It’s been a long battle between two longtime nemeses — a utility company and HVACR contractors. The major players in this case are Michigan HVACR contractors (including those associated with the Michigan Alliance for Fair Competition [MAFC]), local utility Consumers’ Energy, and the Michigan Public Service Commission (PSC).

The PSC has been asked to rule on Consumers Energy’s policy of using its marketing and administrative advantages to sell a home appliance service plan (ASP) to its residential energy customers.

According to Consumers Energy, its ASP program provides repair services for residential HVAC equipment, as well as major kitchen and laundry appliances. Customers enter into yearlong contracts for such services and have the option of paying in advance or having a fixed fee added to their monthly utility bills. Covered repairs are provided at no extra cost for service calls, parts, or labor.

Some contractors, led by the independent voice of Phil Forner, owner of Allendale Heating and Cooling, Allendale, Mich., assert that Consumers Energy is using ratepayer money to fund their unregulated separate entity, the ASP program. In other words these contractors argue that the utility is engaging in cross-subsidization.

In a complaint filed with the PSC as a private citizen in July 2001, Forner cited a ruling by the PSC that Consumers Energy must comply with the terms of a “code of conduct” issued by the PSC to Consumers Energy in December 2000, Case No. U-12134 (

Forner claims that Consumers Energy has not lived up to the terms of the code and that the utility should be ordered to cease using monthly bill stuffers to advertise the program and to stop promoting ASP on the utility’s Web site.

In the two-year interim, Consumers Energy has asked for, and consistently received, extensions on deadlines to completely separate the two entities.

In a February 20, 2003 ruling, the PSC ordered Consumers Energy to immediately comply with all terms of the code and stated that it would grant one final extension (to Dec. 31, 2003) for Consumers Energy to terminate its ASP program or complete the full functional separation of its regulated activities from the ASP program. The PSC also said, “Consumers shall operate its [ASP] program by requiring the [ASP] program to bear the full cost of advertising and promotional activities through the use of separate mailings.”

Letters And More Letters

Consumers Energy encouraged customers to flood the PSC with letters of support for the ASP plan and to extend the code of conduct waiver deadline. The utility even provided tips for writing effective letters. One of the points that a Consumer’s spokesperson emphasized in his “how-to” letter was that “ASP customers who are employees or retirees should not identify themselves as such. Instead, they should write as concerned customers.”

There are several samples of these letters, as well as the instructions for writing them, on file with the PSC at

Encouraging Words

Tony Ponticelli, a Baltimore-based attorney who is active with many grassroots efforts to battle unfair utility competition, had some interesting comments on the situation in Michigan.

“The decision in Michigan is a vindication of the coalition’s long efforts to eliminate unfair utility competition. While I’m sure that many of us would wish that the commission did not delay implementation of the order, it still is a clear victory.

“From a purely personal standpoint, while I would have preferred to see the commission embrace structural separation (a legally distinct and separate entity without any sharing of officers, directors, or employees) rather than functional separation (which relies mainly on accounting or “on paper” separation), it appears that the requirements are satisfactory, given the other provisions in the code. ...

“If there’s a story here, it’s in the commitment made by the contractors and leadership exercised in that state to reach this point. This all started with a win in the legislative area, without which the state commission might not have followed the path that it did. The second necessary step was the dogged pursuit of the legislative victory through the many years of regulatory proceedings to obtain the necessary language in the code and then following it with enforcement efforts. Michigan contractors won because they never gave up. They were relentless.

“If I sound like a press agent for them, I apologize. However, I’ve seen too many examples in other states where contractors could have gained far more but just gave up after the first few setbacks. In this struggle, there are many losses, which need to be sustained, but, far more often than not, whenever contractors make a sustained effort, they are successful. If I could bottle Michigan and peddle it as a solution, I would.”

Consumers Energy also responded to the PSC ruling. Dan Bishop, Consumers Energy Public Information Director, issued this statement: “Consumers Energy is pleased to continue to offer its Appliance Service Plan to customers. We do not have detailed comment at this time on the PSC’s recent order.”

Serving Homeowners

It seems to me that a balance can be struck that would be beneficial to both sides in this dispute.

I have always been on the side of HVACR contractors, as they represent many small businesses that operate in a highly competitive marketplace. Competition is a fact of life, and it should make businesses operate more efficiently and profitably if a good business model is in place.

Consumers Energy has been reaching out to its customers with a plan that is designed to fit into a monthly budget and backed up by dependable service.

Utility competition, like competition from consolidators, is a good thing if the playing field is level and the terms of the competition are fair. In this case, the Michigan HVACR contractors objected that cross-subsidized competition was unfair, and they fought to see that the situation was rectified.

The latest PSC ruling is a victory for Michigan HVACR contractors. Let’s now wait to see if fair competition will ultimately prevail.

John Hall is business management editor. He can be reached at 248-244-1294, 248-362-0317 (fax),

Publication date: 03/24/2003