Proposed DTE increase on LED streetlights leaves local cities split

By: K. Michelle Moran | Grosse Pointe Times | Published March 12, 2015


GROSSE POINTES — A DTE Energy proposal that would raise rates for light-emitting diode streetlights has drawn criticism from a number of cities that have converted to the more energy-efficient light, but the response from some Pointe leaders is mixed.

Some city leaders from around the state are protesting what they say would be a hike in the cost of using the newer LED streetlights, combined with a decrease in the price for operating the older sodium-vapor lights. They say the proposed price change would discourage communities from moving to more energy-efficient LEDs because it would largely eliminate the savings that communities now enjoy from these streetlights.

In December 2014, DTE filed paperwork with the Michigan Public Service Commission to seek approval for the new rate structure. DTE officials say the LEDs are costing the utility more than initially expected.

Rick Bunch is the director of the street lighting consortium of the Southeast Michigan Regional Energy Office. He said about 25 communities — including St. Clair Shores, Harper Woods, Warren, Sterling Heights, Royal Oak and Dearborn — have joined the consortium to oppose DTE’s new rates. Last month, officials in Ypsilanti and Ann Arbor passed resolutions against the proposed rate change and submitted their resolutions to the Washtenaw County Board of Commissioners.

“It’s fair enough for DTE to recover its cost for service,” Bunch said, but he argued that cities who bought into the idea of paying more for investing in LEDs with the understanding that they’d recoup those costs from energy savings are now facing the loss of those savings.

“The issue is that DTE has proposed new tariffs,” Bunch said. “Their new tariff proposal would greatly narrow or, in some cases, possibly eliminate (savings in energy costs from LEDs).”

For most communities, he said, the payback period is about three to four years. Bunch said a lot of communities now feel like they’ve been the victims of a bait- and-switch by DTE.

“This proposal of theirs to change the rates to provide for lower (pricing) under the guidelines for sodium vapor lights is a mislabeled view of trying to ignore energy use policy and good practices, and simply (defeats) the growth of less expensive, better lighting LED (products) out there,” said Eastpointe City Manager Steve Duchane. “All this will do is make the payback calculation longer for those interested in going to LED, and that in itself may change the minds of some.”

DTE officials disagree with that assessment. Scott Simons, senior media relations specialist with DTE, said that, on average, the rates for streetlights would only be going up 1 percent, between the LED rate raise and the sodium-vapor rate drop. While the older light rate is changing, he said, due to changes in technology, the LED rate is changing because the utility has more information on costs.

“It’s based on the cost of providing that service,” Simons said. “When we started off doing LED street lighting four years ago, communities were charged what was an experimental rate based on estimated LED costs and limited LED operating history. So as we (gained) more experience with the technology, we changed the pricing to reflect that understanding.”

Bunch said that since DTE introduced its LED conversion program, the price for these lights has gone down in the market, and they’re generating more lumens per watt than initially anticipated, so the rates that communities pay for LED streetlights should actually be dropping, not rising.

Simons said the new rates would encourage energy efficiency efforts by municipalities and that communities moving to LED would still see “significant savings” in their energy rates.

That’s certainly the impression that Grosse Pointe Farms officials have. Farms City Manager Shane Reeside said via email that the Farms was “glad (we) made the LED conversion when we did. With savings over the last couple of years, we are near our three-year payback period.” Although the Farms would be looking at a 5 percent increase over what it’s paying now, a DTE representative told Reeside that the conversion to LED has saved the Farms $124,297 so far, with an annual savings based on 2014 rates of $94,098.

Even if the DTE increase is allowed to take effect, Reeside said his city is still happy to have made the switch from an environmental and financial standpoint.  Most of the 830 lights that the Farms switched to LED were done via DTE’s series conversion projects, which included a DTE contribution toward fixture costs and required no labor expenses on the city’s part.

“LEDs are still a savings when compared to mercury or sodium lights,” Reeside said.

Grosse Pointe City had a different form of energy-efficient lighting installed, so the DTE proposal wouldn’t negatively impact the City.

“When DTE offered to replace the City’s streetlights with more energy-efficient lighting a couple of years ago, the City accepted DTE’s recommendation to install more energy-efficient lighting that was not LED,” Grosse Pointe City Manager Pete Dame said by email. “At the time, DTE was not certain of the cost-effectiveness of LED streetlights, and DTE also offered to replace the City’s existing streetlights with no additional charge, unlike the up charge associated with LEDs. What DTE is now saying is that the LED lights cost more than the initial pilot rate that was being charged. Before the pilot rates for energy-efficient lights, there was no incentive at all to change. Now, DTE has proposed increasing that initial rate for LEDs.  The proposal as submitted by DTE favors the type of energy-efficient lights the City has in place.”

Dame said DTE should charge for the “actual costs … of providing electrical service” and not subsidize one type of energy-efficient light over another.

Grosse Pointe Shores, which completed a citywide energy-efficiency overhaul last year, doesn’t expect to be hurt by DTE’s proposal either, but for a different reason. Shores Public Works Director Brett Smith said the Shores owns its own streetlights. While he said some cities paid DTE to convert their old streetlights into LEDs, expecting to use the savings in electricity costs to pay for the new lights, the Shores made the conversion on its own.

“We are an energy-only customer for our street lighting,” Smith said.

Bunch confirmed that for cities that own their own streetlights, “there won’t be much impact for them” from this proposal.

Since street lighting is the single largest utility expense for most communities, Bunch encouraged residents and city leaders to study this issue closely and voice their opinions now, before a final decision is made on the rate proposal.

Staff Writer Kevin Bunch contributed to this report.