Agreements Solve Power Problem in Michigan, Move Wisconsin Energy’s Acquisition of Integrys Forward

Michigan Gov. Rick Snyder announced a series of deals designed to eliminate a costly utility rate payment in the state’s Upper Peninsula (UP), while providing long-term, cost-effective energy reliability for the region.

The solution was developed through four principle agreements. In one, the electric utility businesses now owned by We Energies and Integrys (doing business as Wisconsin Public Service Corp.)—including the 431-MW coal-fired Presque Isle Power Plant in Marquette, Mich.—would be sold to Upper Peninsula Power Co. (UPPCO). The sale would mean a single UP–based corporation would provide electric service to the majority of the UP.

The transaction would allow UPPCO to terminate System Support Resource (SSR) payments for the Presque Isle plant, protecting ratepayers from much higher energy bills. Without protection from SSR payments, residents could be asked to pay approximately $150 more per year, and businesses could pay tens of thousands of dollars—or even millions of dollars—per year, depending on their location and energy usage, according to the governor’s office.

“This is a critical development for the Upper Peninsula and our entire state,” Snyder said. “The solution these agreements advance ensures reliability, rids the U.P. of years of unaffordable charges, improves the environment, and most of all gives the U.P. the power and ability to adapt to the future.”

The other agreements making up the solution include a deal in which Cliffs Natural Resources Inc. (Cliffs) would purchase a majority of its power from UPPCO until Presque Isle retires, which is expected in 2020 due to federal air emission requirements impacting coal generators statewide. Cliffs is a mining and natural resources company that is a major supplier of iron ore pellets to the U.S. steel industry from its mines and pellet plants located in Michigan and Minnesota.

In addition, Invenergy would build, own, and operate a new natural gas–fired, combined heat and power facility on Cliffs’ site to supply electricity and steam to Cliffs and excess energy to other local utilities. The facility would commence operation prior to Presque Isle’s retirement, resolving long-term reliability concerns.

Lastly, the governor, attorney general, Michigan Public Service Commission (MPSC), and Cliffs have all agreed to notify the Federal Energy Regulatory Commission and the MPSC of their position of no objection to the merger of Wisconsin Energy and Integrys Energy Group.

All of the agreements have a number of contingencies and will be subject to further discussion and refinement, but the governor said he is “personally very optimistic” about the ability to bring the transactions to fruition and get the required approvals.

Aaron Larson, associate editor (@AaronL_Power, @POWERmagazine)