MI Cornerstone Thoughts – Laying the Foundation for Economic Development
Op-Ed Title: “The Value of ‘Energy-Intensive, Trade-Exposed’ Companies”
By: Matt Vanisacker
Published in Monroe News
April 5, 2021
It is hard to imagine a time without electricity. We interact with electricity in nearly every facet of life and no doubt would be lost without it. Think about the number of ways that you interact with electricity every day. Hard to comprehend? Now think about the number of ways that the other nearly 8 billion people on Earth utilize electricity. I will not ask you to think any further than that as the point of my writing today is not to give you a headache but rather to focus on a group of energy users that do have to think about electricity every day; we call those companies …. “Energy-Intensive, Trade-Exposed”.
When it comes to energy, Michigan is a regulated state meaning that, depending on where you live, work and play, there is a determined provider of your electricity. Regulation for electricity generation and distribution functions are overseen by the Michigan Public Service Commission (MPSC) and the transmission system is regulated by the Federal Energy Regulatory Commission (FERC).
Throughout the United States, individual states have the discretion to choose regulation or deregulation. The path of regulation is one that numerous other states have followed as it creates a number of benefits to the end user. One benefit in particular is that there is long-term certainty that your provider will, barring a natural weather phenomenon, will have the capacity to provide electricity that meets the demand. Additionally, rates in regulated states remain fairly consistent as infrastructure improvements and delivery costs are included in your rate.
There are four primary classifications of electricity users in the United States: Residential, Commercial, Industrial and Transportation. Both residential and commercial users account for greater than two thirds of electricity usage nationwide while both transportation and industrial users make up the remaining portion. It is important to note, however, that the rate structure for each classification functions a bit differently based on usage.
Commercial/Industrial users who utilize large quantities of energy for have been labeled separately under the designation: “Energy Intensive, Trade Exposed” (EITE). These companies come in a variety of shapes and sizes but receive the “Energy Intensive” label as they require a large amount of electricity for their processes to work. Additionally, they are “Trade Exposed” meaning they are highly exposed to global competition. Unless you work directly with energy, this is probably the first time you are hearing of EITE’s, however, you are all too familiar with the products they create.
Glasses you drink out of, material for the cars you drive in and even the cleaner used to wash your floors all are produced by EITE companies. In Michigan, electric providers have allocated special rates to these companies in an effort to make them competitive against their competition, in non-regulated states, who are able to buy their electricity on the open market. It achieves this by allowing EITE companies to buy electricity on the open market while being in a regulated state.
My purpose for convening this information is to first make you aware of the term “Energy-Intensive Trade-Exposed”. Secondly to emphasize the importance of these companies on the economy of Southeast Michigan and Northwest Ohio. Being part of the automotive capital of world with our proximity to Detroit and with the Glass City as our neighbor, we have our share of EITE’s. They employ our friends, family, and fellow community members and create a substantial economic impact throughout our world, country, state, and county.
As energy continues to evolve, it will be important to follow how future changes in the regulation of electricity impacts our EITEs.