Wisconsin utility willing to invest in new U.P. power plant

©2014 E&E Publishing, LLC
Republished with permission

By Jeffrey Tomich

Wisconsin Energy Corp.’s chief executive said the company is “willing to be an investor” in a new power plant to help alleviate a generation capacity shortfall in Michigan’s Upper Peninsula.

CEO Gale Klappa made the comment Wednesday during an earnings conference call in answer to questions about whether the unfolding crisis in upper Michigan could affect Wisconsin Energy’s ability to win approval from Michigan regulators for the buyout of Integrys Energy Group.

Klappa said that the company remains engaged in talks with Michigan Gov. Rick Snyder’s administration and state Attorney General Bill Schuette on a “global solution” to the Upper Peninsula’s energy woes, and that a solution could be agreed on within 60 to 90 days.

That solution, Wisconsin Energy officials said, would likely involve a new 250- to 350-megawatt combined-cycle natural gas plant and perhaps the addition of renewable generation.

“There are a lot of moving pieces,” Klappa said. “Clearly, I think the preference of the administration is building additional generation in the UP, and we have indicated that we would be willing to be an investor as part of that solution.”

The comments come days after Snyder and the attorney general submitted formal comments with the Michigan Public Service Commission calling Wisconsin Energy’s proposed billion-dollar buyout of Chicago-based Integrys Energy Group “fatally flawed.”

“The level of concentration in both generation and transmission in the Upper Peninsula by one company as a result of this merger is a major concern,” the filing said.

Wisconsin Energy announced the $5.8 billion purchase of Chicago-based Integrys in June (EnergyWire, June 24). The acquisition requires approval from the Federal Energy Regulatory Commission as well as four state utility commissions, including Michigan’s.

Klappa said Wisconsin Energy has agreed to push back the Integrys review schedule by two months at the request of Michigan’s attorney general. But approval is still expected by June, in time for closing next summer.

Concern about the future of the Presque Isle plant and lack of additional generating capacity in upper Michigan has been brewing for more than a year. Those concerns began after two Upper Peninsula iron ore mines chose to buy power from an alternative supplier, prompting We Energies to seek approval to suspend operations at the plant.

But the issue went from a slow simmer to a full boil over the summer following a sequence of events that now threaten to saddle Upper Peninsula residents with staggering rate increases Dec. 1 (EnergyWire, Oct. 28).

The region’s grid operator, the Midcontinent Independent System Operator, has required We Energies to continue to run the Presque Isle plant at a cost of $97 million a year to help ensure electric reliability in the region.

And changes in how those costs are allocated at the request of We Energies mean the costs will be paid almost solely by upper Michigan consumers beginning Dec. 1, adding hundreds to thousands of dollars a year to utility bills.

While much of the anger of upper Michigan residents and politicians has been directed at We Energies and FERC, there have also been fingers pointed at Michigan’s electric choice law.

Under a 2008 Michigan law, customers representing up to 10 percent of a utility’s retail sales can choose an alternative power provider. But the law specifically exempted the mines in the Upper Peninsula, meaning that effectively 90 percent of electric load in the region can switch energy providers.

That, Klappa said, is a recipe for the kind of crisis now looming in the Upper Peninsula.

“Its becoming very, very clear — it has been clear for a while to us, and I think it’s becoming clear to all the parties in Michigan — that the customer choice law there is deeply flawed,” he said.

“Ninety percent customer choice in the UP makes long-term capacity planning very, very difficult.”

CMS Energy Corp.’s chief executive made similar remarks last week.

Asked about the situation facing the Upper Peninsula, John Russell of CMS said: “I think what it does is demonstrate to a lot of people in Michigan the unintended consequences of what I would call full deregulation.”

4 thoughts on “Wisconsin utility willing to invest in new U.P. power plant

  1. Spread the wealth and the risk. Consider an appropriately sized subsidy for increasing biomass power production at each of the UP’s pulp and paper mills. If the mills are willing and able, and if there is a sustainable biomass supply from either the forest or an energy crop like arundo donax (tree free biomass), a new 30-40 MWe biomass power plant at each facility could significantly reduce pressure from out of state suppliers. The mills already have the boiler operator expertise. They will possibly benefit by reducing their landfill requirements from the paper/pulp side by firing their sludge and rejects with the biomass. They will max out their own power needs from the on-site power production and provide the rest to the grid. The idea keeps the money from power sales in the state, increases renewable energy jobs and should keep the power price to consumers at lower risk of volatility. Public support could be overwhelming.

  2. The clueless politicians passed this law which was probably handed to them by ALEC. Now the UP is seeing the consequences of their politicians stupidity. Now the politicians want to act like they are concerned and the politicians want to blame WE Energies for the mess they created.
    The alternative supplier of the mines power is Integrys Energy. WE Energies is buying out Integrys. When the buyout is complete both the mines and the UP will be getting their power from WEC again. The problem will be solved but the guv and his equally stupid attorney general will act like they deserve all the credit for the “solution”. What a farce.

  3. So a new power plant is about 36 months away at best. The SSR payments start Dec 1, with over 116 million billed to the UP in the next 14.5 months. By the time the plant is built there will be no business left to serve in the UP. We need a short term solution and a long term solution. We need the short term solution now.

  4. What is not being talked about is the additional cost consumers will be paying. Gas generation is more expensive than coal generation. Gas and coal are equivalent when gas cost around $4/deca therm. Several years back gas cost were over $13/deca therm. Will consumers be happy about paying over 3 times what they currently pay the next time prices spike? fluctuates a lot more than coal prices.