We Energies says despite flux, capacity will be there in Michigan’s Upper Peninsula

Despite various complicating factors, Wisconsin Electric Power d/b/a We Energies told the Michigan Public Service Commission on Feb. 17 that it can meet capacity needs in the area of Michigan’s Upper Peninsula that it serves – assuming it will serve those customers for much longer.

The PSC had in December ordered utilities serving the state to offer their assessments of capacity and availability needs in the 2015-2019 period. That inquiry is due in part of thousands of MWs of capacity, mostly coal-fired, in the region in and around Michigan that is about to be retired due to federal air rules, mainly the Mercury and Air Toxics Standards (MATS).

We Energies said in the Feb. 17 response that it expects that during the 2015-2019 period, it will meet the electric requirements of: current full requirements service customers; and customers who are currently served by an Alternative Electric Supplier (AES) that choose to return to We Energies for full requirements service.

We Energies is engaged in the generation, distribution and sale of electric energy in Wisconsin and the Upper Peninsula of Michigan. We Energies provides electric distribution service to approximately 27,600 customers in the Upper Peninsula of Michigan representing a total peak demand of about 367 MW.

On Jan. 13, 2015, the company announced under a deal brokered by Michigan government officials that it had signed a non-binding term sheet to sell its Michigan electric retail distribution business and the coal-fired Presque Isle Power Plant (PIPP) to Upper Peninsula Power Co. (UPPCo). “Because, as of the date of this Assessment, the sale of these assets has not been completed, We Energies has completed this Assessment and the Reporting Template (Attachment A) as if these assets will be under the ownership of the Company throughout the 2015 through 2019 timeframe,” We Energies noted.

The transmission system in the Upper Peninsula of Michigan and Eastern Wisconsin are owned by the American Transmission Co. LLC (ATC LLC) and operated by the Midcontinent Independent System Operator. MISO has determined there are limitations to the transmission system in the Upper Peninsula of Michigan. Given the transmission system limitations and in order to reliably serve load in the Upper Peninsula of Michigan, MISO has determined that three generating facilities in the Upper Peninsula of Michigan 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 PIPP (Units 5 through 9). Of these three generating sources, only PIPP is owned by We Energies.

We Energies installing life-extending air controls at Presque Isle

As a result of MISO’s determinations, the MISO has entered into System Support Resource (SSR) agreements to ensure the continued operation of these facilities to support the reliable operation of the bulk electric system. The determination and allocation of costs associated with these SSR agreements continues to be the subject of proceedings before the Federal Energy Regulatory Commission.

“However, for purposes of this Assessment, it is assumed that these facilities will continue to operate through Planning Year 2019 or until such time that transmission improvements and/or new generation additions have been installed and MISO allows their retirement,” We Energies wrote. “The PIPP is subject to various federal environmental regulations, including the Mercury and Air Toxics Standards (‘MATS’) which has a compliance date of April 16, 2015. We Energies requested and received a one-year extension for the PIPP, making the new compliance date April 16, 2016. Based on the results of a test program completed in 2011, We Energies verified that dry sorbent injection (‘DSI’) and powder activated carbon (‘PAC’) are viable technologies to meet the MATS requirements. Further tests completed in 2014 demonstrated that a single injection system for a blended PAC/lime (the DSI Sorbent) would meet the MATS requirements.

“We Energies is in the process of procuring and installing the necessary equipment to meet the MATS requirements and anticipates the systems will be in service by the end of 2015, thereby allowing PIPP to continue to operate if required by MISO. As discussed earlier, We Energies has announced its intention of selling its Michigan electric retail distribution business and the PIPP to the UPPCo. Wisconsin Electric concludes that the closing of the transaction will not adversely affect the adequacy of electric supply in the transferred service territory nor will it impact the reliability of the bulk electric system, based upon the assumption that UPPCo will continue to operate PIPP.

“In addition to the sale of the above assets, it was also announced that a natural gas-fired cogeneration power plant could be built, owned and operated by Invenergy on the property of Cliffs Natural Resources in the Upper Peninsula. With the construction of the cogeneration plant, it is anticipated that the PIPP could be retired in 2020. Because the continued operation of PIPP is required by MISO to provide reliable operation of the bulk electric system, for the purposes of this Assessment, it has been assumed that PIPP will continue to operate through Planning Year 2019, whether under annual SSR Agreements or otherwise. If operated under SSR Agreements, the capacity of the PIPP will be offered into the MISO Planning Resource Auction and will not be used to directly meet the Planning Reserve Margin Requirements (‘PRMR’) of We Energies’ load in the Upper Peninsula or Wisconsin. By making the capacity of PIPP available through the MISO Planning Resource Auction, any [load serving entity] relying upon the MISO Planning Resource Auction to serve load in the Upper Peninsula has adequate assurance that this capacity is deliverable to the load they are serving.

“For the purposes of this Assessment, it was also assumed that the proposed new cogeneration plant cannot be relied upon to meet the reliability requirements of the Upper Peninsula until after Planning Year 2019. In the event that the cogeneration plant would be available sooner, it is probable that the available capacity would simply be offset by the retirement of a similar amount of capacity from PIPP.”

We Energies said that during the Feb. 10 West Technical Study Task Force conference call to discuss the annual need for the White Pine Units 1 and 2 SSR agreements, MISO indicated that the change in the availability of UPPCo’s Portage Combustion Turbine would allow for the retirement of White Pine Unit 2. However, MISO indicated that White Pine Unit 1 is still required for reliability and an extension SSR agreement would be filed.

As for the Escanaba Power Plant, the completion of the Holmes-Old Mead Road 138-kV transmission line should allow for the retirement of both units. This line has an expected in-service date of Dec. 31, 2016.

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.