Detroit Edison Secures 10-Year Contracts with Big Three Automakers

Strategic Insights -

Detroit Edison, the Michigan-based electric utility company, has secured regulatory approval for 10-year, $2 billion sole supplier contracts with the Big Three automakers: Chrysler, Ford, and General Motors. This landmark agreement not only secures a significant revenue stream for the utility but also provides reduced energy costs for the automakers, making them more competitive in the industry. The contracts cover 54 assembly and parts manufacturing plants, headquarters facilities, and design and technical centers in Southeastern Michigan.

Key Takeaways:

  • Detroit Edison becomes the first utility in the nation to secure 10-year contracts with an entire industry in its geographic service area.
  • The contracts cover 54 assembly and parts manufacturing plants, headquarters facilities, and design and technical centers operated by the Big Three automakers in Southeastern Michigan.
  • The utility will receive about $2 billion in revenue over the life of the agreements, while providing reduced electric rates to the automakers.
  • The contracts guarantee specific levels of service reliability, which are unique to the electric industry, and provide for on-site energy experts to help the automakers use all forms of energy more efficiently.
  • The utility will save the automakers between $30 million and $50 million annually through 2004, and the automakers have the option to reduce their electricity purchases by 20 percent annually during the last four years of the contracts.
  • Detroit Edison expects to offset the associated revenue reductions by further reducing operating expenses.
  • The contracts will help maintain a strong, labor-intensive manufacturing base in Michigan and keep rates stable for all of its customers.

Statistics:

  • $2 billion: The total value of the 10-year contracts with the Big Three automakers.
  • 54: The number of assembly and parts manufacturing plants, headquarters facilities, and design and technical centers covered by the contracts.
  • $30 million - $50 million annual savings: The estimated reductions in energy costs for the automakers through 2004.
  • 10 years: The duration of the contracts with the Big Three automakers.
  • 20 percent: The option for the automakers to reduce their electricity purchases annually during the last four years of the contracts.
  • 2 million: The number of customers served by Detroit Edison, Michigan's largest investor-owned electric utility.
  • 30 percent: The percentage of sales accounted for by industrial customers at Detroit Edison.

Sources:

  • PRNewswire, "Detroit Edison Wins Regulatory Approval of 10-Year Contracts with Big Three Automakers" (March 23, 1995)
  • Detroit Edison, "Detroit Edison Secures 10-Year Contracts with Big Three Automakers" (Press Release, March 23, 1995)