Cliffs Natural Resources works out interim power deal with We Energies

Cliffs Natural Resources (NYSE: CLF) announced Feb. 18 that it has finalized an interim power agreement with Wisconsin Electric Power d/b/a We Energies for its operations in Michigan’s western Upper Peninsula, near the Wisconsin line.

Cliffs said that this is one key step in a series of contemplated short- and long-term agreements that are essential to the viability of its iron ore mines in the Upper Peninsula.

Lourenco Goncalves, Chairman, President and Chief Executive Officer, said: “Cliffs Natural Resources is pleased to have reached an agreement with We Energies which positively impacts our costs. The signature of the agreement also benefits the electric consumers in the Upper Peninsula, with the elimination of the onerous SSR payments. We continue to work with Governor [Rick] Snyder’s office as we pursue other power related initiatives to the benefit of Cliffs and the U.P. community.”

This is part of a larger deal announced Jan. 13 by Snyder and other parties that would, among other things, see: the construction later this decade by Invenergy of a gas-fired cogeneration plant at Cliffs’ facilities; the sale of the coal-fired Presque Isle power plant and its customer base in the Upper Peninsula by We Energies to Upper Peninsula Power; and the shutdown of the Presque Isle power plant at the end of this decade, to be replaced by the new Invenergy cogen.

The SSR payments mentioned are System Support Resource allocations imposed by the Midcontinent ISO to help support, for regional grid stability purposes, certain power plants. Given the transmission system limitations and in order to reliably serve load in the Upper Peninsula, MISO has determined that three facilities in the Upper Peninsula that were looking to either suspend operations or retire must continue to be available for operation. These facilities are the White Pine Power Plant (Units 1 and 2), the Escanaba Power Plant (Units 1 and 2) and Presque Isle (Units 5 through 9). Of these three generating sources, only PIPP is owned by We Energies.

Cleveland-based Cliffs Natural Resources is a major supplier of iron ore pellets to the U.S. steel industry from its mines and pellet plants located in Michigan and Minnesota.

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.