Presque Isle coal plant gets life support deal for one year

The Midcontinent Independent System Operator on Jan. 31 filed with the Federal Energy Regulatory Commission for approval of a System Support Resource (SSR) that will keep the coal-fired Presque Isle power plant in Michigan’s Upper Peninsula available for operation for the next year.

The agreement, with plant owner Wisconsin Electric Power, covers the the Presque Isle facilities located in Marquette, Mich. These facilities include five major generating units that provide approximately 344 MW of capacity. Presque Isle has coal-fired steam boilers that were installed in the 1974-1979 period.

In August 2013, Wisconsin Electric submitted an Attachment Y to MISO for suspension of Presque Isle Units 5-9, beginning on Feb. 1, 2014, and resuming operations as of June 1, 2015. Operations would resume before the Mercury and Air Toxics Standards (MATS) would go into effect for these units in April 2016.

MISO said it completed its analysis of the Attachment Y notice and Jeffrey Webb, MISO’s Senior Director of Expansion Planning, notified Wisconsin Electric on Oct. 16, 2013, that Presque Isle Units 5-9 would be designated “SSR Units” until such time as appropriate alternatives could be implemented to mitigate reliability issues. MISO concluded that the proposed suspension of Presque Isle during the 16-month suspension period, without curtailment of load by means of demand response or other alternative, would result in violations of applicable reliability standards. As a result, MISO designated Presque Isle Units 5-9 as SSR Units until such time as appropriate alternatives can be implemented to mitigate reliability issues.

MISO began working with Wisconsin Electric and the MISO Independent Market Monitor (IMM) to negotiate and develop an appropriate SSR agreement. Wisconsin Electric submitted a draft SSR agreement for MISO’s consideration, and Wisconsin Electric agreed to a 12-month SSR agreement for the period between Feb. 1, 2014, and Jan. 31, 2014. Wisconsin Electric has voluntarily agreed to continue operating the Presque Isle units on and after Feb. 1, 2014.

The SSR agreement does not contain compensation for environmental upgrades associated with meeting MATS in 2016. MATS-associated costs do not qualify as “unanticipated repairs” under the agreement, MISO noted.

Attached to the Jan. 31 application was testimony from Christine Akkala, Wisconsin Electric’s Director of Power Marketing and Planning. Akkala said about the reasons to shut Presque isle (known also as PIPP): “By the end of July 2013, more than 85% of Wisconsin Electric’s retail customer load in Michigan (based on 2012 weather-adjusted retail sales) had applied to switch to alternative energy suppliers where they would no longer be served from Wisconsin Electric’s generating resources. In an effort to manage costs in response to this significant loss of sales load, Wisconsin Electric determined that it was no longer economic to continue operating the PIPP units.”

Without the SSR, the utility would not keep these units available as of Feb. 1, Akkala added. “Wisconsin Electric, having satisfied its Attachment Y notice requirements, would have begun to suspend the operation of the PIPP units in order to limit continued operational losses. In addition, Wisconsin Electric has announced its intention to sell PIPP and issued a request for proposals on January 27, 2014, with the expectation of closing any potential sale by March 20, 2015.”

Akkala said capital spending will be needed at the plant during the SSR period. “Capital expenditures, such as an estimated $2.8 million to replace pulverizer motors at Units 5 and 6, will be necessary to maintain continued reliable operations at PIPP and would only be incurred in 2014 because MISO has designated PIPP Units 5 and 6 to be SSR units. If not for the SSR designation, Wisconsin Electric would not have to make such material expenditures.”

Akkala said about what would be involved in extending the SSR term beyond Jan. 31, 2015: “The parties agreed to one hundred and eighty (180) days’ notice of the intent to extend the SSR designation of the units. Because of the unique coal shipping limitations at PIPP mentioned previously in my testimony, Wisconsin Electric will require 180 days’ notice in order to ensure that there is adequate coal inventory to operate the plant past the January 31st end date.” That is a reference to the fact that Presque Isle takes lake deliveries of coal, and Lake Superior is frozen during the winter, meaning wintertime coal inventories are built up at the plant in the fall before the lake becomes impassable.

Wisconsin Electric, a Wisconsin Energy (NYSE: WEC) subsidiary, and Wolverine Power Cooperative said in December 2013 that they had ended their joint venture at the Presque Isle plant. Under the joint venture, Wisconsin Electric d/b/a We Energies would have sold a one third share of the Presque Isle plant to Wolverine, which is a generation and transmission cooperative based in Michigan. The deal would have resulted in new emission controls being installed at Presque Isle to meet the MAS rule, paid for by Wolverine.

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.