DTE Electric plans to issue in the first quarter of 2015 a request for proposals (RFP) for new gas-fired generating capacity on top of the capacity it plans to buy off of an RFP issued earlier this year.
DTE Electric signed the definitive agreement with LS Power on Oct. 29 for the existing Renaissance Power Plant and expects to financially close that transaction, or officially take ownership, in the first quarter of 2015, wrote Irene Dimitry, Vice President of Business Planning & Development at DTE Energy Corporate Services LLC, a subsidiary of DTE Electric parent DTE Energy (NYSE: DTE). Dimitry’s testimony was filed by DTE Electric on Dec. 19 at the Michigan Public Service Commission as part of a rate case application.
Asked if DTE Electric will be able to utilize the Renaissance plant’s capacity for the Midcontinent ISO’s 2015-2016 Planning Year, Dimitry said: “Yes, DTE Electric expects to financially close the transaction prior to MISO’s deadline for registering resources for the upcoming 2015-2016 Planning Year (PY). MISO’s 2015-2016 PY spans from June 1, 2015 to May 31, 2016. In conjunction with the agreement to acquire the Plant, DTE Electric has also entered into an agreement with Renaissance Power to secure the Plant’s MISO PY 2015-2016 Zonal Resource Credits through a Bi-lateral Capacity Purchase Agreement in the event the transaction does not close prior to March 20, 2015.”
DTE Electric intends in the first quarter of 2015 to solicit bids to acquire approximately 300 MW of Michigan-based simple cycle gas fired generation at an estimated cost of approximately $100m. This purchase, along with Renaissance, is expected to address the 900 MW shortfall in DTE Electric’s planning resource requirements for the 2015-2016 planning year and beyond. That $100m estimate for the next capacity buy is based on the Renaissance purchase price.
In response to the tightening capacity market in MISO, mainly due to coal-fired power plant retirements, DTE Electric issued an RFP in June 2014 that resulted in LS Power having the winning bid with the Renaissance plant. The net present values of the revenue requirements (NPVRR) indicated that this power plant purchase option was $122m lower than the Base Plan. The purchase of Renaissance is expected to break even on a NPVRR basis within approximately the first six years of ownership.
The Renaissance plant is a 732 MW (Name Plate Capacity) natural gas-fired simple- cycle power plant located in Carson City, Michigan, approximately 50 miles north of Lansing, in MISO Zone 7. The facility is equipped with four Siemens-Westinghouse 501FD combustion turbines, which achieved commercial operation between 2002 and 2003.
Black & Veatch (B&V) was hired as a third party consultant for the technical due diligence of Renaissance. DTE Electric negotiated a $240m purchase price for the plant. DTE Electric expects to spend $25m on capital spare parts for the Renaissance Power Plant in 2015 after the financial closing of the transaction. This expenditure is needed to purchase the combustion turbine spare parts that will be used in future maintenance outages. The capital spare parts LS Power currently owns for the plant are not part of the transaction.
DTE Electric, which announced the deal on Nov. 10, on Nov. 12 filed at the Federal Energy Regulatory Commission for approval of the Renaissance plant buy.