It's been a hot button amongst HVACR contractors for several years - unfair utility competition. Michigan contractors have been fighting to achieve a level playing field when it comes to marketing and performing service and maintenance work for thousands of homeowners throughout the state.

Earlier this year I wrote about the Michigan Alliance for Fair Competition (MAFC) and its support of a code of conduct enacted by the Michigan Public Service Commission (PSC). (See "To Fight Fair or Not: It's Up to This Utility," March 24.) The code of conduct was designed to provide guidelines for the marketing/servicing activities of Consumers Energy and its administration of its Appliance Service Plan (ASP).

One of the major goals of the code was to ensure that utilities did not engage in cross-subsidization, the funding of unregulated business entities with the proceeds from regulated services, such as providing electricity and natural gas.

In a Feb. 20, 2003 ruling, the PSC ordered Consumers Energy to immediately comply with all terms of the code of conduct 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.

Earlier this year, Consumers Energy lobbied to support legislation that contains an exemption to the code of conduct for Consumers Energy's ASP. Michigan Senate Bill 612 would exempt the utility's ASP from the code of conduct if it has less than 30 percent of the market share for the service and repair of heating and cooling systems within its service area.

The bill states, "a subsidy does not exist if the revenues of the repair and servicing program exceed the incremental costs of the program and the revenues of the program are credited to utility customers in general rate cases."

The bill was passed in the Michigan Senate, but House legislators drafted a substitute measure, putting SB 612 on hold until hearings could be held on the ASP program. House Bill 5188 extends the deadline for Consumers Energy to comply with the code of conduct for its ASP program until July 1, 2004.

Lynn Briggs, executive director of the Michigan Chapter of the Air Conditioning Contractors of America (MIACCA), stated, "This delay (which we supported) will give the Michigan Alliance for Fair Competition additional time to educate legislators on the issues contained in SB 612, such as ‘incremental accounting' and the im-portance of the code of conduct for all utility programs, both regulated and non-regulated."

Detroit News reporter Charles Ramirez (center) takes notes during his conversation with Craig Jones (left) and Cliff McCourt (right), two Michigan contractors who are fighting utility cross-subsidization.

Getting The Word Out

Two Detroit-area contractors who are active in MAFC kicked off a campaign to make information about the issue available to the general public and Michigan legislators. Cliff McCourt, owner of Day & Night Heating & Cooling, Novi, and Craig Jones, co-owner of Slasor Heating & Cooling, Livonia, also took their case to the media, documenting the history of the MAFC and the struggles that HVACR contractors have faced with Michigan utilities.

McCourt and Jones recently spoke with Detroit News business reporter Charles Ramirez. McCourt told Ramirez that senior citizens who were subscribers to the ASP program were encouraged by Consumers Energy to write letters to legislators, complaining that if Consumers Energy had to comply with the code of conduct, the ASP program would be discontinued. The letter-writing campaign urged legislators to pass SB 612.

"SB 612 passed quickly be-cause no legislators wanted to be seen as being responsible for taking away a program for senior citizens," McCourt said.

"There is a lot more at stake than just unfair competition," Jones said. "Ratepayers have to be concerned, too."

MAFC hopes to get its message across through newspaper articles and through a series of "Protect Fair Competition" summits in Michigan in early 2004. The first summit is scheduled for Jan. 7, 2004 at a yet-to-be determined location in the Detroit area.

"The importance of having as many contractors participate as possible cannot be overstated," said Daniel Squires, owner of Vincent's Heating & Plumbing, Port Huron, and a member of MAFC. "We need multiple contacts with every single legislator. Our message is a powerful one that legislators cannot easily dismiss, no matter how many lobbyists utilities hire."

The MAFC is looking for contractors to sign up as members or donate money to the organization. Information and updates are available at www.mifaircompetition.org.

Consumers Energy's Position

Jeff Holyfield, spokesperson for Consumers Energy, gave The News a statement from his company.

In the statement, Carl English, president and chief executive officer of Consumers Energy's gas division, stated, "The action on HB 5188 by lawmakers and Gov. Jennifer Granholm allows about 175,000 Consumers Energy customers to go through this winter with the [ASP] protection that they've already chosen. The six-month extension also provides members of the Michigan House with the time they need to take testimony, hear from their constituents, and deliberate upon SB 612."

English also noted, "The [ASP] is an optional program for residential customers and there's no charge to customers for service calls, or parts and labor for covered repairs. ASP pays for itself with no subsidy from the utility and provisions in SB 612 will continue to ensure that natural gas ratepayers don't subsidize the program."

He added the utility would also emphasize the key role that independent contractors play in the program. "Last year, about 150 independent contractors handled nearly half of the 128,000 repair calls done under ASP," English said. "Those contractors realized $6.9 million in revenue through ASP. The excellent work done by the independent contractors and Consumers Energy employees is reflected in surveys that show a customer satisfaction level of about 95 percent."

As Consumers Energy maintains its position that the ASP program is not subsidized by ratepayer money, the MAFC continues to dispute that claim. They appeal to contractors, legislators, and the general public to examine the facts and understand the entire issue. As McCourt pointed out, the resolution of this issue could have a significant impact not only in Michigan, but other states in which similar utility programs are under scrutiny.

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

Publication date: 12/15/2003