The Presque Isle power plant near Marquette, Michigan.

Superior Watershed Partnership

The Presque Isle power plant near Marquette, Michigan.

Upper Peninsula ratepayers to pay millions to keep coal plants online

Customers of a Michigan co-op would see significant bill increases for keeping Upper Peninsula coal plants online, according to new figures from the region’s grid operator.

The Midcontinent Independent System Operator, or MISO, has issued a new cost calculation for operating three coal plants in Michigan’s Upper Peninsula — notably the Presque Isle plant in Marquette — to maintain reliability in the area.

Totaling $49.7 million, the bills for keeping those plants open over a period in 2014-2015, known as System Support Resources payments, will become due in less than three weeks and range from thousands of dollars to more than $11 million for one U.P. utility.

For what are relatively small utilities, the payments could have a significant impact on ratepayers across the U.P.

Cloverland Electric Cooperative, which covers the eastern portion of the U.P., is on the hook for nearly $11.3 million.

Cloverland President and CEO Dan Dasho blames the Presque Isle cost-shifting onto other utilities on 2008 legislation that enabled all mines in the U.P. to exercise electric choice, whereas the rest of the state is under a 10 percent cap. When mining company Cliffs Natural Resources left its utility, We Energies, in 2013, the utility sought to close the plant but was forced to keep it open to maintain reliability.

“The problem is Cloverland got zero benefit from that legislation and now we’re paying the bill,” Dasho said. “It’s really inappropriate. Our people can’t afford to pay that.”

Cloverland hasn’t determined what the final impact may be, but the payments could increase average residential bills $17-$20 a month for the next 14 months, Dasho said.

“$11 million across 44,000 (of our) meters — you can do the math,” Dasho said. “It’s quite a chunk of change and we’re in an area with high unemployment, low wages and people on fixed income. They can’t afford this. And where is the benefit? We are very frustrated with this whole process.”

While a bulk of the SSR payments — $42.5 million — will go back to We Energies for operating the Presque Isle plant, the remaining amount covers operations at the Escanaba and White Pines plants over a period in 2014 and 2015. Payments for those plants will go back to eight different utilities and alternative energy suppliers, including Cloverland.

Exelon subsidiary Constellation Energy Services would owe roughly $22 million in SSR payments. The Upper Peninsula Power Co. (UPPCO), which has about 54,000 customers, would owe $9 million.

The saga continues

The SSR repayments signify the next major step in a years-long struggle over coal plants in the Upper Peninsula, particularly Presque Isle.

A previous SSR payment allocation plan would have placed most of the costs on Wisconsin ratepayers.

MISO submitted the latest cost allocation filing last week to the Federal Energy Regulatory Commission, which in May approved MISO’s latest allocation methodology. FERC gave MISO another month to come back with details about how payments and refunds would be distributed. MISO’s filing is still subject to FERC approval.

Affected parties now have a chance to comment on MISO’s cost-allocation proposal. Cloverland and the Michigan Public Service Commission have each said they plan to.

However, the repayments will become due in less than a month and will span 14 monthly installments. It’s unclear how the repayment process would unfold should FERC reject MISO’s filing after payments had begun.

Last year, an agreement involving Cliffs, We Energies and the state of Michigan returned the mining company as a We Energies customer as a generation alternative is planned once Presque Isle eventually closes in 2019. The new generation will likely come from natural gas as part of an agreement between Cliffs and Chicago-based Invenergy.

An MPSC spokesperson said while the MISO filing was expected and that it does not hamper efforts for a U.P. energy solution, the MPSC will object to the SSR payments “because it contemplates retroactive surcharges, which the PSC believes are not permitted under current law,” spokesperson Judy Palnau said in an email.

We Energies agrees with the latest cost allocation.

“We believe the entities that benefited the most from the continued operation of Presque Isle units as system support resource (SSR) units should be responsible for the SSR costs,” spokesperson Brian Manthey said in an email.

Additionally, as part of an agreement with the state of Michigan, We Energies has agreed to create a new utility specifically for its Michigan customers, Manthey said.

“The formation of the new utility should help foster a future generation solution for the U.P. and ensure that the cost of that solution is properly allocated to Upper Michigan Energy Resource’s customers,” Manthey said.

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