We Energies told it can’t shut down Presque Isle Power Plant

MARQUETTE – The Presque Isle Power Plant should remain operating through at least 2014 to maintain reliability of electric service in the Upper Peninsula.

That was the conclusion of the Midcontinent Independent System Operator Inc., which oversees the electrical grid in the Upper Midwest and part of Canada.

“MISO recently completed its reliability assessment related to the request to suspend operations of the Presque Isle Power Plant,” MISO spokeswoman Jennifer June Lay said. “The assessment determined that a suspension of the plant would result in violations of applicable reliability criteria.”

The Presque Isle plant’s largest customer, Cliffs Natural Resources, told Wisconsin Electric in July that the mining company was switching its electric provider service to Integrys Energy Services Inc. of Chicago effective Sept. 1.

State officials estimated the switch would save Cliffs roughly $25 million annually, assuming a three-year deal. Cliffs spent about $120 million with We Energies last year.

In September, in response to the Cliffs decision, We Energies filed a request with the MISO to suspend operations at the Presque Isle plant beginning in February.

Michigan’s utility choice law allows customers to choose their energy provider, but the amount of departing customers is capped at 10 percent of a company’s state retail sales. In 2008, Cliffs’ mines were exempt from that cap.

Michigan Public Service Commission Chairman John Quackenbush said earlier this month that when Cliffs switched, We Energies’ cap was filled and Cliffs was 75 percent of the company’s Michigan load. Cliffs consumed 270 to 280 megawatts of power from the Presque Isle plant each day.

The MISO may now agree to offer “system support resource payments” to We Energies in exchange for keeping the plant operating.

“MISO will now begin a stakeholder process to determine whether any alternatives exist that would mitigate violations of the applicable reliability criteria. If no alternatives are identified, Presque Isle will be designated as a system support resource pursuant the MISO tariff,” Lay said.

The long-term future of the power plant remains uncertain.

In October 2011, We Energies officials planning long-range to contend with federal environmental pollution regulations had said there was a likelihood the plant could be retired in 2017.

Last November, a deal was announced between We Energies and the Cadillac-based Wolverine Power Cooperative. Wolverine agreed to invest up to $140 million in pollution control upgrades at the plant in exchange for a one-third interest in the facility. Ratepayers would not fund any of that cost.

The Cliffs’ supplier switch has also prompted We Energies to rethink its contract with Wolverine. The utility said that unless changes to the agreement can be made, it may result in “the full or partial death of the plant.”

With the MISO ruling now handed down, We Energies is expected to finalize its talks with Wolverine.

A Wolverine spokeswoman told the Platts financial trade publication the cooperative is weighing the possible purchase of the Presque Isle plant with a final decision expected before the end of the year.

Meanwhile, talks with We Energies continue.

In the long-term, MISO can’t order We Energies to run the plant indefinitely and must provide an alternative, but MISO can’t order generation solutions, only transmission solutions, according to state officials. All of the players involved have only limited authority to influence the issue and must work cooperatively if a satisfactory solution is to be found.

The Presque Isle plant employs 170 workers. The facility was built from 1955 to 1979, originally with nine operating units, five of which remain, producing a combined 431 megawatts of power.

John Pepin can be reached at 906-228-2500, ext. 206.