Michigan PSC rejects argument over DTE Electric’s coal price forecasting

The Michigan Public Service Commission on May 14 rejected arguments over certain coal price forecasts of DTE Electric that were offered in a Power Supply Cost Recovery (PSCR) case first begun in September 2013.

The PSCR cases are filed annually, so the May 14 decision actually skips by the PSCR case filed in September 2014. A prehearing conference in this case was held in November 2013 before Administrative Law Judge Sharon Feldman (ALJ). The ALJ granted intervenor status to the Michigan Department of the Attorney General (Attorney General), the Association of Businesses Advocating Tariff Equity (ABATE), the Michigan Environmental Council and Sierra Club (MEC/SC), and the Great Lakes Renewable Energy Association (GLREA). At a second prehearing conference held on December 2013, the ALJ granted permissive intervention to the Institute for Energy Innovation (IEI). The commission staff also participated in the proceedings.

Said the May 14 decision about the coal pricing issue: “MEC/SC contended that DTE Electric seriously underestimated the cost of coal in its five-year forecast, pointing to the fact that the coal prices projected in this case were substantially reduced from those in the forecast presented in the company’s previous PSCR plan proceeding. MEC/SC added that the changed forecast deviates substantially from other industry forecasts and was presented with no explanation. MEC/SC raised concerns that DTE Electric is making decisions on the dispatch of its coal units, and on the feasibility of installing pollution control equipment on these units, using a forecast that the MEC/SC contended lacked credibility.

“The ALJ found that MEC/SC primarily had issues with the coal prices projected for the 2015- 2018 forecast period, and not the 2014 plan year, and that MEC/SC was also concerned that DTE Electric was using a flawed forecast to decide whether to retire or retrofit aging coal units. The ALJ noted that the Commission has previously determined that a PSCR plan proceeding is not the appropriate venue for evaluating capital expenditures and plant retirement. Issues concerning capital costs or plant investment decisions should be addressed in a rate case where the company will be expected to fully justify its plans.

“MEC/SC takes exception arguing that the Commission should find that DTE Electric’s coal forecast is relevant to this PSCR plan proceeding and urging the Commission to issue a Section 7 warning to protect customers in the event the company’s forecast is too low.

“In reply, DTE Electric argues that MEC/SC’s exception is without merit. Contrary to MEC/SC’s claim, DTE Electric asserts that it provided ample explanation for its coal cost projections for both the plan year and five-year forecast. According to DTE Electric, the company plans to increase purchases of lower-cost western coal while decreasing purchases of more expensive eastern coal. DTE Electric also points to the much lower costs of contract and spot coal for 2015, compared to 2014, along with lower transportation costs.

“The Commission finds that MEC/SC’s exception should be rejected. While DTE Electric’s coal forecast in this case may have differed significantly from its previous PSCR forecast, the Commission finds that DTE Electric’s projected coal costs were developed using the same methods it has used in the past. The Commission further finds that the company provided sufficient explanation for why these costs are projected to decrease, including changes in coal blend, lower transportation costs, and reduced demand due to the expected closure of older coal units.”

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.