WEC Inks Deal for Gas Plants to Replace Presque Isle

WEC Energy Group, parent company of We Energies, signed a deal with mining firm Cliffs Natural Resources that will support two natural gas engine plants in the Upper Peninsula (UP) region of Michigan and replace power currently supplied by the coal-fired Presque Isle Power Plant, due to retire in 2020 (Figure 1).

Presque Isle

The 365-MW Presque Isle coal plant will be replaced by a pair of natural gas engine plants under an agreement announced on Aug. 15. Courtesy: We Energies

 

The deal has been in the works for several years, and grows out of discussions with the Michigan state government on future electric supplies for the UP, which themselves grew out of Wisconsin Energy’s acquisition of Integrys Energy Group (WEC was formed out of that acquisition).

Last year, We Energies and the state settled on a series of agreements to change rate structures in the UP while Cliffs agreed to purchase power from Presque Isle until its retirement. The deal on Aug. 15 secures replacement power for Cliffs’ operations at the Tilden iron mine as well as other UP customers.

Under the agreement, Presque Isle’s power will be replaced by a pair of engine-based plants totaling 170 MW. According to WEC spokesperson Amy Jahns, this approach was selected because of its high flexibility and low environmental impact. The project will cost around $255 million.

The roots of the saga can be found in some unintended consequences of changes in Michigan energy law in 2008. The 365-MW Presque Isle plant in Marquette, Mich., first came online in 1955, though the earliest units were retired in the mid-2000s. In 2013, Cliffs, which accounted for 85% of We Energies’ demand load in the UP, opted to purchase its power from another utility, something that it was allowed to do by the 2008 law.

In response, We Energies moved to shutter the five remaining 1970s-era units at Presque Isle. But that plan was stopped in its tracks by the Midcontinent Independent System Operator, which ordered We Energies to keep the plant open for reliability reasons, and it set up a system support agreement to pay the utility for continued operations. Those stiff added costs for keeping the plant open—estimated at up to $600 per customer annually—ultimately led the Michigan government to work out last year’s agreements with WEC.

—Thomas W. Overton, JD is a POWER associate editor (@thomas_overton, @POWERmagazine).