Three Key Interventions to Deliver Electricity Cost Savings in Michigan

Data centers are driving rapid growth in electricity demand, yet without rate structures to reflect this new reality, these costs are effectively passed on to everyday customers. The Synapse analysis estimates that if regulators require data centers to pay for the full cost of the electricity they use, Michigan households could save at least $99 per year by 2030, or about $398 total between 2027 and 2030, from just one gigawatt of new data center load, and far more capacity has already been proposed. 

This estimate draws on analysis conducted by Consumers Energy, Michigan’s other major electricity utility, demonstrating that this approach is both feasible and already under consideration in the state. Requiring data centers to power their operations with clean energy—the cheapest and fastest-to-deploy source today—would deliver even greater savings, improve public health, and help Michigan meet its clean energy goals.

The Michigan Public Service Commission (MPSC) and the legislature have the authority to establish clear, uniform rules to ensure data center costs are assigned appropriately to the customers that cause them. Without those guardrails, costs will continue to shift onto everyday customers—making bills significantly higher as electricity demand balloons. Requiring data centers to pay their fair share for the power and infrastructure they use would protect ratepayers in a consistent, fair way.

Private (or “investor-owned”) utilities in Michigan earn an authorized return on equity (ROE) on capital investments, such as grid infrastructure, in exchange for taking on the financial risk of funding them. Setting an appropriate utility ROE is a core responsibility of state regulators. At a time when energy affordability is a growing concern, it makes sense to revisit these returns and adjust them while still enabling utilities to invest in needed grid upgrades and infrastructure.

Synapse’s research shows the average DTE customer pays about $362 per year toward utility returns on all grid investments. The analysis finds that reducing the ROE by 1.7 percentage points, from 9.9% to 8.2%, could save households $71 per year by 2030, and $267 total between 2027 and 2030. That’s a meaningful reduction in bills, without sacrificing system reliability or necessary investment. Both the state legislature and the MPSC have the authority to make this change.

Customer-owned clean energy like rooftop solar, battery storage, energy efficiency, and demand response are among the cheapest and fastest ways to add energy to the grid– while reducing the need for new expensive large-scale utility infrastructure.

Incentivizing households and businesses to use these resources strategically, through programs like virtual power plants, helps reduce reliance on expensive power plants during times of peak electricity demand. Without action, Michiganders will miss out on these savings. 

Synapse analysis estimates that increasing use of these resources could save DTE customers– whether they directly participate in these programs or not– about $54 per year by 2030, and $125 total between 2027 and 2030. Households that do participate would save even more. By enabling more customers to generate and manage their own clean energy, Michigan can increase energy supply, improve system efficiency, and put downward pressure on bills.

The MPSC, the legislature, and utilities themselves all have roles to play in expanding use of these resources. Michigan leaders should establish programs and policies to accelerate deployment of customer-owned clean energy, efficiency measures, and demand response.