Citing Resource Adequacy Concerns, Michigan PSC Seeks Answers From Consumers Energy On Early Termination of Palisades Nuclear PPA

The Michigan Public Service Commission opened a proceeding to seek additional information on Consumers Energy's announcement that it intends to terminate early its power purchase agreement (PPA) with Entergy Nuclear Palisades, LLC (ENP) for the purchase of electricity from the Palisades Nuclear Power Plant.

Under the PPA approved by the MPSC in 2007, the utility purchases nearly all of Palisades’ electricity generation. The PPA term runs through April 11, 2022. Consumers Energy seeks to terminate the PPA as of May 31, 2018, at which time ENP will enter into a new PPA under which the plant will continue to operate until Oct. 1, 2018, when Entergy said it intends to close the plant permanently.

See RetailEnergyX.com for further details on the PPA termination

"The Commission emphasizes that it considers Palisades to be a significant contributor to the state’s electric generation mix, producing 811 MW of low-emission, baseload power, enough to power 800,000 Michigan households. Publically and repeatedly, the Commission has voiced its concerns related to resource adequacy in the near to medium term, and the loss of this generation without immediate sufficient and reliable replacement sources would introduce additional uncertainty to the state’s energy picture," the PSC said in its order

Among other things, the PSC directed Consumers to:

• Provide detailed data and analysis on the cost of any new energy and capacity sources Consumers seeks to use to replace Palisades, and expected ratepayer savings compared to the market estimates; such cost analysis should include sensitivity analyses related to the preferred replacement portfolio to account for cost drivers such as fuel costs as well as any additional resource options in the event cost, timing, reliability, regulatory considerations, or other factors affecting Consumers’ ability to execute its plan.

• Identify specific resources that will be available in a timely manner to replace the capacity and energy provided by Palisades, while again accounting for additional constraints caused by the loss of 800 MW of generation. Provide detailed information on the analyses and forecasts that have been relied upon in determining that supply and demand in Zone 7 will be adequate after the early termination of the PPA, including a description of the assumptions made regarding Zone 7 with respect to energy resources, capacity, and load. Identify any timing issues with the proposed replacement portfolio and execution risks with Consumers’ plan.

• Explain the bid process used for determining how replacement capacity will be procured. As applicable, Consumers should provide an analysis of how it will approach compliance with the Code of Conduct and affiliate guidelines with respect to the replacement power. Additionally, provide a detailed description of any certificate of need (CON) filing planned for the 2017-2022 time period.

Case No. U-18218 et al.