By Amanda Durish Cook

Critics are pushing back on a plan by Upper Michigan Energy Resources Corp. (UMERC) to build two natural gas-fired generators in Michigan’s Upper Peninsula, claiming that the company hasn’t adequately justified the need for them.

The Michigan Public Service Commission last year approved a settlement to create UMERC, which consists of the electric and gas distribution assets of Wisconsin Electric Power Co. and Wisconsin Public Service, both subsidiaries of Milwaukee-based WEC Energy Group. (See Michigan Upper Peninsula Getting its Own Utility.) The company earlier this year filed for a certificate of necessity to build two reciprocating internal combustion engines — at a combined 183 MW — to replace We Energies’ 431-MW coal-fired Presque Isle Power Plant (18224).

The PSC is expected to decide on the application in the fall. If approved, construction would begin early next year, with the plants expected to be in service by 2020.

But the company’s $277 million plan is now a target of criticism from multiple organizations that charge that the application was not well thought out.

‘Closed-Door Negotiations’

The Chicago-based Environmental Law and Policy Center (ELPC) contends that the gas-fired projects are the result of “closed-door negotiations” between UMERC and Tilden Mining, owner of a local iron mine and the largest future customer of the proposed plants.

In a mid-July brief asking the Michigan PSC to reject UMERC’s application, ELPC argued that the company flouted an official PSC process that requires developers to first study renewable alternatives to fossil fuel-based projects, and instead prematurely agreed to Tilden’s request for natural gas generation — and no other technology — in a special contract.

“Prior to signing the contract, no analysis was done by WEC to determine whether [reciprocating internal combustion engine] technology was the most reasonable and prudent means of supplying electricity in what would become the UMERC service territory in Michigan’s Upper Peninsula,” ELPC said.

“Even though ELPC fully supports the closure of the Presque Isle Power Plant, we’re concerned about the process here. In order to pass the cost of the proposed gas units on to its customers, UMERC has to look into several things and one of them is the partial displacement of the proposed generation through renewables,” ELPC senior staff attorney Margrethe Kearney told RTO Insider.

According to Kearney, UMERC only studied a single-source scenario in which renewables met 100% of the need in the Upper Peninsula.

“I don’t think anybody at this point thinks that renewables will cover all of the needs [in the area],” Kearney said. “That’s what flagged our concern. We said, ‘Wow, they didn’t really look into this.’”

When UMERC did factor renewables into its plan, the company neglected to reduce a corresponding amount of capacity from the proposed gas-fired plants, making the renewables appear costly and unnecessary, Kearney said.

“I find it troubling that they wouldn’t go back on whatever project they agreed on with the mine and consider replacement of some of the gas units with renewables. They did it out of order,” she said.

Kearney also worries that UMERC may be overlooking renewables to the detriment of its customers.

“The amount that they’re building is pretty significant,” she said. “It’s more capacity than what they need. I don’t think there’s any question that they’re not going to need to build anything for a long time. But they’re not looking at five years ahead when the cost of storage and renewables drops.”

While Kearney said she understands that energy is expensive in the Upper Peninsula, her organization wants to ensure that the region’s energy “is crafted with all of the factors in mind.”

“I can’t say that this is the best option for the rest of the customers. The only stakeholder involved in the process was the mine. The goal is not to accuse them of a nefarious plot, but it really calls into question the legitimacy and credibility of the proposal,” she said.

UMERC’s Defense

UMERC stands by its filed proposal.

“We believe our proposal will provide a long-term, low-cost source of electric power to the Upper Peninsula,” WEC spokeswoman Amy Jahns said.

UMERC considered multiple renewable supply options for the Upper Peninsula, but they weren’t the best fit for the region, according to Jahns.

“Those options were found not to be a low-cost and reliable source of power. Wind and solar energy options are limited to generating or producing intermittent power that would not meet the need of our customers. In addition, advances in battery storage technology do not meet the need for this project,” she said.

The Marquette County Board of Commissioners penned a resolution in support of UMERC’s plans, claiming the “environmental benefits of the new generating solutions will greatly reduce regional air emission and will negate the need for the development of costly major transmission lines.”

Overbuilding?

Nearby Cloverland Electric Cooperative also asked the PSC to deny the certificate of necessity, saying that UMERC “insufficiently addressed a number of issues contained in its application.”

Cloverland contends that UMERC is overbuilding capacity in relation to need in the area, and that the proposed plants may cause congestion on the local transmission system, forcing the cooperative to pay system reliability, voltage or local reliability payments to MISO. It also asked the PSC to shield it from such payments.

“Since transmission is an alternative to UMERC’s proposal and transmission would not create the cost risks for Cloverland that the [proposed] facilities do, Cloverland would have no objection to the commission conditioning the relief in this case on UMERC holding Cloverland harmless from the cost risks UMERC’s choices have created,” the cooperative said in a brief with the PSC.

In its application for the certificate, UMERC said its integrated resource plan demonstrated that the projects were needed only to replace Presque Isle and would not result in “wasteful duplication of facilities.” The company also said that the two plants are the “most reasonable and prudent alternative under the alternate scenarios analyzed,” including new transmission or upgraded transmission, new renewable sources and energy efficiency programs.

Cloverland also finds fault with the “extensive analysis” UMERC claimed it performed under its IRP.

“UMERC’s integrated resource plan failed to consider a number of potential solutions that could have potentially led to results that would be more beneficial and more efficient to the entire Upper Peninsula. The integrated resource plan provided by UMERC is nowhere near comprehensive enough for this commission to grant the relief requested,” Cloverland wrote.

Michigan Technological University also intervened in the case, claiming that as an interruptible gas customer, “the availability and reliability” of its gas supply may become compromised by possible gas capacity constraints introduced by the two new plants.

“The Northern Natural Gas Pipeline is already capacity constrained during peak demand periods. And without adequate safeguards in place, the addition of UMERC’s … electric generation facilities will only further constrain the natural gas capacity in the Upper Peninsula,” the university said, asking the PSC to condition UMERC’s certificate on the “adequate supply of natural gas” for all customers served by the Northern Natural Gas Pipeline.

Jahns said that UMERC has “received no evidence that our project will adversely impact” the university.