Consumers Energy Threatens to Drop Coal Retirement Plans Based on Proposed Michigan PSC Ruling
Consumers Energy on Monday threatened to drop plans to phase out its fleet of coal-fired power plants by 2025 if the Michigan Public Service Commission (PSC) approves a recommended decision that the utility says would untangle the essentials of its integrated resource plan.
the recommended decision published on March 7 does not give Consumers Energy certainty that it would be able to recoup the costs of decommissioning its coal-fired plants early or have the power supplies to replace them, the CMS subsidiary said. Energy in a deposit with the PSC on Monday.
“Without a satisfactory resolution of these issues, this process will unfortunately end without an approved new resource plan and Michigan will have lost an opportunity to accelerate its transition to clean energy, reduced emissions, increased reliability and lower energy costs. “said the Jackson, Michigan. -based on the said utility.
Overview of the dive:
Energy consumers in June published a plan to phase out coal production 15 years earlier and be carbon neutral by 2040.
Key elements of the plan include closing two oil and gas-fired units totaling 934 MW at its Karn power station next year and its 1,388 MW Campbell coal plant in 2025.
Consumer Energy’s coal-fired power plants accounted for almost a third of its electricity supply last year, according to CMS Energy Annual Report filed February 10 with the Securities and Exchange Commission.
The utility intends to replace the retired capacity with 2,180 MW of existing natural gas-fired generation, including approximately 1,000 MW from an affiliate. It also plans to add about 8,000 MW of solar power by 2040 through annual demands of 500 MW.
Consumers Energy expects to spend more than $1 billion on the plan over the next five years starting this year, according to CMS Energy’s annual report. The utility projects the plan will save its customers about $628 million.
A PSC administrative law judge (ALJ) has recommended that the commission decline to approve cost recovery for Consumer Energy’s planned purchase of gas-fired power plants from its subsidiaries. If the commission approves cost recovery, it should decline an “acquisition premium” included in the purchase price, the ALJ said.
The ALJ has also called for requiring Consumers Energy to conduct additional analysis before it is allowed to retire its 788 MW coal-fired Campbell 3 unit.
Consumers Energy said it would reject a decision that would not allow it to purchase its subsidiary’s gas-fired generation if the decision did not provide a “reasonable” alternative route to acquiring existing generation.
Consumers Energy said it would also reject an order with an “unrealistic expectation” that the utility would incur hundreds of millions of dollars in depreciation to purchase the affiliated units at much less than the contracted price.
According to the utility, it’s critical that Consumers Energy be able to recover approximately $1.5 billion in unrecovered book value related to generating units it plans to retire early.
“Consumers Energy will therefore reject an order requiring a separate proceeding to determine recovery methodology or failing to provide certainty of recovery methodology in that proceeding,” the utility said.
The utility is also refusing to take on the $1.5 billion in uncollected debt through securitization. “The company will not sacrifice its long-term financial health by having a material and negative impact on its credit metrics,” Consumers Energy said.
Consumers Energy will no longer enter into power purchase agreements for part of its power supply if it does not have a “financial compensation mechanism” for the contracts as requested, according to the utility.
“Without adequate assurance of cost recovery from the early retirement of its remaining coal-fired plants and without an adequate plan to replace the capacity and energy derived from these plants, Consumers Energy will operate these plants until their previously planned shutdowns, keeping Consumers Energy and Michigan dependent on coal for nearly two decades,” the utility said.
Comments on the recommended decision are expected on March 21.