LANSING, MI – Electric rates for the power company serving the bulk of Michigan’s Lower Peninsula will soon rise, thanks to the largest rate hike approved in more than 20 years.
On Friday, March 27, state utility regulators in Lansing gave permission for Consumers Energy to implement a $276.6 million rate increase for its nearly 2 million customers.
It’s the largest single amount approved for Consumers since at least 2004, according to Michigan Public Service Commission figures dating back to that year.
With the hike, the monthly bill for a residential customer with typical usage of 500 kilowatt-hours a month will increase $6.46, or 6.1%, when new rates go into effect May 1, regulators say.
The three members of the Public Service Commission, appointed by the governor and tasked with overseeing the state’s largest utilities, say the increase will allow Consumers to continue reducing outages and improving historically bottom-tier reliability after several years of upward progress.
Targeted investments funded with the increased rates, like more frequent tree trimming, align with the recommendations of a deep-dive audit regulators commissioned into outage problems on the grids run by Consumers and Michigan’s other dominant for-profit utility, DTE Energy, regulators said.
“Reliability and affordability are not competing objectives,” said Katherine Peretick, a member of the commission. “They are fundamentally linked. Investments that are well targeted, data driven and cost effective will reduce outages, minimize the need for emergency and reactive spending, and ultimately lower costs for customers over time.”
Their 605-page rate order issued Friday also approves $21.7 million for increased tree trimming and $14.6 million in cloud computing costs as “deferrals,” spreading the recovery of the costs from customers out over time and reducing immediate bill impacts.
The Friday decision is the culmination of a 10-month legal proceeding called a “rate case,” where Consumers must justify specific investments in order to increase rates.
More than 20 outside groups, including environmental organizations, large power customers and consumer advocates picked apart the request across more than 4,600 pages of often dense and technical legal testimony.
Regulators say they shaved more than $100 million from Consumers’ rate request, which amounted to $436 million, plus another $24.3 million surcharge, when filed last June. It was the utility’s largest ask since at least 2004.
In a call with reporters this week before the rate order, Consumers executives made the case for using customer dollars to make its grid more resilient in the face of ice storms, tornadoes and other extreme weather.
“No one likes to pay more for anything, whether it’s energy, groceries or housing. We understand that, but it’s important to understand that we made this request to pay for the investments and work to make our grid more secure and more reliable for customers,” said Senior Vice President of Regulatory and Legal Affairs Kelly Hall.
About 75 cents of every new customer dollar goes directly to “securing our grid,” she said.
Both the utility and regulators emphasize that customers’ monthly bills remain below national averages, and increases have fallen below the rate of inflation in recent years.
Contributing to this is relatively lower power usage in Michigan, a state that relies largely on natural gas for heating. Consumers’ residential power rates outpace the national average, helping cement Michigan as the priciest state in the Midwest for power costs measured in terms of cents per kilowatt-hour for residential customers.
Consumers maintains its “reliability roadmap” investments are paying off, part of a larger trend of improving utility performance in Michigan, long among the worst states for outages.
“To make it simple, we want fewer people to lose power, and when they do, we want to get the lights on faster. The good news is, in spite of the worsening weather, we are getting better,” said Gregory Salisbury, Consumers senior vice president of electric distribution.
In 2025, extreme weather, like the historic ice storm in northern Michigan and scores of tornadoes, battered Consumers’ grid.
That ended three consecutive years of improvement in weather-adjusted outage duration per customer, but utility executives say the bump of only 8 minutes shows progress in its ability to quickly restore power and harden the grid.
While Consumers continues that reliability-driven spending, electric customers shouldn’t expect any slow-down in rate hike requests.
The utility has sought to raise rates every year for six years running, and filed the request decided Friday on the first day it was legally able to do so last year.
Utility staff and attorneys are already preparing the next rate hike request, slated to be filed in June.
“We’re hard at work developing our case and determining what our request will be. We have not nailed that number down yet,” said Hall.
It continues a trend of yearly rate hike asks from Michigan’s largest utilities. They can, but are not required to, file a new rate case every 12 months. The cases then take 10 months to be adjudicated.
Consumers power rates last rose about a year ago, by some $153.8 million. This February, regulators also granted DTE, the state’s largest power provider, a $242 million electric rate increase.
Consumer advocates dery the frequent hikes.
In a statement, Amy Bandyk, executive director of the nonprofit advocacy group Citizens Utility Board of Michigan, which participated in the case, pushed back on the notion that Consumers needs to hike rates to ensure reliability.
Historically, there isn’t a relationship between how much is spent on the grid and reliability outcomes, she said. “Essentially, it’s not about how much you spend. It’s about how smart you are with your spending.”
Bandyk also pointed to a portion of the rate request that would have raised the rate of profit for utility shareholders on capital investments, a component influencing customers’ power bills known as return on equity.
Regulators disregarded Consumers’ request to raise that percentage, maintaining it at 9.9%. But they also ignored calls from advocates and a recommendation from an administrative law judge overseeing the case to lower it, which would have saved ratepayers money, according to Bandyk.
On Friday, regulators urged Consumers to make a clear link between new capital investments and specific, cost-effective reliability improvements in future rate requests.
The Public Service Commission also ordered Consumers to model in future proceedings how it could implement “virtual power plants,” collections of small energy sources and power-saving technology, like rooftop solar panels to smart thermostats, that can be pooled together and operated in unison to generate power or shift usage.
Those programs can offer power capacity in the place of expensive power plants, but Consumers has expressed skepticism about ongoing efforts by lawmakers in Lansing to bring more of them to Michigan.
The Friday order doesn’t reflect any direct costs from large-scale artificial intelligence data centers currently being developed across Michigan.
But utility executives have said the new megaprojects stuffed with computer servers and boosting power demand for the first time in decades could be a good thing for power affordability.
“Our ability to attract data centers and other large customer loads to our system will have the effect of reducing costs for other customers,” Hall said. “That’s because the large loads will bear a share of the fixed costs.”
Consumers secured approval for a special rate for these projects last year, as Big Tech began to eye Michigan for its data centers. The utility says the structure will shelter other customers from the risks the big projects bring, but advocates are still anxious data centers could drive up utility bills if not carefully handled.
Consumers is nearing final terms in a rate agreement with an unnamed data center announced last year, which could draw as much power as 750,000 homes, its executives told investors in February.
Editor’s note: This story was updated after initial publication to add comment from the Citizens Utility Board of Michigan.
