher Lamphear stressed that the utility works with customers to help arrange affordable payment plans or get financial assistance and contributes millions of dollars annually to a range of programs for low-income communities and customers. He said DTE forgave $2.6 million in debt for struggling customers in 2020.

But DTE, which told state regulators it has half a million customers living in poverty, has acknowledged the struggles faced by customers who can’t afford electricity. In recent testimony before state regulators, DTE described how some people build up significant debt on their monthly bills and then see the problem exacerbated by late fees, shutoffs and security deposits required for reconnection.

Many of the customers who experience shut-offs “are stuck in a repeated cycle of disconnects and reconnects” and must “make tough choices about which monthly bills get paid, and which ones don’t,” a company representative testified.

Outlier Media helps Detroit residents access useful and verified information via an automated text messaging system monitored by reporters who will follow up with them. This winter, Outlier heard from hundreds of DTE customers who were looking for resources to help pay their bills.

Of those, 136 said they had had their power shut off or owed money to DTE. Another 343 said they needed help to pay their current DTE bill. Among their comments:

“I was diagnosed with covid and stuck in bed so I missed my notice.”

“Insurmountable debt owed to DTE. I live in an apartment which has very little insulation, thereby causing my heating charges to be extreme.”

“My service was shut off due to nonpayment just last month. I had to come up with $135 to get my service restored.”

One Detroit man who responded to Outlier was shut off earlier this year and reconnected the same day. His bill shows he currently owes more than $2,500 to DTE. In an interview, the recent widower described the stress of not knowing if he could keep the electricity on for his children so they could use the internet for school.

“I open the door and I’m just hoping that my service is not off,” said the man, who didn’t want to be named in the story to protect his family’s privacy. “When the power is off, that stops the kids from being able to go to school.” DTE confirmed that his account had been shut off.

Even though many customers routinely scramble to pay their bills, the state’s utility regulators are not empowered by state law to directly consider affordability when setting prices. Echoing a dynamic seen across the country, Michigan’s regulators focus primarily on keeping utilities profitable enough to satisfy investors and on ensuring customers receive power without unexpected blackouts.

“There’s not sort of a clear place in Michigan law where it gets to ‘And also can customers afford to pay for it?’” said Dan Scripps, chair of the entity charged with overseeing utilities, the Michigan Public Service Commission.

Over the last decade, the MPSC has granted DTE a regular series of price hikes worth billions of dollars in revenue to the company.

The state has rules prohibiting shut-offs during extreme weather and requiring notices before disconnection, but it’s often up to utilities to decide how much leniency to show customers.

DTE’s Lamphear said in an email that it has “an obligation to all customers” to manage unpaid bills in a cost-effective way, so that lost revenue doesn’t result in higher costs for all.

“Given these challenges we continue to advocate for additional financial support from federal and state sources to provide a safety net for the most vulnerable people we serve,” Lamphear wrote.

Federal data shows that DTE’s price, as measured in cost per kilowatt-hour, is the second highest among investor-owned utilities in Michigan, behind the Upper Peninsula Power Company, a utility with only about 50,000 customers in Northern Michigan. Consumers’ rate, meanwhile, is about 10% lower than DTE’s.

DTE’s price per kilowatt-hour is also higher than the price charged by the largest utility in each of the other Great Lakes states of Illinois, Indiana, Minnesota, Ohio and Wisconsin.

Despite the rate it charges, DTE said, its average monthly bill is on par with the national average, in large part because Michigan residential customers use less electricity than the average American customer.

Outlier and ProPublica employed the same methodology used by DTE to compare its average bills to those of the largest utilities in those five Great Lakes states. DTE’s average bill turned out to be the second most expensive among that group in 2020, the most recent year with full data.

Researchers have developed another way to measure affordability called “energy burden,” which accounts for price and income by calculating the share of customers’ monthly earnings that goes toward utility costs. A recent study of 25 large metropolitan regions determined that the burden for low-income Detroit residents was particularly severe.

Michigan regulators don’t require utilities to disclose where shut-offs happen or which communities are most affected, and DTE declined to provide that information to an Outlier reporter. But advocates in Detroit’s low-income neighborhoods and researchers say Black communities are significantly impacted. The percentage of Black residents in DTE’s service area is nearly three times as high as Consumers’, according to a ProPublica and Outlier analysis of census data.

Jeremy Lark of Greenpath Financial Wellness, a nonprofit that helps customers to access payment plans for DTE debt, said more than 60% of people working with Greenpath to manage their DTE debt are Black.

“The customers that come to us,” he said, “it’s pretty common that past due bills are in the thousands of dollars.”

High Prices and Oversight That Favors Utilities

Thomas Edison grew up in Port Huron, Michigan, before going on to help develop electric power generation. One of his first licensees for generating electricity was the Detroit Edison Company; it was reorganized into DTE Energy in 1996.

In the early part of the 20th century, as industry and ordinary households demanded more electricity, governments across the country didn’t have the funds, expertise or will to build a brand new electric grid. Instead, they struck deals with large power companies to supply and distribute power; the utilities would be subject to government oversight but also would be insulated from future competition.

These “investor-owned utilities” — some, like DTE, with publicly traded stock — provide utility service for the majority of Americans and often need government approval to set prices.

The Michigan Public Service Commission, which negotiates these rates through an administrative proceeding, is not empowered to reject rates on the grounds they’re too expensive for low-income customers. Instead, it “has an obligation under Michigan law to set rates based on whether the investments proposed are reasonable and prudent and then allowing for the opportunity to earn a profit on those that are,” said Scripps, chair of the commission.

He added: “Affordability is always a front-of-mind issue, but it’s not tied to how we evaluate utility investments.”

Similar dynamics are at play across the country. Two recent exceptions can be found in Oregon and Massachusetts, where recent legislation gave regulators power to take customers’ ability to pay into consideration when setting gas or electric rates.

Since 2011, the MSPC has approved six rate increases for DTE, each for amounts that were about half of what the company had requested. Over that same time period, according to the commission, DTE’s revenues have increased by several billion dollars, due in part to those rate increases. DTE is currently asking for a seventh rate increase, worth an additional $388 million in annual revenue.

Nationally, the rate DTE charges residents ranks in the top 5 percent of all investor-owned, public and cooperative electric suppliers, according to government data analyzed by Outlier and ProPublica.

In DTE’s service area, the increases in residential rates stand in contrast to what’s happened with businesses and industry. The commercial rates businesses pay have been relatively stable in recent years, while industrial users saw their rates decline between 2010 and 2019, according to federal data analyzed by the Citizens Utility Board of Michigan, a state-funded consumer advocate.

Amy Bandyk, executive director for CUB of MI, said her organization — and by extension residential ratepayers — is outspent by the utility companies, which can afford more lawyers and experts to argue their side in rate cases.

“DTE and Consumers have lots of lobbyists and lawyers and analysts all focused on getting a better return for their shareholders,” she said. “I like to think our arguments are good, but the utilities are just very well-funded.”

She’d like to see the state move toward a billing structure that caps bills at a percentage of income for those who might otherwise struggle to pay, a reform that is popular with advocates nationally.

The MPSC has urged DTE and Consumers Energy to take some steps in this direction, and both companies have taken steps to test this approach. DTE’s pilot program, which began in January, caps bills at 10% of income for some households who use DTE for both gas and electric service, with the company absorbing the rest of the cost. The program will last two years for no more than 2,000 customers living at or below 200% of poverty.

Even as Bandyk observes what’s happening with the MPSC, she would like to see more urgency.

“There are so many people that need help right now,” she said. “High utility rates affect everyone, and, obviously, there are specific groups of customers hit especially hard.”

Donald Lutas is one of those customers. A retiree on a fixed income, he has tried to make his 105-year-old Detroit home more energy-efficient by adding insulation in its attic and replacing windows. But his house is still large and drafty, and he has problems keeping up with his gas and electric bills, especially in winter when he’s seen monthly charges of more than $500.

“Right now I have to make a choice between paying my part of Medicare or paying for utilities,” said Lutas, who used to run a residential care facility for people with mental health challenges. “I couldn’t afford both. I had multiple shut-off notices last winter, and I couldn’t allow myself to get disconnected.”

Lutas said he chose to forgo his primary care visits and only keep his hospitalization insurance in order to afford to pay DTE. As he struggles to make payments, Lutas can’t help but think about how DTE continues to thrive financially.

“It is a problem which is more glaring considering that DTE is constantly posting a profit, a major profit,” he said.

Even as the pandemic upended lives in the Detroit area, DTE saw strong earnings in 2020 and 2021. Cash dividends paid out to investors in the electric company, bolstered by rate hikes, rose 76% from 2010 to 2020, to $539 million. DTE’s financial success is important to everyone in the region, the utility argues, because it allows DTE to attract additional investors and borrow money at a lower financing cost.

Beyond its investor dividends, the health of the company’s finances is reflected in the pay of its top executive. CEO Jerry Norcia received a salary of $1.2 million as part of total compensation of $9.7 million in 2020, his first full year on the job. In every other year since 2017, the company’s compensation package for its CEO has topped $10 million.

DTE Shut-offs Outpace Other Utilities’

When the pandemic began in 2020, causing a wave of medical and financial hardship, 34 states directed utilities to stop shutting off customers’ service, according to the National Association of Regulatory Utility Commissioners. But Michigan was not one of those, relying instead on voluntary pauses by the state’s utilities.

DTE’s shut-off moratorium was shorter than those put in place by the largest utilities in Illinois, Indiana, Minnesota, Ohio and Wisconsin.

MPSC chair Scripps defended the utility’s decision to limit its self-imposed moratorium to only three months in a commentary published in the Detroit Free Press in December 2020. Citing experience from Michigan’s recession in the early 2000s, Scripps said people who stop paying their bills during a longer moratorium might be unlikely to ever catch up. He argued that focusing instead on aggressively distributing assistance dollars would have more long-term benefit.

Consumers Energy, meanwhile, voluntarily extended its shut-off moratorium to eight months for most residential customers, through October 2020. The longer moratorium did not lead to more shut-offs once it ended, according to data filed by the company with the MPSC. Consumers’ shut-offs in 2021 were the third fewest for any year since 2013. Only 2016 and 2020 had fewer.

Looking back on its moratorium, Consumers said it did the right thing for its customers. “We believe our approach was the right one,” the utility said in an email, “as we did not want to add additional stress onto our customers during an already stressful time.”

The MPSC has required utilities to file frequent reports on shut-off numbers during COVID-19, every two weeks for the first few months of the pandemic and then every month since. But those reports only tally the number of people who remain shut off from electric, gas or both services at the end of each month-long period. Because these reports don’t account for shut-offs where service was later reconnected, they underrepresent the true problem.

But Michigan utilities also file quarterly reports with the MPSC tallying every disconnection for nonpayment. Through examining these, a more complete picture of the breadth of shut-offs during the pandemic emerges.

The analysis by ProPublica and Outlier found that from April 2020 through December 2021, the last month for which data is available, DTE disconnected accounts 208,000 times for nonpayment. These reports contain numbers for both residential and commercial disconnections, but the preponderance are residential.

Because of the way the MPSC collects its data, the analysis could calculate the total number of shut-offs, not the number of customers affected. A single customer might be disconnected more than once during a period of time. DTE, for instance, said that its 80,600 shut-offs in 2020 “represented approximately 66,000 unique customers.”

ProPublica and Outlier asked both DTE and Consumers for their company policies on what triggers a shut-off notice. Again, there was a clear difference.

DTE said it can begin the shut-off notification process after customers miss just one payment and fall more than $100 behind on a bill. State law requires a shut-off notice be sent at least 10 days before an account is disconnected. In order to avoid shut-off, customers can pay their entire past due balance, agree to a payment plan or apply for assistance, which includes a shut-off hold during the application process.

“We offer them a range of options based on their circumstances: affordable payment plans, senior protections, medical holds and low-income assistance,” DTE said in an email. It added: “DTE acts leniently wherever possible within the MPSC’s rules.”

Consumers Energy said it also can start its notification process after customers miss just one bill, but only if they have fallen at least $200 behind. If a late customer gets their balance owed below $75, Consumers said, it won’t go through with the disconnection.

Both companies require customers who get disconnected for nonpayment to provide a deposit before getting reconnected. The deposit can be significant. Under Michigan regulations, the deposit can equal up to twice a customer’s average monthly bill; the fee is waived for anyone receiving utility assistance from the state to help them reconnect.

In 2020, aided by an influx of federal COVID-related assistance, the state helped more than 341,000 people across Michigan with energy costs ranging from bills to furnace repairs.

However, more than 40% of individuals who applied that year were rejected, usually because of income requirements, when they applied for that help. Some of the state’s relief programs also require a shut-off notice to qualify.

Detroit’s Heavy Burden

Cassia Haywood, who lives on Detroit’s West Side with her 11-year-old daughter, is quite familiar by now with what DTE shutoff notices look like: a letter marked by several thick red lines and plenty of bold red type.

For years, those letters have forced her to scramble to avoid losing electricity and gas-powered heat. In that very basic sense, her efforts were a success in 2021.

Thanks to payment plans with DTE and intermittent help from social service agencies, Haywood has managed to keep her electricity on. Payment plans can give people more time to pay off money owed to the company in affordable chunks, but some plans still allow the total debt to grow.

Her debt to DTE, built up over several years of gas and electric charges, now totals $8,000, part of which will be added to her bill each month until she has paid it all down. It’s a debt she fears she may never pay off.

Haywood has an auto-assembly job but is only getting sporadic hours. “I’m just not getting ahead with it,” she said.

The financial pressures bearing down on Haywood and others reflect the energy burden faced by many Detroit residents: a household’s energy costs, both electric and gas, divided by its income. Researchers and policy makers largely agree that an energy burden over 6% is unaffordable.

Haywood said she uses about $200 of energy each month, making her burden about 10%. Because she also needs to pay hundreds of dollars toward her debt with DTE each month, the actual burden of her DTE bill is about 34% of her income.

Sometimes a DTE bill for electricity and gas can rival housing costs.

“We pay so much, even on the payment plan,” said Germaine Iwu, who lives with her husband and four children on the East Side of Detroit. Their typical monthly bill this year has been $326 through their plan. “Our mortgage is only like $400,” she said.

A recent study by the American Council for an Energy Efficient Economy, a national nonprofit, put the median energy burden in the Detroit metro area at 10% for low-income families. That’s higher than the national average and the third-highest among the metropolitan areas it studied, behind Baltimore and Birmingham.

This research found that 43% of Black and 38% of Latinx households in the Detroit metro area have an unaffordable energy burden. Researchers cite a combination of factors for these percentages, including higher energy usage because of older housing stock that is not energy-efficient.

A separate survey of more than 350 Detroit families — conducted over the winter of 2020 by Detroit nonprofit We Want Green Too and Kate Hutchens, a University of Michigan researcher— found their average energy burden was close to 16%, higher than that of the overall metro area.

Addressing the problem in Detroit won’t be easy.

The National Consumer Law Center, which has extensively studied utility prices and regulation, advocates that states develop payment plans that are based on a percentage of income, eliminate deposits for reconnection and prohibit shut-offs for low-income households that include infants or people who are elderly or disabled. To get a clearer view of who is being impacted, the center also wants utility companies to provide more data about who is affected by shut-offs.

In Michigan, the MPSC has pushed utilities to experiment with percentage-of-income plans for some, but there seems to be little momentum for bigger changes. State Sen. Jeff Irwin, a Democrat from Ann Arbor, said regulators and legislators have been overly responsive to the utilities’ desires for reliable investor payouts. For instance, Democrats have pushed legislation limiting shut-offs of water but not electricity.

Irwin said the legislature is too responsive to industry and “blind to the needs of residential affordability.

“The very specific conversation about helping people who can’t pay their bills does not get a lot of play,” he said.

DTE is currently pushing a different idea: a prepaid option it said would help low-income customers. Its reference in state filings to the struggles of customers who face shut-offs came as it urged the MPSC to endorse that proposal.

Under DTE’s plan, people would prepay into an energy account, and if that account runs dry, the company would then use a “remote disconnect feature.” Customers would need to make a minimum payment of $40 to get their power restored, and the process would begin again.

“That is the thing that brings me closest to feeling like I’m living in a post-apocalyptic world,” said Margrethe Kearney, a lawyer with the Environmental Law & Policy Center, which opposes the plan and has intervened in the still-undecided MPSC case.

“DTE has lots of reasons for wanting to do this. And they say, ‘Well, you know, it’ll help people manage their energy use. It’ll keep people from racking up these $3,000 bills.’ But at the same time, it’s like, what happens when it’s the middle of a heatwave? And you don’t have any money to put in your account?”

Some activists want to fundamentally challenge the way low-income communities must rely on DTE. Advocacy from Soulardarity, an environmental justice group, has led to a pilot program, endorsed by MPSC, that will give hundreds of low-income residents in Highland Park, Detroit and River Rouge access to solar power and credits on their bills.

Shimekia Nichols, the group’s executive director, considers that a small step, if an insufficient one, toward a larger goal of independence from DTE’s monopoly.

“That is what energy democracy is about,” she said. “It’s what we have to do, because otherwise people are just going to keep needing help.”

About the Data: How We Analyzed Shut-off Rates and Service Area Demographics

Outlier Media and ProPublica collected quarterly reports from the Michigan Public Service Commission that cataloged total disconnections of electric customers for nonpayment by month since 2013. The shut-off numbers do not separate out residential and non-residential customers. The news organizations then calculated average monthly shut-off rates during the pandemic by averaging the disconnections from April 2020 through the end of 2021, which was the most recent data available, and divided that by the average number of electric customers (residential and non-residential) reported by Michigan’s investor-owned utilities to MPSC for 2020. Customer counts for 2021 were not available at the time of publication. We followed a similar method for calculating the average shut-off rate from 2013 through 2019, averaging the monthly customer count figures reported for each year as our base.

For our analysis of the customer demographics for Michigan’s largest two utilities, we re-created an MPSC map of the electric service areas for DTE and Consumers Energy at the Census tract level, using 2010 boundaries. We then matched these tracts to Census data and calculated the percent of residents in each service area who are Black and the percent who are low-income, using the 2015-2019 five-year American Community Survey. We defined low-income percentage as the number of people at or below the poverty line divided by the total population, for each service area. We excluded tracts where the utilities appeared to only serve a portion of the total area.

Comparisons of average bills and rates per kilowatt-hour were based on data from the U.S. Energy Information Administration.

Erin Smith, Alyssa Johnson and Alex Mierjeski contributed research.

Update, March 18, 2022: This story was updated to include the name of Chris Lamphear, a DTE spokesman.

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