MICHIGAN

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MICHIGANS RETAIL ACCESS PROGRAMS

• Not the last Frontier

A presentation to The National Energy Marketers
Association
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History of Electric Restructuring in Michigan

• Pilot programs began in 1994
• Over 300 MW of load in pilot programs
• Lessons from pilots carried over to permanent
  programs
• Act 141 of 2000 provided full customer choice on
  January 1, 2002

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2000 PA 141

• Restructure/not deregulation
• Choice for those that want it Protection for
  those that dont.
• Learned lessons from telecom (1995) Grow market
  before deregulation. Make PSC effective traffic
  cop.
• Lower rates
• Residential (5 reduction for CE and DTE 6/5/00)
• Business (5 reduction for DTE 4/14/01)
• Increases prohibited for CE and DTE before
• 1/1/04 for Large Business
• 1/1/05 for Small Business
• 1/1/06 for Residential

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2000 PA 141, continued

• Increase Generation/Transmission capability.
• Attract Competitors.
• Promote new infrastructure development.
• Increase Transmission capability by 2,000 MW by
  July, 2002
• Financially sound IOUs
• Creation of Low Income/Energy Efficiency Fund

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Power Plants Under Construction or Built since
2000

• Mirant Zeeland LLC 830 MW 400 million
• Kinder Morgan 550 MW 350 million
• Dynegy 680 MW 150 million
• PGE Covert 1170 MW 500 million
• Bay Windpower 4.5 MW 5 million
• Total 3230 MW 1,405 million

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PSC orders have solidified ROA program

• PSC established zero transition charge
• Securitization Offset
• Rate Reduction Equalization
• Allows new suppliers to compete

Offset for Securitzation and Tax Charges and Rate
Reduction Equalization
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Customers Being Served
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Customers Enrolled
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Progress Continues

• CAEMs RED Index currently identifies Michigan
  as having the 6th most progressive retail
  competition program in the U.S.
• The RED Index noted Michigans program has had
  the 2nd most dramatic improvement in the Index
  scoring in 2001
• The first four months of 2002 has seen 90 percent
  growth in ROA participation, from 465 mw at the
  first of the year to 885 mw by the end of April

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Liquidity is Key to Regional Wholesale Electric
Market

• An open, independent and reliable transmission
  system is crucial to market development
• FERCs RTO and regional market policy initiatives
  support Michigans ROA market by developing a
  robust wholesale electric market in Midwest
• Rates, reliability and transmission planning must
  be addressed at the regional level
• FERCs Standardized Market Design initiative
  seeks to develop consistent wholesale markets to
  promote seamless trading

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Liquidity is Key (cont.)

• MISO-PJM-SPP single market design forum
  represents an ambitious, voluntary and
  cooperative effort to create a mega-market
  throughout the Midwest and portions of the East

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Funding Transmission Upgrades and Expansion Must
be Sensible

• FERC and RTOs should have flexibility to decide
  transmission cost allocation on a regional basis
  to balance standardization with local needs
• The Landrieu Amendment would limit new
  transmission cost allocation to Participant
  Funding
• Participant Funding requirements stifles
  financing flexibility and may increase risk of
  market power undermining competition

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Gas Choice Programs

• No statutory basis for PSC programs
• Tariff provisions provided for registration by
  alternate gas suppliers
• Alternate gas suppliers agreed, pursuant to
  utility tariff, to abide by code of conduct
• Allegations of misrepresentations and fraud have
  surfaced in recent months, causing primary
  alternate supplier to cease enrollments