Consumers Energy is getting ready in case it has to permanently retire in the near term several coal-fired generating units that it plans to deactivate for clean-air purposes in 2016.
On Aug. 6, this CMS Energy (NYSE: CMS) subsidiary applied at the Michigan Public Service Commission for advanced approval of accounting treatment for the remaining undepreciated book value of Cobb Units 1-5, Weadock Units 7-8 and Whiting Units 1-3 (called the “Referenced Units”), associated demolition costs, and other costs of removal in the event these units are retired earlier than previously planned.
Consumers also wants assurance that the commission will, in future rate proceedings, afford the company ratemaking treatment consistent with that accounting.
Consumers Energy suspended operations of Cobb Units 1-3 in January 2009 due to safety concerns. Original repair estimates exceeded $10m and the company suspended operation of the units with the intent of monitoring future market conditions. The company filed appropriate documentation with the Midcontinent Independent System Operator (MISO), which MISO approved, supporting the suspension of operations for those units. Since that time, market conditions have not warranted the investment needed to return these 65-year-old, small (183 MW combined operating capacity) and relatively less efficient units to service.
The U.S. Environmental Protection Agency more recently issued the Mercury and Air Toxics Standards (MATS). The initial compliance date for the MATS rule is April 16, 2015.
“Consumers Energy has determined that it may be uneconomic to install the pollution controls necessary to achieve compliance with MATS on Cobb units 4&5, Weadock units 7&8, and Whiting units 1-3,” the company told the PSC. “Accordingly, in 2012, the Company sought approval from MISO to suspend operation of those units. Consumers Energy also sought an extension of the April 16, 2015 compliance date from the Michigan Department of Environmental Quality (‘MDEQ’). The MDEQ granted an extension to April 16, 2016. MISO subsequently approved the Company’s request to suspend operation of these units as of April 16, 2016. Therefore, Consumers Energy anticipates that, as of April 16, 2016, operations will be suspended for all of the Referenced Units.”
The Referenced Units are currently scheduled for retirement in 2025. However, based on current projections of future capacity prices, Consumers Energy believes that it is likely that future operations of these plants beyond April 15, 2016 would be uneconomical. In addition, on July 12, Consumers Energy filed an application seeking a Certificate of Necessity (CON) in connection with the construction of a new, 700-MW natural gas combined cycle plant at the Thetford site in Genesee County. The Thetford project is a more economical alternative to continuing to operate the Referenced Units.
“Although uncertainties regarding future market conditions, future regulatory actions, and system stability issues exist that could require the Company to restart the Referenced Units at some future time that possibility is highly unlikely,” the utility added. “It is more likely that the Company may elect to retire the Referenced Units before 2025 – perhaps as early as April 15, 2016.”
The affected units are:
- BC Cobb Units 4 (156 MW installed) and 5 (156 MW);
- JC Weadock Units 7 (145 MW) and 8 (145 MW): and
- JR Whiting Units 1 (101 MW), 2 (99 MW) and 3 (124 MW).
The company has previously said it is actively reviewing the scope, cost and requirements to repower the BC Cobb Units 4 and 5 with natural gas as a potential alternative to market capacity purchases beyond the capacity provided by the Thetford plant.
The coal units that would remain open, with new air controls added, are:
- JH Campbell Units 1 (260 MW installed), 2 (347 MW) and 3 (751 MW); and
- Dan E Karn Units 1 (255 MW) and 2 (260 MW).