Millions of dollars in life support payments for an unprofitable coal plant in Michigan’s Upper Peninsula would no longer be required under a proposal to temporarily reconfigure the area’s transmission system.
American Transmission Co., a transmission-only utility in the Upper Midwest that’s jointly owned by more than two dozen electric distribution companies, proposed the solution to the region’s grid operator, the Midcontinent Independent System Operator (MISO), this week.
If approved, the plan would save electric ratepayers in the Upper Peninsula about $7.3 million a year in system support resource (SSR) payments that was going to keep the 60-megawatt White Pine coal plant running, according to the Michigan Agency for Energy. The SSR payments for White Pine have been required since 2014 to help ensure reliability in the region.
Michigan officials said the ATC proposal would provide the same benefits by reconfiguring the area’s transmission grid and revising operating procedures in the northwestern part of the peninsula, returning the system to how it was configured in 1998.
The ATC proposal would be left in place under the proposal until new transmission or generation can be developed as a permanent solution.
Valerie Brader, executive director of the Michigan Agency for Energy (MAE), urged the grid operator to quickly approve the proposal.
In a letter to MISO on Wednesday, MAE said the transmission solution is preferable to continuing SSR payments to keep the inefficient, 60-year-old White Pine plant in operation.
Carmel, Ind.-based MISO, which operates the bulk transmission grid across parts of Michigan and 14 other states from the Gulf Coast to Canada, said it is "encouraged by ATC’s proposal, and looks forward to discussing the proposal in its stakeholder process."
MISO has a stakeholder meeting set for Aug. 9 to discuss the proposal. A timeline for considering it further will be established after that meeting, spokesman Andy Schonert said. Any proposal to terminate an SSR agreement must be approved by the Federal Energy Regulatory Commission.
The White Pine plant is the last of three fossil-fueled plants in the Upper Peninsula to receive SSR support payments over the past few years. Debate over how those costs are allocated among electric companies in Michigan and Wisconsin has fueled a controversy that continues today.
While ATC’s proposal would end the payments going forward, utilities, regulators and MISO continue to squabble over the historical allocation of SSR costs for the White Pine, Presque Isle and Escanaba power plants in the courts and more than 20 dockets at FERC (EnergyWire, July 8).
SSR payments for Presque Isle ended as part of a deal negotiated by the state of Michigan and other parties in 2015 (EnergyWire, Jan. 14, 2015). The Escanaba SSR agreement was terminated in mid-2015.
Earlier this week, an administrative judge in one of the cases before FERC recommended at least $17 million in refunds for Michigan ratepayers related to SSR payments for the 344-MW Presque Isle coal plant in Marquette, Mich., for 2014 and early 2015.
MAE, which challenged the costs at FERC, said the proposed decision reflects $10 million in charges for improvements at Presque Isle that were never made.
The agency also criticized MISO’s procedures that led to the dispute and urged federal regulators to quickly approve reforms proposed by the grid operator.
"MISO blindly accepted numbers without reviewing their reasonableness, resulting in the state and other interested parties having to challenge the expenses through costly proceedings at FERC," Brader said. "Michigan strongly supports proposed reforms that will let the people footing the bill put those costs to the smell test before anyone signs on the bottom line."
The grid operator, however, said it followed a FERC-approved process to determine an appropriate level of Presque Isle SSR payments. And contrary to MAE’s claim, MISO said it reviewed and negotiated the costs presented by Presque Isle’s owner based on information available at the time.
"Following the original negotiation, circumstances can and do change, which the case before FERC is evaluating," MISO said.
MISO said it has proposed changes to the SSR process to further improve and streamline transparency around costs associated with plants needed for reliability.
"These improvements involve interested parties in cost discussions at the beginning of the process," the grid operator said. "We hope that FERC acts quickly on our request."