Wisconsin Public Service officially shelves Fox Unit 3 gas-fired power project

Wisconsin Public Service Corp. (WPSC) on June 3 officially withdrew an application with the Public Service Commission of Wisconsin for approval of its 400-MW Fox Energy Center Unit 3 gas-fired project.

The commission, in its May 21 approval of a merger between the parent of WPSC and the parent of Wisconsin Electric Power, had said that Wisconsin Electric Power has excess generating capacity and that WPSC may no longer need the Fox Unit 3 project. 

“Wisconsin Public Service Corporation (‘WPSC’) hereby withdraws its application in the above-referenced docket for a Certificate of Public Convenience and Necessity (‘CPCN’) for a 400 megawatt combined-cycle natural gas plant known as Fox Unit 3 (‘Application’). WPSC understands that if the proposed acquisition of Integrys Energy Group, Inc. by Wisconsin Energy Corporation, approved in the Final Decision, fails to close, WPSC may re-file the Application and that this re-filing will re-start Commission staff’s review of the Application.

“WPSC further understands that the re-starting of this review will involve WPSC’s response to the staff’s application incompleteness letter dated May 19, 2015. Provided that WPSC’s response addresses the two items in staff’s letter, with the requirement for a joint resource plan for the combined loads of WPSC and Wisconsin Electric Power Company rendered moot by the failure of the acquisition, the Application will be deemed complete and the 180-day review period under [Wisconsin statute] will commence. WPSC also hereby notifies the Commission that the company has ceased all pre-certification spending on the Fox Unit 3 project except for the minimum costs necessary to preserve the project as a viable and cost-effective alternative pending completion of the joint integrated resource plan required by the Final Decision.

“For example, WPSC may incur costs under the recently executed Generator Interconnection Agreement for transmission planning and design work. These costs are necessary to keep the project in its very advantageous MISO ‘queue’ position. WPSC minimized the cost of maintaining its MISO queue position by putting up a parental guarantee for transmission planning and design costs instead of a large upfront cash payment.”

The Public Service Commission of Wisconsin on May 21 approved the acquisition of Integrys Energy Group (NYSE: TEG) by Wisconsin Energy Corp. (NYSE: WEC), with various conditions put on the deal, including this one about Fox 3.

WEC is a Wisconsin holding company with a number of wholly-owned subsidiaries, including Wisconsin Electric Power Co. (WEPCO) and Wisconsin Gas LLC

Integrys Energy is a Wisconsin holding company which presently owns and operates five regulated natural gas and electric utilities, including Wisconsin Public Service Corp.

Upon merging, WEC will change its name to WEC Energy Group Inc. The overall Integrys Energy acquisition is valued at approximately $9.1 billion, with $3.3 billion of assumed Integrys Energy debt. 

The commission said in the May 21 order that for WPSC ratepayers, the commission will require the new holding company to fully consider the possibility of delaying or avoiding construction of the proposed Fox Energy Center Unit 3, a gas-fired new unit to be added at an existing power plant in Wrightstown, Wisconsin (Fox Unit 3). The commission wants the combined company to do a joint integrated resource plan (IRP) looking at the need for this new unit.

The commission noted: “According to the applicant, the larger generation portfolio and geographic footprint created by the acquisition may result in economic opportunities that are not available to the stand-alone companies. Commission staff’s EGEAS modeling of the combined utilities’ generation portfolios demonstrates that there is a potential to avoid approximately $600 million in net present value revenue requirement by delaying or canceling future electric generation projects if WPSC and WEPCO portfolios are combined for planning purposes. The applicant did not identify any specific capital projects that would be avoided or delayed as a result of the acquisition. However, WPSC submitted an application to the Commission on January 21, 2015, for a Certificate of Public Convenience and Necessity for a 400 megawatt combined-cycle natural gas plant, known as Fox Unit 3. Commission staff and other parties noted that while WPSC, as a standalone utility, may have a need for capacity in the near-term, this project may not be needed if the generation portfolios are combined because WEPCO has surplus generation capacity that may be available to meet WPSC’s needs.”

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.