Government and Sustainability

MPSC approves Consumers' integrated resource plan

Utility company modified settlement after receiving recommendation from Administrative Law Judge Sharon Feldman.

June 14, 2019
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The Michigan Public Service Commission approved Consumers Energy’s integrated resource plan, the first strategic, forward-looking IRP to be acted upon by the MPSC under the state’s energy laws passed in 2016.

Jackson-based Consumers was the first utility required to submit an IRP. In June 2018, the utility filed its original plan, and on March 23, the MPSC proposed a modified settlement that most parties supported.

The MPSC proposed a modified settlement after receiving a recommendation from Administrative Law Judge Sharon Feldman. Feldman reviewed and made some constructive criticism of the plan but, ultimately, felt the need to recommend the MPSC reject the plan.

In her ruling, Feldman argued Consumers Energy’s modeling of the potential early retirement of two of its coal plants by 2023 relied on “certain unsupported assumptions and certain limited modeling choices.”

Feldman recommended the company provide a revised analysis and recognize other noneconomic and operational factors that indicate early retirement of one or more of those units by 2023 would not be feasible.

She also argued a financial compensation mechanism in Consumers’ IRP did not properly reflect the cost to Consumers Energy and its ratepayers of imputed debt, and if used in the competitive bidding process, would unfairly favor Consumers Energy and its affiliates.

After modifications were made, the MPSC found the settlement is “fair and reasonable and assures reliable service to customers.”

Sally Talberg, chairman of the MPSC, said the approval was a significant milestone in the implementation of the state’s 2016 energy law.

“With this first utility integrated resource plan, we are seeing the positive outcomes of bipartisan legislation and a collaboration among stakeholders,” Talberg said. “This ultimately benefits customers, optimizes utility investment and protects the environment with an increased commitment to clean energy and market forces.”

When Consumers submitted its IRP to the commission in 2018, the plan called for the retirement of two aging coal-fired units at the Campbell Generating Complex near Holland in 2031, which would be the end of their design lives. Under the new settlement, Consumers is to conduct a retirement analysis of the plants and possibly retire them as early as 2025.

The settlement also modified the avoided cost rates and terms for small, alternative power producers under the Public Utility Regulatory Policies Act of 1978. Changes include a five-year planning horizon, instead of 10 years, when determining whether the company needs additional capacity; updated avoided cost rates for energy from the independent producers based on wholesale power prices or forecasts; and capacity rates based on the company’s competitive bidding results.

Other aspects of the approved agreement:

  • Retire coal units 1 and 2 at the D.E. Karn Plant near Bay City in 2023, replacing them with renewable energy sources and programs that cut energy waste. Consumers will pursue customer cost savings by seeking to use a low-cost method of financing known as securitization to recover the unamortized book value of the closed Karn units.

  • Approval of new investments in cost-effective programs that help residents and businesses to cut energy waste (totaling 718 megawatts by June 2022, or about 2% of the utility’s annual electricity sales); improve system efficiencies through conservation voltage reduction programs (44 megawatts over the next three years), and demand response programs that shave peak consumption to avoid having to build new power plants.

  • Conduct annual competitive bidding administered by an independent third party for adding power generation capacity, including 1,200 MW of new solar energy from 2019-21. Consumers can own up to half of all the future additional capacity that it procures through competitive bidding and it must buy the remaining electricity through power purchase agreements with third parties, excluding Consumers affiliates.

  • Approval of a financial compensation mechanism for power purchase agreements the company enters into with third-party power suppliers, including power producers under PURPA, as authorized by the 2016 energy laws to remove disincentives to arrange supplies from third parties.

  • File a new IRP in June 2021.

Consumers Energy President and CEO Patti Poppe said the Clean Energy Plan is a response to customers who care deeply about how Consumers Energy handles issues such as air quality, water management and greenhouse gas emissions.

“This plan establishes Michigan as a national clean energy leader and provides benefits to homes and businesses, as we supply affordable, reliable and clean energy and create innovative solutions to our state’s energy needs,” Poppe said.

Consumers expects to meet 90% of customers’ electricity capacity needs through clean energy resources like renewable energy, energy waste reduction and energy storage by 2040; with the addition of 5,000 megawatts of solar energy through competitive bidding even earlier by 2030.

The parties agreeing to the settlement were Consumers, commission staff, the Michigan Environmental Council, the Natural Resources Defense Council, the Sierra Club, the Association of Businesses Advocating Tariff Equity, Energy Michigan Inc., Independent Power Producers Coalition, Michigan Chemistry Council, Michigan Electric Transmission Company LLC and the Department of the Attorney General.

Groups that did not join the settlement but offered a statement of nonobjection, were Great Lakes Renewable Energy Association, Residential Customer Group, Michigan Energy Innovation Business Council, Institute for Energy Innovation, Environmental Law and Policy Center, Invenergy, the Ecology Center, the Union of Concerned Scientists and Vote Solar.

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