Legal & Regulatory

Michigan Backs Gas Plants for Upper Peninsula

Michigan regulators on October 25 gave their support to Upper Michigan Energy Resources Corp.’s (UMERC) plan for two new natural gas-fired plants in the state’s Upper Peninsula (U.P.). The plants approved by the Michigan Public Service Commission (PSC) would be built in Baraga and Negaunee townships.

The plants are designed to produce a combined 183 MW of generation. Construction could begin by year-end, and the current schedule calls for both plants to begin operating in 2019. Electricity from the two facilities would partly replace generation from We Energies’ 359-MW Presque Isle Power Plant on Lake Superior in Marquette, Michigan, where the last five coal-fired units are scheduled to close in 2020.

The first of the five remaining units (Units 5 through 9) at Presque Isle begin operating in 1974; the last of those five came online in 1979. Units 1 and 2 at Presque Isle were retired in 2007, and Units 3 and 4 were closed in 2009.

The new gas-fired plants have a combined price tag of $277 million. They will use reciprocating internal combustion engine (RICE) technology, which uses less water compared to a conventional gas-fired power plant. The Negaunee Township will be the larger of the two, generating more than 120 MW.

Upper Michigan Energy Resources is a subsidiary of WEC Energy Group, as is We Energies, which is Wisconsin’s largest utility. UMERC was formed to separate the Michigan and Wisconsin utilities of We Energies and Wisconsin Public Service Corp. of Green Bay, which is also a WEC subsidiary. WEC was formed when Wisconsin Energy bought Integrys Energy Group in 2015.

The plan approved Wednesday was filed with Michigan regulators in January of this year. At the time, J. Patrick Keyes, who became president of UMERC when it was formed on January 1, 2017, said the filing was evidence of his group’s “commitment to a long-term viable solution for electric reliability in the [Upper Peninsula].” Keyes previously was Wisconsin Energy’s chief financial officer.

Several groups have opposed the plan to build gas-fired units to replace Presque Isle, saying renewable energy sources such as wind and solar should have been considered. Regulators said concerns about grid stability were part of the decision to move forward with the gas-fired plants; they also said improved grid stability would enable future development of wind and solar power in the region.

The Tilden Mine, an energy-intensive iron ore mine operated by Cliffs Natural Resources Corp., is the largest user of electricity in the U.P. The Negaunee Township plant is sited just north of the mine. UMERC has asked the PSC to approve a 20-year special supply contract for Tilden. The utility also has said a natural gas pipeline serving the region will need to be upgraded; UMERC has an agreement with pipeline company Northern Natural Gas (NNG) to build a new compressor station and make other improvements.

The mine and UMERC reached a service agreement in August 2016 as part of the plan for the new gas-fired plants. Cliffs and We Energies have been at odds over the mine’s electricity costs over the past few years, with Tilden’s operators replacing We Energies as its service utility under Michigan’s partly deregulated power system, leading to legal and regulatory battles. We Energies, without the mine as a customer, said it would close Presque Isle early. The Midcontinent Interconnection System Operator (MISO) has required the plant to remain in service due to reliability concerns in the region; WEC has collected System Support Resource (SSR) payments from Wisconsin and Michigan customers to keep the plant open. The Michigan Agency for Energy last week said those payments have totaled about $60 millon.

The payments have been the subject of legal action against the utility, and the Federal Energy Regulatory Commission (FERC) last week cut by almost $23 million costs associated with Presque Isle that can be passed on to U.P. ratepayers, meaning customers could be eligible for refunds.

Darrell Proctor is a POWER associate editor.

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