By Chris O’Malley

Michigan officials and members of the state’s congressional delegation urged the Federal Energy Regulatory Commission last week to rethink its approach to replacing the retiring Presque Isle power plant, saying FERC is favoring expensive transmission over cheaper generation.

The officials are seeking new generation to replace Wisconsin Energy’s 430-MW coal-fired plant in Marquette, Mich., rather than a transmission expansion that could cost $600 million or more.

Invenergy Thermal Development is in discussions with Cliffs Natural Resources to build a combined heat and power cogeneration facility that would serve Cliffs’ mining complex in Marquette County and “substantially replace” Presque Isle’s output, Gov. Rick Snyder, Attorney General Bill Schuette and U.S. Reps. Fred Upton and Dan Benishek wrote in a six-page letter to FERC commissioners.

But the officials complained that a transmission alternative is being given a “procedural advantage” because of “jurisdictional lines that prevent holistic consideration of alternatives.”

“Under the federal rubric that has been set up, transmission solutions are the only solutions that MISO can require be funded, and generation solutions can only be considered once they are essentially guaranteed to come into service,” they wrote. “In short, the current structure’s only tool is a hammer, and it is trying to fix every situation with a nail. We believe that sometimes transmission is the appropriate investment. But sometimes it is not, and we need entities that have a full toolbox — both information and regulatory authority — ready to engage in the determination of what solution is the right one.”

The officials also complained that FERC “is repeatedly being asked to assume more of the responsibilities that have been carried out well by state commissioners for years.”

Failed Deal

Wisconsin Energy’s We Energies decided to retire Presque Isle rather than invest in environmental upgrades to keep the plant running.

Last November, Michigan utility Wolverine Power Cooperative struck a deal with We Energies in which Wolverine would spend $135 million on environmental upgrades in return for a one-third ownership stake in the plant.

Michigan officials said that the deal was attractive because it maintained reliability, provided for environmental improvement and would have been “vastly more affordable for ratepayers than any other solution.”

The deal fell apart after Cliffs Natural Resources agreed to buy power from Integrys Energy Services, a subsidiary of Integrys Energy, instead of We Energies. With no other offers available, We Energies decided it would close Presque Isle.

Wisconsin Energy’s proposed merger with Integrys requires the latter to divest its Energy Services unit.

After the merger, the Michigan leaders noted, Wisconsin Energy would own more than 60% of transmission operator American Transmission Co., “which would own and operate any transmission needed to offset [Presque Isle’s] retirement.”

“The new proposed combined company also stands to benefit significantly from the increased transmission that would be needed to be constructed as a result of the [Presque Isle] retirement without generation replacement.”

The Michigan leaders told the commission it should consider whether new transmission, new generation or a combination of both is the best solution for replacing Presque Isle.

“That is unfortunately not the course of action being pursued in the many dockets now before you, nor is it much evidenced in the decisions made to date by FERC, MISO and other federally regulated entities regarding this problem.

“Unfortunately, to date, it appears that all these entities’ processes are designed to favor one possible solution – running [Presque Isle] until a great deal of transmission can be built, and all at ratepayer expense.”