MPSC approves Consumers Energy's integrated resource plan. It's the first long-term utility outlook OK'd under 2016 state energy laws
The Michigan Public Service Commission approved Consumers Energy Co.'s integrated resource plan, the first strategic, forward-looking IRP to be acted upon by the MPSC under the state's energy laws passed in 2016.
The Commission found the contested settlement (Case No. U-20165) is fair and reasonable and assures reliable service to customers.
“This is a significant milestone in the implementation of Michigan’s 2016 energy laws,” said Sally Talberg, chairman of the MPSC. “With this first utility integrated resource plan, we are seeing the positive outcomes of bipartisan legislation and a collaboration among stakeholders. This ultimately benefits customers, optimizes utility investment, and protects the environment with an increased commitment to clean energy and market forces.”
Energy laws that went into effect in 2017 required the Commission to develop modeling parameters and assumptions that utilities must follow in their IRPs, which outline how a company will meet the electric needs of its customers for the next five, 10 and 15 years. The MPSC was also directed to set filing requirements and schedules.
Consumers was the first utility required to submit an IRP. In June 2018 it filed its original plan and on March 23 proposed a significantly modified settlement that most parties supported.
In its order today, the Commission noted the groundbreaking aspects of the agreement: It significantly changes the way Consumers conducts its business by using competitive bidding for future energy supplies. It also moves the company away from fossil fuels and toward renewable energy sources and ways to help residential and business customers cut energy waste.
Key aspects of the approved agreement approved:
- Retire coal Units 1 and 2 at the D.E. Karn Plant near Bay City in 2023, replacing them with renewable energy sources and programs that cut energy waste. Consumers will pursue customer cost savings by seeking to use a low-cost method of financing known as securitization to recover the unamortized book value of the closed Karn units.
- Approval of new investments in cost-effective programs that help residents and businesses to cut energy waste (totaling 718 megawatts by June 2022, or about 2 percent of the utility’s annual electricity sales); improve system efficiencies through conservation voltage reduction programs (44 MW over the next three years), and demand response programs that shave peak consumption to avoid having to build new power plants (607 MW).
- Conduct annual competitive bidding administered by an independent third party for adding power generation capacity, including 1,200 MW of new solar energy from 2019-21. Consumers can own up to half of all the future additional capacity that it procures through competitive bidding and it must buy the remaining electricity through power purchase agreements with third parties, excluding Consumers affiliates.
- Modified the avoided cost rates and terms set in Case No. U-18090 for small, alternative power producers under the Public Utility Regulatory Policies Act of 1978 (see related rulings below). These changes include a five-year planning horizon (instead of 10 years) when determining whether the company needs additional capacity; updated avoided cost rates for energy from the independent producers based on wholesale power prices or forecasts; and capacity rates based on the company’s competitive bidding results.
- Approval of a financial compensation mechanism for power purchase agreements the company enters into with third-party power suppliers, including power producers under PURPA, as authorized by the 2016 energy laws to remove disincentives to arrange supplies from third parties.
- Conduct a retirement analysis of coal-fueled Units 1 and 2 at the J.H. Campbell Plant near Port Sheldon, and possibly retire them as early as 2025.
- File a new IRP in June 2021.