Consumers Energy cuts Thetford project cost estimate by $50m

Consumers Energy is revising its total estimated cost for the 700-MW, gas-fired Thetford power project to approximately $700m in 2017 dollars, which is a reduction of about $50m from the company’s prior estimate.

Those figures were filed Dec. 9 with the Michigan Public Service Commission in a brief update to prior testimony of Consumers official John Mahan. The commission is looking at the utility’s July application for a Certificate of Necessity (CON) for the Thetford project.

“Consumers Energy is in the process of procuring several long-lead time pieces of major equipment for the Project,” wrote Mahan about the reasons for the cost update. “The information the Company has received during the course of the procurement process indicates that some of the major equipment will be purchased at a cost below the original estimated cost. On that basis the Company is confident of reducing the approximate estimate related to major equipment we have bid. Two other areas of the Company’s estimate that changed based upon the revised long-lead time major equipment estimate are escalation and allowance for funds used during construction. Consumers Energy is currently in negotiations for the referenced equipment, and has not yet signed contracts with Original Equipment Manufacturers.”

Assuming that Consumers Energy determines to proceed with the Thetford project, the company anticipates signing contracts for the long-lead time major equipment referenced above in the next one to two months.

This $50m reduction in project cost may come as a blow to other power producers who have intervened in the Thetford case, saying they can provide cheaper capacity from revamped or expanded gas-fired power plants in the state of Michigan. Any cost reduction for Thetford would tend to undercut their economic arguments.

For example, New Covert Generating Co. LLC has told the commission that it has a gas-fired, combined cycle facility that has been significantly underutilized since it was built early last decade. New Covert’s analysis shows that there are several lower-cost alternatives to the Thetford new-build project, including Consumers buying the New Covert facility at a price similar to the original $750m Thetford cost estimate.

Also, Midland Cogeneration Venture Limited Partnership (MCV) owns an existing gas-fired power plant in Michigan and wants to sell capacity from an expansion project to Consumers under a power purchase agreement (PPA). MCV is planning to construct a 640-MW natural gas combined cycle facility to be co-located with MCV’s existing 1,633 MW natural gas combined cycle facility.

Another gas-fired power plant operator with a complaint is Renaissance Power LLC, an affiliate of LS Power Development LLC which has an existing plant at Carson City, Mich. The company said it can uprate this facility and sell the plant itself, or capacity from it, to Consumers at a cost-effective price. The Renaissance plant is a natural gas-fired facility with a net average annual capacity currently of approximately 716 MW.

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.