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AG Nessel, Consumers Energy Reach Settlement to End Use of Coal in Michigan
April 20, 2022
LANSING – As part of her advocacy for affordable and safe energy for residents across the state, Michigan Attorney General Dana Nessel entered into a proposed settlement agreement with Consumers Energy Company in its integrated resource planning case (Case No. U-21090) before the Michigan Public Service Commission (MPSC).
The proposed settlement is still subject to final approval by the MPSC. If approved, it will provide significant savings over the original proposal and will also result in Consumers ending its use of coal by 2025, which is 15 years earlier than originally planned.
Consumers Energy filed its new integrated resource plan in June 2021. Its current plan was approved in June 2019 and provided for studying the closure of two of the remaining three coal plants the company owns. However, this case proposes the early closure of all remaining coal plants and further movements to reducing carbon emissions.
According to Consumers, it will be one of the first utilities in the country to end its use of coal.
In addition to going coal-free, the settlement agreement provides for the building of nearly 8,000 additional megawatts of solar energy by 2040. If everything goes as planned, Consumers will generate 90% of its electricity using clean energy resources by 2040.
Another significant term of the settlement provides for the provision of direct financial resources to ratepayers. At the urging of the Attorney General, Consumers Energy agreed to donate $5 million this year to a fund that helps low-income utility ratepayers, with the potential for $33 million in total assistance in additional $2 million increments over a 14-year period.
“Not only is this settlement a win for our environment, it’s also a win for Michigan ratepayers who have struggled to stay current on their bills,” Nessel said. “This agreement was truly a collaborative effort from all involved parties and a symbol of what we can achieve when stakeholders work together to create positive change.”
The Citizens Utility Board of Michigan (CUB) was also involved in negotiating the settlement. CUB is a nonpartisan Michigan non-profit dedicated to making utility costs more affordable for Michigan residents.
“CUB applauds the AG for striking this settlement that will provide $5 million of new assistance for low-income residential customers this year and Consumers will continue to donate up to $2 million a year to this fund over the next 14 years,” CUB Executive Director Amy Bandyk said. “Importantly, these donations will not be recovered through higher rates, but rather donated by Consumers Energy. Residential rates have been soaring over the past few years, so this assistance is a good step. We hope to continue working with the AG to win much-needed relief for ratepayers.”
The settlement agreement also provides the following:
- Establishment of a regulatory asset for the undepreciated book balance of the retiring coal plants which will earn a return equal to the Company’s WACC with a 9.0% ROE and that amortizes the reg asset over a period of time consistent with their original design life of those units. And recovery of associated decommissioning and ash disposal costs less salvage value will be included in a regulatory asset which the Company may request to recover in future base rate proceedings subject to a reasonableness and prudency review.
- Approval of the Acquisition of the New Covert Generating (natural gas) Facility (but avoids the acquisition of additional gas plant proposed by the Company in its application) and approval of Demand Response and Conservation Voltage Reduction capital costs for recovery in rates in future Company rate cases.
- Retirement of Karn Units 3 and 4 which are gas peaking plants on or before May 31, 2031, unless the regional system operator or other emergent issues within the Company’s generation portfolio requires prolonged operation to maintain sufficient supply (i.e., system or company reliability require continued operation).
- The Company will conduct a one-time competitive solicitation to provide the Company with capacity credit in MISO Zone 7 starting in the 2025 planning year (including acquisition of 700 Zonal Resource Credits).
- Maintaining an FCM which is generally the same as the currently approved FCM for Consumers Energy.
- The Company agrees to the extension of the annual competitive bidding process to acquire supply-side resources and it will use commercially reasonable efforts to maintain a 50/50 split between new capacity from Company-Owned projects and new capacity from PPAs.
- Approval of the proposed battery deployment program.
“On behalf of our 150,000 members across Michigan, we're proud to sign onto this historic settlement agreement with such a broad and diverse group of stakeholders," Mike Berkowitz, Michigan Senior Beyond Coal Campaign Representative for the Sierra Club, said. "The Michigan Public Service Commission should approve this settlement so Consumers Energy can get to work moving beyond coal by 2025, planning for worker transitions, and building out a remarkable amount of clean energy. This is a groundbreaking agreement that ensures Consumers Energy is meeting the urgency demanded by the climate crisis while creating homegrown green jobs. West Michiganders can breathe easier knowing the J.H. Campbell coal plant will soon stop polluting their air as well as Pigeon Lake, a tributary to Lake Michigan."
Since taking office, AG Nessel has secured $1.3 billion in ratepayer savings for Michigan residents.
Consumers Energy provides electricity to approximately 1.9 throughout Michigan and natural gas to 1.8 customers across the state.