MISO works out deals to preserve Gaylord, Straits units for a year

The Midcontinent Independent System Operator (MISO) on Oct. 16 asked the Federal Energy Regulatory Commission for approval of a deal with Consumers Energy that will keep old, gas-fired capacity at the Gaylord plant in operation until grid fixes are made.

MISO is seeking FERC approval a System Support Resources (SSR) agreement with Consumers. SSR Tariff provisions permit MISO to negotiate compensation for selected generation resources where a market participant desires to retire or suspend operation of a facility but MISO determines that the facility is needed to maintain system reliability.

If a facility wins SSR status, MISO will enter into agreements with market participants that own or operate this facility to allow for recovery of certain going-forward costs, offset by any expected payments for resource adequacy and net revenues from energy market transactions. The costs under an SSR agreement generally are assigned to the entities serving load in the affected control areas.

Consumers owns the subject facilities located near Gaylord in northern Michigan. These facilities include three units (Units 1-3) that provide about 40 MW of capacity. These units are natural gas-fired combustion turbines that were installed in 1968.

Consumers originally submitted to MISO an August 2011 notice in which Consumers stated its intention to suspend Gaylord Units 1-4 for thirty-six months. The date for the beginning of the suspension was not stated.

MISO completed its reliability analysis and notified Consumers in February 2012 that the Gaylord units would be SSR-designated until such time as appropriate alternatives could be implemented to mitigate reliability issues. Consumers later informed MISO that Unit 4 was inoperable and had been in an outage status since April 2010. In later correspondence, Consumers stated its desire to suspend the Gaylord units at a later date, and Oct. 1, 2013 was agreed upon by the parties to the SSR agreement.

MISO began working with Consumers and the MISO Independent Market Monitor to negotiate and develop an appropriate SSR agreement. Consumers submitted a draft SSR agreement for MISO’s consideration on Aug. 23 and Consumers proposed a 12-month SSR agreement for the period between Oct. 1, 2013 and Sept. 30, 2014. Consumers has voluntarily continued operating Gaylord through the present time, MISO noted.

MISO on Oct. 16 also filed a separate deal with Consumers for the gas-fired Straits plant. Consumers owns the subject facilities located near Makinaw City in northern Michigan. These facilities include a generating unit that provides about 10 MW of capacity. Straits is a natural gas-fired combustion turbine installed in 1968.

Consumers originally submitted to MISO an August 2011 notice in which Consumers stated its intention to suspend Straits for thirty-six months. The date for the beginning of the suspension was not stated. MISO completed its reliability analysis and notified Consumers in February 2012 that Straits would need to be SSR-designated. MISO determined that three transmission reinforcements, due for completion by mid-2014, would be needed to resolve reliability problems. In later correspondence, Consumers agreed to suspend Straits and begin SSR status for Straits as of Oct. 1, 2013.

MISO began working with Consumers and its IMM to negotiate an appropriate SSR agreement. Consumers submitted a draft SSR agreement for MISO’s consideration on Aug. 23 and Consumers proposed a 12-month SSR agreement for the period between Oct. 1, 2013, and Sept. 30, 2014. Consumers has voluntarily continued operating Straits through the present time.

Gaylord, Straits not the only gas facilities on the shutdown list

Consumers Energy, in a Sept. 30 power supply cost recovery (PSCR) case filed at the Michigan Public Service Commission, said various gas facility shutdowns are in the works.

David Ronk Jr., Director for Electric Transactions and Wholesale Settlements at Consumers, testified that the company is evaluating whether it can remove the gas-fired Karn Units 3 and 4 from service for planning years 2014 and 2015 and replace that capacity with Zonal Resource Credits (ZRCs) at a lower cost than the company’s cost of maintaining these units for service.

Ronk said the company had at one point planned to remove Gaylord Units 1-3 and the Straits combustion turbines (as well as other small combustion turbines) from service, effective March 1, 2012. In February 2012, however, the company received notice from MISO that its transmission study showed that by removing these units, it would create a violation of its reliability standards. As a result, these units would need to be designated as SSRs until transmission upgrades are made. Ronk said at that point that Consumers was still negotiating the SSR agreement with MISO, which will run for an initial term of 12 months.

The company has recently retired the gas-fired Thetford Units 5-9 and has, for purposes of this PSCR plan, modeled Morrow Units A and B, Whiting Unit A, and Weadock Unit A in extended reserve shut down status for the next several years. The company has recently made arrangements to potentially allow Morrow Units A and B and Gaylord 4 to be retired in late 2013 or 2014. It anticipates that Thetford Unit 1 will be placed in extended reserve shutdown status or retired in 2014 as well.

Sara Walz, a General Engineering Technical Analyst in the Electric Sourcing and Resource Planning Section of the Energy Supply Operations Department at Consumers, noted that the company is proposing an addition of 730 MW of gas-fired nameplate capacity at the Thetford Generating Station, assumed to be in-service on June 1, 2017. The company is also proposing to suspend the operation of the seven coal units (Cobb 4-5, Weadock 7-8, and Whiting 1-3) in lieu of retrofitting the units to comply with the federal MATS rule.

This PSCR case reflects the company’s decision to mothball or place in extended reserve shutdown status the following combustion turbine units: Campbell Unit A, Morrow Units A and B, Weadock Unit A, Whiting Unit A, and Cobb Units 1-3. Gaylord Unit 4 has been assumed to retire as of September 2013. Thetford Units 5-9 are assumed to retire as of October 2013. The Thetford Units 1-4 are assumed to be available for Black Start operation only. Gaylord Units 1-3 and Straits Unit 1 are assumed to be designated as SSRs.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.