Consumers Energy to Pursue $1.6 Billion in Environmental Upgrades at Generation, Allocation to Choice Customers Possible

Consumers Energy has announced the cancellation of a proposed clean coal plant project near Bay City and the anticipated suspension of operation of seven smaller coal-fired units in 2015.

Consumers also said that it intends to make $1.6 billion in environmental investments at its five major coal-fired units.

Notably, the Michigan PSC recently said that choice customers, "must be expected to help shoulder the burden of environmental compliance," in an order on Detroit Edison's most recent rate case. Though the PSC did not, in that case, approve a nonbypassable charge for environmental compliance costs for utility-owned generation (citing a lack of evidence in the instant record regarding costs), from a policy perspective, it appears clear the PSC is prepared to endorse such a nonbypassable charge for environmental costs of utility-owned generation if such costs are supported with evidence (see 10/21).

The seven small coal-fired plants are expected to retire by Jan. 1, 2015, and include three at the J.R. Whiting Generating Complex near Luna Pier, two at the B.C. Cobb Generating Plant in Muskegon, and two at the Karn/Weadock Generating Complex near Bay City.

Consumers Energy said it was canceling the new clean coal plant project because of the same market factors that led it to defer development of the project in May 2010. "Those primarily are reduced customer demand for electricity due to the recession and slow economic recovery, surplus generating capacity in the Midwest market, and lower natural gas prices linked to expanded shale gas supplies," the company said in a news release.

The claimed need for new utility-owned generation was one of the impetuses of the 10% choice cap currently in place in Michigan, as utilities argued such generation could not be built if customers could freely migrate to competitive suppliers.

The Customer Choice Coalition (CCC) offered the following statement in response to the announcement that the clean coal plant would not be built:

"This is only the formal burial of a plan that was hatched in 2007 to manipulate the Legislature and Gov. Granholm into killing competition and choice and restoring monopoly power to our two major utilities.

"CCC provided factual data and statements in 2008 showing that this plant was not needed, but Consumers continued to tell lawmakers that it was -- but then backed off construction 'plans' as soon as it was handed monopoly power.

"Thanks to the 2008 law passed due to the misleading information provided policymakers by Consumers Energy, Michigan today has the highest electric rates in the Midwest, and rates well above the national average. Meanwhile states with competition -- Illinois and Ohio -- have seen rates decrease over the last year, and competition works. Michigan commercial and industrial customers are paying $1 billion annually above the Midwest average for electricity, according to the U.S. Energy Information Administration figures."

Energy Choice Now also offered the following statement:

"Killing competition based on the promise to build new coal-fired power plants also killed off private investment in the state. In 2008, plans to build a 750 MW independent power plant project was cancelled based on the enactment of the energy legislation killing competition. In 2008, the MI Legislature and Granholm Administration sent a loud and clear message to global and national companies and investors: You're Not Welcome in MI."