U.P. energy users get short-term rate relief

By Andy Balaskovitz
Michigan officials recently announced a proposed accord among multiple electric entities and private businesses to solve what some fear could turn into an energy crisis in the Upper Peninsula.

The governor’s office says the deal, which was months in the making, will provide short-term relief for ratepayers by this summer in avoiding indefinite and costly “System Support Resources” payments to keep the aging Presque Isle Power Plant online. The plan also achieves long-term goals of reliability and eliminating out-state utilities from the state’s energy future, Michigan officials said.

Also as part of the deal, a major mining company and energy consumer would discontinue its electric choice contract with an out-of-state supplier while the region would get a new natural gas cogeneration facility, tentatively planned to generate 280 MW, to partially displace Presque Isle.

Under the proposal, the Upper Peninsula Power Co. – a stand-alone, regulated utility with roughly 52,000 customers in 10 U.P. counties – would grow by 28,000 customers by acquiring Wisconsin-based We Energies customers and assets that include Presque Isle and distribution lines. It’s uncertain how much UPPCO will pay to acquire We’s assets in the U.P.

We Energies would still maintain roughly 10 hydroelectric facilities in the U.P. that sell electricity back to the grid, said spokesman Brian Manthey.

The plan, which Manthey said could be finalized by mid-year or perhaps sooner, involves four moving parts:

• UPPCO agrees in principal to buy Presque Isle and “step into” existing electricity rates;
• UPPCO would terminate System Support Resource (SSR) payments no later than July that are keeping Presque Isle open while Cliffs Natural Resources – a major mining company in the U.P. – would get a “significant majority” of its power from UPPCO until Presque Isle is retired, anticipated in 2020;
• Cliffs agrees in principle to partner with Invenergy, which would build and own a cogeneration plant on Cliffs’ site and provide heat and power to the mining operation;
• and finally, Cliffs and Michigan officials would withdraw formal opposition to a proposed merger between We Energies and Integrys Energy Group.

Cliffs – which went from a We Energies to an Integrys customer in 2013 by exercising electric choice and setting off the SSR payments – has agreed to go back to We Energies on Feb. 1, Cliffs spokeswoman Patricia Persico said. Once the deal is finalized by this summer, Cliffs would become an UPPCO customer for the remainder of Presque Isle’s operation, she said.

In a statement, Gov. Rick Snyder called it a “critical development for the Upper Peninsula and the entire state.”

To ensure reliability – which has been the main driver behind Presque Isle staying open and rate increases for U.P. customers – the goal is to transition Cliffs and other U.P. customers off of coal in favor of the new cogeneration natural gas plant owned by Invenergy. Cliffs would be the plant’s primary customer, while excess energy would be provided to other utilities. Persico said the natural gas plant is tentatively planned to have a 280 MW capacity.

Another goal that would be met is protecting U.P. customers from costly, indefinite SSR payments that were expected to hit families and businesses hard. Reductions in bills, which will vary widely by customer, will likely happen in July once the SSR payments stop. Under the agreement, Cliffs would buy a majority of its power from UPPCO.

Also, any customers of We Energies, Integrys or UPPCO would not be asked for a rate increase on the day the deal goes through, said Valerie Brader, Snyder’s deputy legal counsel and senior policy advisor.

Andy Balaskovitz reports for Midwest Energy News where this story first appeared.