By Amanda Durish Cook

A group of Upper Peninsula electric users plans to ask FERC to investigate Wisconsin Electric Power Co. for allegedly falsifying records to increase its revenues under the Presque Isle power plant system support resource agreement.

“The numbers presented by MISO and WEPCo going back to 2014 were inflated, and part of that was falsifying documents,” Todd Chapman, spokesman for Cloverland Electric Cooperative, said Monday.

Chapman said that the organization expects to file a brief later this week or next week detailing the allegations, which were included in Administrative Law Judge Michael Haubner’s initial decision last month saying WEPCo had overcharged ratepayers by $17 million over the SSR (ER14-1242-006, et al.).

Last week, meanwhile, FERC approved nine out of ten SSR process revisions proposed by MISO.

Consulting Contract Allegedly Backdated

Haubner said WEPCo changed the dates on a $1.4 million consulting services invoice relating to upgrades for EPA’s Mercury and Air Toxics Standards at the 61-year-old coal plant. (See ATC Plan Could Eliminate White Pine SSR; Refunds Coming on Presque Isle?)

“Evidence shows that the invoice for services was originally executed and sent to WEPCo on Oct. 9, 2014. Then, a WEPCo employee requested the consultant resubmit the invoice with a later date, Oct. 16, 2014,” Haubner said.

According to Haubner, the invoice dates were changed after WEPCo learned that a new version of its SSR agreement with MISO would cover costs incurred from MATS upgrades under a revised fixed-cost component. MATS upgrades were ineligible for recovery under the previous SSR agreement.

“This evidence demonstrates that WEPCo changed the date on the consulting services invoice to one day after the replacement SSR agreement became effective. It appears this manipulation was done by WEPCo to include these costs under the later agreement,” Haubner concluded.

WEPCo issued a statement insisting the company was not seeking to recover MATS compliance costs through the SSR payments. “Beyond that, the company will not comment on cases currently being litigated. The issues that are in contention in the initial ALJ decision, including this issue, will be addressed by our future filings in this case,” it said.

Chapman said the $1.4 million worth of back-dated invoices was “carved out” in the judge’s estimated refunds and contributed to Cloverland lowering its expected amount owed to MISO for the Presque Isle SSR to “the neighborhood of $9.8 million,” instead of the original $11.7 million, for 2014.

Chapman said Cloverland is waiting on a larger decision from FERC in order to verify the $9.8 million figure.

Cloverland will be joined in its request for an investigation by mining company Cliffs Natural Resources, Upper Peninsula Power Co., paper producer Verso Corp., the City of Mackinac Island and the Sault Ste. Marie Tribe of Chippewa Indians, Chapman said.

If FERC decides to investigate, a probe from its Office of Enforcement could take years, Chapman said.

“None of that is going to wipe it all out and completely dismiss the amount we owe,” Chapman said, adding that the outcome of a possible investigation “probably” wouldn’t further reduce the amount owed. “If FERC agrees that it was fraudulent, then we’re back to the same lower number,” he said.

MISO Confused by Refund

Meanwhile, MISO complained in an Aug. 16 brief that Haubner’s ruling was inconsistent and confusing.

MISO said Haubner used two “inconsistent” methods to determine variable compensation under the two separate Presque Isle SSR agreements. The RTO also said the judge at times mixed up fixed compensation and clawback values. Finally, MISO said Haubner did not outline a procedure for calculating the total amount owed to ratepayers.

“MISO is unable to determine the amount of refund that should be made by the Wisconsin Electric Power Co.,” the RTO wrote to FERC. It also said it “hoped for an initial decision that would contain internally consistent findings that MISO could implement in its role as Tariff administrator.”

FERC Accepts Changes to MISO SSR Process

In a related order on Aug. 19 (ER16-1758), FERC accepted nine out of ten SSR process revisions proposed by MISO, which affect the execution, filing and compensation of SSR units.

MISO proposed that while it would still file SSR agreement terms and conditions, SSR owners in “all cases” would make separate filings for compensation. MISO previously only had SSR members resort to a FERC filing when it couldn’t agree on compensation.

FERC agreed. “Given that many recent SSR filings have set compensation issues for settlement and hearing procedures, the advantage of requiring that MISO and the market participant undergo preliminary compensation negotiations prior to executing an SSR agreement is limited and outweighed by the administrative burden of conducting such negotiations,” the commission said.

The Michigan Public Service Commission supported MISO’s proposal, saying it would allow customers and regulators to offer input before MISO and SSR owners reach an agreement.

Chapman said it was better that MISO not take generators’ cost numbers at face value. “I think MISO will learn their lesson, but not before this happens again,” he said, referring to future coal plant retirements.

Inappropriate Limit

The order also allows MISO to enforce a 30-day notice period before retirement on forced outage units and units that are pseudo-tied out of the RTO. Pseudo-tied units now also have a 36-month maximum suspension period in a five-year time frame before their interconnection service is pulled. Black start-designated units must now fill out an Attachment Y notice, which triggers a reliability study, before retiring. Finally, all retirements can be made public by MISO once their retirement date passes.

However, FERC rejected MISO’s proposal that a return to service on a retired former SSR would be defined at the point that the unit re-enters the interconnection queue, saying it would “inappropriately limit” situations where a generator would have to refund certain costs. FERC called MISO’s existing Tariff language on refunds “appropriately broad.”

Cliffs-WEC Deal

Chapman blames a Michigan exemption that allows mining companies to choose electricity suppliers for the creation of the disputed SSR. Mining company Cliffs Natural Resources took advantage of the exemption, leaving Presque Isle for an estimated $20 million to $30 million annual savings.

“Nobody thought anything of the exemption at first. At the time, it protected the mines, and Cliffs is the largest employer in Marquette,” he said.

Cloverland now has a new concern, spawned by Cliffs’ announcement last week that it has entered a 20-year power purchase agreement with WEC Energy Group to power its Tilden mine. The contract would result in the construction of two natural gas-fired plants on the Upper Peninsula totaling 170 MW.

He said Upper Peninsula ratepayers would be on the hook if Cliffs should go out of business, as the Upper Peninsula’s transmission network isn’t able to reliably export power to Wisconsin and the Lower Peninsula.

Cliffs CEO Lourenco Goncalves said the new generators are a “strategic energy solution for the Upper Peninsula [that] optimizes affordability and improves reliability for all ratepayers for decades to come.”

The $255 million plan will need to be approved by the Michigan PSC.