The Michigan Public Service Commission on Feb. 10 issued a “show cause” order to Wisconsin Electric Power that basically sets up a proceeding to look at the complex issues with the coal-fired Presque Isle power plant in Michigan’s Upper Peninsula.
“The existing paradigm under which Wisconsin Electric, [the Public Service Commission of Wisconsin], and the Commission had been operating started to come under stress in 2013 due to some substantial changes to Wisconsin Electric’s Michigan customer base,” the Michigan order said. “Prior to May 2013, none of Wisconsin Electric’s Michigan retail customers had opted to become a retail access service (RAS or choice) customer. In May 2013, Wisconsin Electric began to receive notifications from small primary customers that they intended to switch from being full requirements customers of Wisconsin Electric to receiving service from alternative electric suppliers (AESs) under Michigan’s choice provisions in Public Act 286 of 2008; MCL 460.10 et seq.
“By July 21, 2013, Wisconsin Electric had received enrollment forms from customers whose annual loads comprised approximately 173,731 megawatt-hours (MWh) of the total projected Michigan usage of 2,547,768 MWh from the company’s most recent rate case order. Then, its two largest customers, Tilden Mining Company L.C. and Empire Iron Mining Partnership (the Mines), both of which are Upper Peninsula iron ore mining facilities that collectively account for around 80% of Wisconsin Electric’s Michigan load, submitted choice enrollment forms. The timing and order of the departures of these customers to choice service was critical. Under Michigan law, only 10% of an electric utility’s load could select to switch to choice service. However, an unlimited amount of load of a customer operating an iron ore mining facility, iron ore processing facility, or both, located in Michigan’s Upper Peninsula is authorized to be served by an AES. Combined, the customer losses to choice providers reduced Wisconsin Electric’s full service Michigan load by over 85%.
“On August 1, 2013, Wisconsin Electric submitted an Attachment Y notification to Midcontinent Independent System Operator, Inc. (MISO), for the suspension of facilities at its Presque Isle Power Plant (PIPP) located in Marquette, Michigan, beginning on February 1, 2014, with operations resuming June 1, 2015. Under the August 1, 2013 Attachment Y notification, the PIPP’s operations would have resumed before the Mercury and Air Toxics Standards (MATS) would go into effect.
“After completing its Attachment Y analysis, on October 16, 2013, MISO notified Wisconsin Electric that the PIPP would be designated a System Support Resource (SSR), and indicated that the proposed suspension of the PIPP would result in violations of specific applicable reliability standards. Wisconsin Electric and MISO negotiated an SSR agreement for keeping the PIPP in operational status for grid reliability purposes. MISO filed the original SSR suspension agreement with the FERC in Docket Nos. ER14-1242 and ER14-1243. On August 13, 2013, Wisconsin Electric sought accounting authority from this Commission in an effort to obtain approval to use deferred accounting for all of the PIPP’s production costs, except variable costs related to fuel, that were intended to be recovered via demand and energy rates applicable to energy sold to Michigan customers that switched to choice service and no longer purchase energy directly from Wisconsin Electric. On August 29, 2013, the Commission issued an order in Case No. U-17463 granting the company’s application subject to limitations ‘consistent with the manner in which the ‘slice of system’ regulation of Wisconsin Electric has been conducted in the past.’ After approval of the SSR agreement by the FERC, PSCW filed an action at the FERC, which was docketed as Docket No. EL14-34-000, challenging provisions for the assignment of costs associated with the SSR agreement. By this action, PSCW was seeking to change the existing allocation of costs between Wisconsin Electric’s Michigan and Wisconsin service territories for the SSR payments.”
Michigan PSC wants to know if system is reliable without Presque Isle
The Michigan PSC noted that state law demonstrates that Wisconsin Electric has an obligation to serve the customers in its territory; but, at present, Wisconsin Electric is unable to provide the commission with assurance of a reliable supply of electric service given it has announced its intention to retire the PIPP despite the mines’ Feb. 1, 2015, return as customers of Wisconsin Electric (also known as We Energies).
“In particular, the Commission emphasizes that the urgent problem of constrained capacity in the Upper Peninsula will continue for multiple years,” the order added. “In light of the events described above, the Commission directs Wisconsin Electric to show cause in this docket why it should not be prohibited from suspension or retirement of the operation of the PIPP.”
The commission ordered Wisconsin Electric to appear at a prehearing conference on Feb. 25 at the commission’s Lansing offices. The prehearing conference will be conducted by Administrative Law Judge Suzanne D. Sonneborn (ALJ). At the prehearing conference, the ALJ will rule on petitions to intervene, if any, and establish a schedule for the progress of this proceeding, which should be conducted on an expedited basis. For guidance, the commission suggested that the ALJ adhere to the following proposed schedule, if possible:
- Prepared direct testimony from all parties – March 4, 2015.
- Rebuttal testimony from all parties – March 11, 2015.
- Motions to strike – March 16, 2015.
- Evidentiary hearing – March 19, 2015.
- Briefs – March 26, 2015.
- Reply briefs – April 2, 2015.
Plan in the works for extending Presque Isle’s life, but only to 2020
Notable is that Michigan Gov. Rick Snyder, state Attorney General Bill Schuette, Wisconsin Electric, Upper Peninsula Power (UPPCO), Invenergy and Cliffs Natural Resources recently worked out a deal to ensure stable power supplies in Michigan’s Upper Peninsula and calls for a new owner of the Presque Isle plant. Presque Isle includes five major generating units that provide about 344 MW of capacity in total. Presque Isle has coal-fired steam boilers that were installed in the 1974-1979 period.
The four agreements announced Jan. 13 are:
- Agreement in principle between UPPCO and We Energies. The electric utility businesses now owned by We Energies and Integrys (doing business as Wisconsin Public Service Corp.), including the Presque Isle plant, would be sold to UPPCO, meaning a single U.P.-based corporation would provide electric service to a majority of the U.P. UPPCO indicated that it will “step into” existing rates, except that the SSR will be terminated.
- Agreement in principle between UPPCO and Cliffs. Upon acquisition of the Presque Isle plant, which is expected no later than July, the SSR payments would be terminated and UPPCO would not seek an SSR. Cliffs would purchase a significant majority of its power from UPPCO until the Presque Isle plant’s retirement, anticipated in 2020 due to new federal air emission requirements impacting coal generators statewide.
- Agreement in principle between Cliffs and Invenergy. Invenergy would build, own and operate a new natural gas-powered, combined heat and power facility, located on Cliffs’ site to supply electricity and steam to Cliffs and excess energy to other local utilities. The proposed facility is planned to commence operation in advance of the retirement of the Presque Isle plant.
- Agreement regarding settlement between We Energies, Gov. Snyder, Attorney General Schuette, the Michigan Public Service Commission staff, and Cliffs Natural Resources. The parties have agreed to notify both the Federal Energy Regulatory Commission and the MPSC of their position of no objection to the merger of Wisconsin Energy and Integrys Energy Group, conditional upon the above agreements being approved.