State officials: U.P. energy issue needs to be addressed soon

MARQUETTE – State officials this week said the problem of developing new electric power generation or transmission – given the expected eventual closure of the Presque Isle Power Plant – is an important long-term issue that needs to be addressed conclusively over the next few months.

We Energies owns the aging coal-fired plant in Marquette, which will need pollution control upgrades after 2016. The utility has tried unsuccessfully to sell the power plant and is currently receiving subsidy payments – funded by ratepayers in Michigan and Wisconsin – for continued operation of the facility to provide power reliability for the region.

The Presque Isle plant is the only significant power generation facility located in the region north of Green Bay. Many state and local officials think finding how best to provide affordable, reliable electric power in the Upper Peninsula for the coming years is among the most important current issues, affecting a range of interests and concerns.

“I think there are some real challenges because of Presque Isle and the power plant situation there and that’s probably one of my largest concerns about economic growth in the U.P. is energy policy and how we can be more proactive,” Gov. Rick Snyder said during a taping of WNMU-TV13’s Media Meet, which is scheduled to air this weekend. “So, we really need to focus in on that for the U.P. and for the rest of the state. So, what we’re trying to work on are two or three key pillars in terms of the things you have to balance when you talk about energy policy.”

Snyder said without a federal energy policy, the solution developed needs to be adaptable.

“You have this issue about the power plant, so what are the facts and we don’t control all those outcomes,” Snyder said. “We need to do better in reliability and we need to do better in cost structure, while being environmentally efficient and thoughtful about it. So it’s really striking a balance on those four cores and I think we need a better long-term answer in the Upper Peninsula in particular.”

John Quackenbush, chairman of the Michigan Public Service Commission, said a solution is needed that will last decades.

“At the end of the day, Presque Isle going away, we need replacement generation or we need a transmission build and we’re really trying to dig in and determine which of those options is best for the Upper Peninsula, the best for Michigan,” Quackenbush said.

Last year, Cliffs Natural Resources announced it would be getting power for its two Marquette County mines from another provider. The Empire and Tilden mines were the biggest consumers of power from the plant. Cliffs consumed 270 to 280 megawatts of power each day from the plant.

In September, given Cliffs’ decision, We Energies filed a request with the Midcontinent Independent System Operator, Inc., (MISO) which oversees the electrical grid in the Upper Midwest and part of Canada, to suspend operations at the Presque Isle plant beginning in February.

In October, the MISO concluded the plant should remain operating, at least through 2014 and denied We Energies’ to suspend operations at the plant.

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

The MISO determined all five units at the plant needed to remain operating to maintain a reliable electric system for electric customers in the Upper Peninsula. We Energies applied for system support resource subsidy payments from the MISO for operating a plant the utility wants to close.

We Energies and the MISO agreed on monthly payments of $4.3 million as equitable compensation to the utility for maintaining the five units at the plant. The Federal Energy Regulatory Commission approved the agreement and, more recently, sided with the Wisconsin Public Service Commission in its complaint Michigan ratepayers should pay the largest share of the Presque Isle costs.

Many officials think that decision will set a precedent causing Michigan rates to soar, while providing a new framework for funding future power generation or transmission projects.

Meanwhile, the search for a long-term answer continues.

“I think it’s an issue we have to address in the next few months,” Snyder said. “Because if you look at some of the activities with We Energies, what’s going on in the marketplace in terms of their corporate structures, the transmission system up here with ATC (American Transmission Co.), I think there are a lot of serious tough questions that need to get resolved and it is a major concern of mine.”

Quackenbush said the Michigan Public Service Commission has put a lot of thought into the issue.

“We haven’t reached any conclusions, but one thing we have observed is that the generation option will tend to get overlooked in the natural process that MISO and FERC goes through,” Quackenbush said. “They will be focused more on transmission solutions. That’s why we are working hard to make sure generation gets a full hearing or a full chance to happen.”

The commission asked MISO to do a study to determine that if a generation plant is to be sited in the U.P. to replace Presque Isle, how big does it need to be and where does it need to be located?

That study was just recently made available to potential generators.

“We are focused on natural gas transmission infrastructure too,” Quackenbush said. “We know that can be some potential expansion or extension of natural gas, the pipeline infrastructure in the Upper Peninsula that could work in tandem with the siting of a natural gas-fired plant.”

Quackenbush said the key thing about generation locally sourced in the U.P. would require less transmission from elsewhere.

“Whether it came from Wisconsin or it came from the Lower Peninsula, there’s always things you would want to do for reliability to make your connections better. But I think you’re talking about a pretty significant build,” Quackenbush said. “If Presque Isle goes away and there’s no longer any base load generation in the Upper Peninsula, then you’re needing, call it a lot of transmission to be the solution. If you site generation here, particularly in a couple strategic spots, then that takes away the need to do the big transmission solution. So it’s an alternative to transmission.”

Quackenbush said he thinks some developments should emerge over the next few months.

“The longer it drags out…whether it’s generation or transmission, these things take a while to site, permit and construct and the longer it takes, the longer the process of making SSR payments for Presque Isle continues,” Quackenbush said. “I think it’s in our best interest to figure out our optimal course of action relatively soon and go after it.”

John Pepin can be reached at 906-228-2500, ext. 206. His email address is jpepin@miningjournal.net.