Michigan energy regulators want lawmakers to change a utility incentive they say adds unnecessary costs to electricity customers’ bills.

The Michigan Public Service Commission renewed its criticism Oct. 1 while approving four Consumers Energy solar power purchase agreements. State law required commissioners to approve financial incentives alongside those contracts, even though federal law already obligated the utility to buy the power, according to the commission’s announcement.

“Adding profits to utility contracts that are entered into pursuant to federal obligations results in unnecessary costs for customers,” Commissioner Katherine Peretick said in the announcement.

The issue centers on a financial compensation mechanism that gives utilities a return on certain contracts to purchase electricity from independent suppliers.

The incentive is intended to make purchasing power more attractive compared with building and owning generating facilities. But regulators say it serves no purpose when utilities are already legally required to purchase the electricity.

In a July 16 letter to Gov. Gretchen Whitmer, the commission said it had authorized $121.7 million in incentive costs on 63 federally required contracts since 2019. That figure describes authorized contract costs, rather than an accounting of money already collected from customers.

The federal requirement comes from the Public Utility Regulatory Policies Act of 1978, known as PURPA. The law requires utilities to purchase electricity from qualifying independent generating facilities under applicable rules.

The commission’s July letter recommended changing state law so the incentive would no longer apply to mandatory purchases. Regulators also sought to exclude certain contracts involving fully depreciated assets and renegotiated agreements that previously did not qualify for the incentive.

The proposal is part of a broader MPSC affordability package released Aug. 10. Other recommendations include moving away from annual rate cases and tying utility earnings more closely to reliability and affordability.

As we reported Oct. 16, a separate Consumers Energy natural gas rate increase takes effect Nov. 1, adding about $4 to a typical household’s monthly bill. That gas-rate decision is distinct from the electricity purchasing incentives regulators want lawmakers to change.