Instead of creating around 11,000 new jobs and investing $11 billion in its backyard, Michigan-based Ford Motor Co. went south, deciding in September to invest in two new electric vehicle battery plants in Tennessee and Kentucky. Ford CEO Jim Farley repeatedly cited lower energy rates as part of the motivation but never explained why those regions’ electricity is cheaper: Privately owned DTE Energy and Consumers Energy prices don’t compete with the large publicly owned utility and electric cooperative that will serve the new plants down south. 

Public utilities and cooperatives typically offer lower rates than investor-owned, private utilities, and the publicly owned Tennessee Valley Authority’s (TVA) average industrial rates are 40%-60% cheaper, and that raises questions about whether Michigan will be able to attract job-rich, energy-intensive battery plants as the automotive industry electrifies and needs more EV batteries.  

Farley’s October remarks suggest utility savings will likely become an increasingly important part of the auto industry’s calculus in determining where to build plants. He told outlets that Ford for the first time considered electricity prices in deciding on a site and that the company wants to work with states that are “giving you access to that low-energy cost.”

Cheaper, public power

Driving the municipal and cooperative utilities’ cheaper power are lower taxes, access to lower borrowing rates and structure—a publicly owned utility or cooperative needs to make enough money to keep providing reliable energy, but they do not need to charge higher rates to make sure shareholders get a return on their investment, like investor-owned utilities. In a period from May 2020 to April 2021, DTE’s industrial customers collectively paid an additional $135 million to satisfy the company’s shareholder obligations, an Outlier and Citizens Utility Board of Michigan analysis found.

“[Publicly owned utilities] are able to charge significantly lower rates and send a lot of money back to their communities, which is pretty advantageous,” said Greg Woodring, president of Ann Arbor for Public Power, an advocacy organization. 

Private utilities negotiate special rates behind closed doors with large customers like auto plants, but the TVA offers an average industrial rate of 4.58 cents per kWh, while DTE’s and Consumers Energy’s average rates for its largest users are 7.59 cents and 10.94 cents, respectively. Battery plants consume five times more electricity than a traditional auto assembly plant, Farley said, and an industrial customer using that much power could save $18 million to $35 million annually in TVA territory versus DTE or Consumers Energy territory. 

The TVA also expects its industrial rates to remain flat over the next 10 years, and its prices have dropped in recent years, the company told Outlier.

Cox Automotive executive analyst Michelle Krebs said she didn’t know particulars about how utility rates factor into companies’ decisions but added that the savings could be important. 

“Currently, electric vehicles generally are not profitable and may not be for some time,” she said. “Every penny counts as automakers consider where they will build EVs.” 

Ford isn’t alone. Even when Clarios, one of the world’s largest electric vehicle battery manufacturers, opened a plant in Michigan, it did so in Holland, a city served by a small public utility. Consumers Energy territory surrounds the city, but an industrial customer like a battery plant could save $20 million annually in an area served by the Holland Board of Public Works, instead of Consumers. Clarios also ran another plant in public utility territory in Delaware until it recently closed.

A Ford spokesperson wrote in an email to Outlier that the company has invested $7 billion in Michigan in recent years, and said other factors, such as suitable sites and location, helped drive its decision.

Consumers Energy spokesperson Brian Wheeler said the company was never contacted by Ford.

“We have a history of working closely with large industrial and commercial customers to provide innovative and competitive rate options, and we are always looking at ways to further reduce business costs,” he said. 

DTE said in an email that it has the ability to work with regulators to set industrial rates that “compete in any jurisdiction to retain and attract investment in Michigan.” The Michigan Public Services Commission, which regulates private utilities, said it hasn’t approved contracts for an auto plant within the last 10 years. 

Power companies have three classes of customers—residential, commercial and industrial. Despite Ford balking at industrial rates, industrial customers pay the lowest rates of the three customer classes, with residential customers paying the most. Over the past decade residential customer rates have increased, but the company has ensured industrial prices have only slightly increased. 

Public power utilities and cooperatives can provide cheaper power in part because they are exempt from federal income tax and many state taxes, though some make payments to support local governments in lieu of taxes. The investor-owned utility industry is known for using creative accounting to dodge its federal income tax responsibility, even as it collects payments from customers to cover those obligations.

DTE has noted that it pays hundreds of millions in taxes at the state and local level, but it has paid zero in federal income taxes for each of the last three years. It charges customers hundreds of millions of dollars upfront to cover the tax obligation. 

“The tax savings and not having to pay out all their profit [to shareholders] is pretty substantial,” Woodring said. His group, Ann Arbor For Public Power, is pushing for the city to break from DTE Energy and form a municipal power company. Its analysis found that Ann Arbor residents often pay about 40% more than cities served by public power. 

Part of what allows publicly owned utilities to keep costs low is that they can borrow money for big projects at much lower rates. Compared with corporate bonds, municipal bond rates “are exceptionally low”, Woodring said, because they’re guaranteed by the state, and governments typically have higher bond ratings than private companies.

Priorities for private utilities

The private business model also prioritizes shareholders’ financial interests over those of customers by incentivizing large, centralized generation projects that earn a higher return for investors but aren’t always good for customers. 

State regulators grant DTE and Consumers Energy a 10% return on their investments and that return is baked into customers’ rates. If DTE spends $2 billion on a gas plant, the company will pay for half with debt and half with shareholder investment, so customers will spend an additional $100 million to cover shareholders’ returns.  

A publicly owned utility or cooperative doesn’t have shareholder payouts to consider as they plan and can prioritize efficient distribution, renewable projects or other measures that save customers money.

DTE and Consumers Energy’s model made more sense in the early 20th century at a time when the nation needed major energy infrastructure build out, but it no longer does, said Amy Bandyk, director of Citizens Utility Board of Michigan.  

“Now things like energy efficiency and distributed energy like microgrids and on-site renewable energy can be the cheaper way to power customers, and they require much less capital paid for through ratepayer bills,” Bandyk said, adding that it’s up to regulators to change private utilities’ incentives. “Doing so would ultimately decrease costs for residential and industrial customers alike and make Michigan’s rates more competitive with other states.”

TOM PERKINS is a freelance journalist and contributing writer for Outlier Media. Reach him at Outlier Media can be reached at

Correction: A previous version of this article incorrectly identified a source as Chris Woodring. His name is Greg Woodring. A previous version of this story also incorrectly reported average industrial rates for TVA, DTE and Consumers Energy. TVA offers an average industrial rate of 4.58 cents per kWh, while DTE’s and Consumers Energy’s average rates for its largest users are 7.59 cents and 10.94 cents, respectively.