Expansion of Holland's power plant is unresolved

September 28, 2009
| By Pete Daly |
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The Department of Energy grant just awarded to the Holland Board of Public Works is good news — but it doesn't necessarily mean that expansion of the coal-fired James De Young power plant is going to happen.

While the grant is an initial step in support of the much larger Clean Coal Power Initiative, that project itself is dependent on expansion of the De Young plant.

About three years ago, the Holland Board of Public Works, which operates the James De Young power plant, applied for an air quality permit from the Michigan DEQ as the first step in the plan to replace the smallest and oldest boiler at the plant. The new one would cost about $250 million and take four or more years to plan and build. It would generate 78 megawatts — effectively doubling the total generating capacity of the plant.

The BPW has forecast that its electricity customers will demand 920,000 megawatt hours annually by the start of 2014 and will reach 1 million megawatt hours by 2020. Currently, demand is under 920,000 and is predicted to decline slightly until some point in 2011.

The Holland BPW and city council have decided the additional generating capacity at the plant is needed and should be built.

"Our biggest obstacle right now is an air permit," said Holland BPW general manager Loren Howard.

After public hearings late last year on the BPW's plant expansion proposal, it was thought the air quality permit was virtually in hand, until Gov. Jennifer Granholm announced in February that "by the year 2020, Michigan will reduce our reliance on fossil fuels for generating electricity by 45 percent."

 She also directed the Department of Environmental Quality and the Michigan Public Service Commission to evaluate the need for additional electricity generation and alternatives to new coal-fired power plants.

On Sept. 8, the Michigan Public Service Commission staff reported to the DEQ that it does not believe there is a demonstrated need for two new coal-fired plants, one proposed by Consumers Energy in Bay County and one by Wolverine Power Cooperative near Rogers City.

"We have looked at the expansion of our plant here, (but) we are interested and have always been interested in other projects," said Howard. He said one potential source of energy that the Holland BPW could buy, as an alternative to expanding its own plant, would be from the plants proposed by Consumers Energy and Wolverine Power.

He said the BPW board favors expansion of the De Young plant because it is "the option over which we would have the most control."

As a result of the governor's decree in February, the Michigan DEQ and Public Service Commission asked the Holland BPW several months ago to provide an Electric Generation Alternatives Analysis, including an analysis of the need for additional power in the Holland area in the near future.

In August, the Holland BPW sent a letter to the Michigan Public Service Commission asking two things: What is the criteria it will use in evaluation of the Electric Generation Alternatives Analysis, and what will be the commission’s role later in the continuing discussion of the proposed plant expansion?

He said the commission’s response to the letter left the BPW board "reasonably satisfied."

However, the BPW still has "an issue" with the Michigan Public Service Commission role in this, because the needs analysis "is exactly what our board and council does and is charged to do for us as a municipal utility. So why do you, the Public Service Commission, need to do it? That is one of the areas of significant concern," Howard told the Business Journal.

The Holland BPW is a municipal utility, not a defined commercial "regulated utility" such as Consumers Energy or DTE Energy. When the regulated utilities want to increase generating capacity, which can drive up rates charged to users, the Michigan Public Service Commission is required by law to determine if there is a bona fide need for that increased capacity.

The Holland BPW is not a utility regulated by the commission, under the law.

The BPW also advised the Public Service Commission that it has commissioned "a fairly comprehensive study of all the different alternatives we have to meet our future (electricity) needs," said Howard.

The study, by Black & Veatch Ltd. of Michigan, is under way and will take a few months to complete, according to Howard.

"Based on the Public Service Commission's response to my areas of concern, we intend to provide that to the Public Service Commission as an alternatives analysis."

"That study, we believe, will meet what the Public Service Commission is looking for," said Howard.

One other potential snag in the BPW's plan to expand the De Young plant is a suit filed by the Sierra Club in December, alleging that the plant is polluting the air and should be shut down. The BPW, which responded that the allegations are without merit, has asked for a summary decision and is awaiting the court's decision.

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