Consumers Energy says it will have needed capacity in Michigan’s Lower Peninsula

Consumers Energy assured its customers on Feb. 17 that it has the electric power they need, despite an electric supply shortfall forecast by a federal reliability organization for Michigan’s Lower Peninsula in 2016.

The utility’s comments were filed Feb. 17 in response to a Michigan Public Service Commission request for 5-year energy supply plans from electric providers. Consumers Energy is Michigan’s largest utility and is the principal subsidiary of CMS Energy (NYSE:CMS).

“Consumers Energy customers can be assured that we’ve got their back and will continue to provide them the reliable and affordable power they need,” said Tim Sparks, Consumers Energy’s vice president for energy supply. “We have a sound, long-term strategy to take care of our customers. That includes adding the Jackson Gas Plant to our generating fleet, which the company is purchasing for about one-fourth the cost of a new plant, and ongoing customer use reductions due to energy efficiency and smart energy programs. With these investments, our typical residential customer’s electric bill will remain at about $3 per day and below the U.S. average.”

The Feb. 17 filing notes that the Midcontinent Independent System Operator (MISO), which oversees electric grid reliability, is forecasting a 3,000-MW electric supply shortfall in the Lower Peninsula by 2016. The shortfall is driven by multiple power plant retirements in the Midwest in response to current U.S. EPA air quality regulations. They include seven Consumers Energy coal units that will be retired by April 2016. 

“With Consumers Energy projecting sufficient power supplies over the five-year planning period to meet the needs of its full service utility customers, the reliability and price impacts of these imminent plant retirements may fall most heavily on several hundred retail open access customers who have elected to receive their generation supplies from retail energy marketers,” Sparks said. 

These marketers traditionally rely on purchases from the MISO electricity market to meet the power needs of their customers. If they are unable to secure electric supplies from the market because of the shortfall, or offer competitive rates due to sharp increases in market prices, customers participating in the retail open access program may seek to return to the reliability and price stability of full utility service. Retail open access customers are currently permitted to return to regulated utility service with minimal notice.    

“This rapid influx of these customers would present significant reliability, price and supply planning challenges for our company,” Sparks said. “The dramatic changes we’re seeing in the energy landscape point to the need for Michigan to take control of its energy future and to implement a plan that ensures all customers have reliable, affordable and clean energy.” 

Consumers Energy said it is committed to working with lawmakers and other stakeholders on a Michigan-first energy plan that will support the construction of a new generation of clean power plants and continued investment in technology and energy efficiency programs that reduce electricity demand and help customers lower their bills.

Buy of Jackson plant will help make up for coal shutdowns

“By 2016, at least nine coal plants will shut down across the state due to air quality rules,” said the utility’s report to the PSC. “These include Consumers Energy’s ‘Classic Seven’ coal-fueled generating plants: two units in Muskegon (B.C. Cobb), two units in Essexville (J.C. Weadock) and three units in Erie (J.R. Whiting). Retrofitting these plants with the emissions controls necessary to comply with environmental regulations does not make economic sense for utility customers. More Michigan coal plant retirements are expected after 2020 when the federal Clean Power Plan takes effect. This impact will extend across the country.

“Michigan must act now to ensure reliability for the future because plant retirements will create an electric capacity shortfall in the state. In fact, MISO, the grid operator for 15 states (including Michigan) and one Canadian province, estimates the Lower Peninsula of Michigan will fall 3,000 megawatts short of the power that homes and businesses need by 2016.” The utility said that failing to address this need could have the following negative consequences:

  • Reliability concerns and higher costs for customers, especially if the state is forced to rely on more power purchased from the volatile open market.
  • Loss of decision-making power to ensure electric reliability, placing the state’s energy future in the hands of out-of-state companies or federal regulators.

Renewable energy, energy efficiency, and other demand-side programs are key components in helping Michigan address the looming capacity shortfall while reducing emissions and helping to protect the environment. Consumers Energy said its energy efficiency programs alone will save an estimated 500 MW — roughly the output of one new natural gas fueled power plant — from 2009 to 2020. However, reducing demand through energy efficiency or other demand-side programs alone will not fully meet the challenges that Michigan faces in the coming years, Consumers Energy added.

Consumers Energy said it has a plan to offset the loss of its Classic Seven generating plants, which collectively represent about 950 MW of capacity. That strategy includes:

  • Continuing use of the renewable energy portfolio Consumers Energy has implemented ahead of the schedule required by Public Act 295;
  • Purchasing a 542 MW natural gas-fired power plant in Jackson;
  • Short-term capacity purchases;
  • Demand-Side Management through a variety of efficiency and demand response strategies.

Consumers Energy provides natural gas and electricity to 6.6 million of the state’s 10 million residents in all 68 Lower Peninsula counties.

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.