After years of looking for a buyer, Consumers Energy announced it struck a $13 deal to sell its fleet of 13 hydroelectric dams in Michigan to a Bethesda, Md., private equity firm.
Consumers Energy agreed to sell the collection of century-old dams for $1 apiece to a newly formed subsidiary of Hull Street Energy in a Sept. 9 purchase agreement. The dams are situated on five rivers across Michigan and have a combined installed capacity of 132 MW, though they currently generate only about 50 MW, according to Consumers.
In a release, Consumers said the sale will reduce long-term costs for its customers and ensure the continued safe operation of the dams.
Consumers has long said maintaining the dams is expensive. The dams were built between 1906 and 1935, making the oldest nearly 120 years old. The utility has acknowledged the dams need significant infrastructure upgrades to remain in compliance with FERC licensing requirements. Consumers estimates that maintaining the dams through a new 30- to 50-year licensing period would cost $1.5 billion. It also has said the dams’ hydroelectric output costs nine times more than its other sources of generation.
Hull Street Energy said it has a “long track record of successfully owning and operating hydroelectric facilities” across North America. It said it has acquired and improved 47 hydroelectric assets in the past decade. Many of the facilities are small or midsize run-of-river dams in New England.
The investment firm created subsidiary Confluence Hydro to own and manage the dams and acquire other hydro assets.
“The firm will leverage its extensive experience and capital resources to upgrade the projects, ensuring the facilities can continue to safely deliver reliable, clean energy to Michigan customers and support economic and recreational opportunities critical to local communities for years to come,” Hull Street Energy said in a press release.
Confluence Hydro CEO Ed Quinn emphasized the company’s commitment to dam safety and refurbishment in a statement.
“With decades of experience operating hydro facilities, we are committed to preserving and modernizing these important resources to maximize their contribution to the grid,” Quinn said, adding that Confluence aims to be “a best-in-class hydro company — one that protects communities, supports employees, mitigates risk, and delivers reliable, clean energy for the future.”
Hull Street Energy was founded in 2014.
The sale agreement dictates that Confluence Hydro enter a contract to sell power back to Consumers Energy from the facilities for 30 years. Confluence said it would seek to renew the dams’ federal operating licenses, which begin to expire in 2034.
“We believe a sale of the dams is the best path forward for our customers. This sale balances two important needs: to lower costs for Consumers Energy’s customers while continuing to care for communities that depend on the dams,” said Sri Maddipati, Consumers Energy’s president of electric supply. “After numerous conversations with community members over the last three years to gather insights and feedback, we are confident this sale will preserve the reservoirs that hold the key to economic, recreational and community benefits at each of the dams.”
Consumers Energy hosted local meetings across Michigan on the fate of the dams beginning in 2022 and issued a request for proposals in early 2024. It also hired Lansing, Mich.-based Public Sector Consultants in 2022 to explore the impacts on communities in the event of partial or full dam removals.
The companies expect the transaction to close within 12-18 months pending approval from the Michigan Public Service Commission and FERC for the sale and license transfer for the dams.
Confluence said it plans to hold meetings with employees and affected communities in the coming months. It also said it plans to offer current Consumers Energy hydro employees “equivalent positions” with Confluence.
Bob Stuber, president of the Michigan Hydro Relicensing Coalition, which represents five conservation groups, expressed concern over a private investment firm buying the dams.
Stuber said because the new owner would sell power to Consumers Energy rather than the public, Hull Street cannot be reimbursed for any future investments through the Michigan Public Service Commission, possibly making future capital investments in the dams unattractive.
“Consumers acknowledges that these hydropower projects are marginally economical. It is a well-managed corporation, so it begs the question: If Consumers is challenged to turn a profit from these projects, how will another entity be able to, especially without a cost-recovery mechanism?” Stuber asked in a statement to RTO Insider.
Stuber said there’s also no guarantee Hull Street will continue to meet licensing requirements.
“History has demonstrated that new owners of older hydropower projects in Michigan are not as committed, as shown by the Edenville and Sanford catastrophic dam failures,” Stuber said, referring to Boyce Hydro’s yearslong negligence that caused the collapse of the Edenville and Sanford dams in Mid Michigan in May 2020. In that case, Las Vegas architect Lee Mueller and family members bought the dams to avoid paying taxes on the sale of an Illinois property. (See Michigan Dam with Prolonged Safety Issues Fails; FERC Terminates More Boyce Hydro Licenses.)
