Michigan rejects application by Consumers Energy for early termination of agreements with biomass power plants

The Michigan Public Service Commission has rejected applications by Consumers Energy for early termination of power purchase agreements (PPAs) with biomass plant operators, finding that ending the contracts prematurely was not holistically considered in the state’s electric capacity needs, posing a potential risk, and that calculated savings may be overestimated.

Consumers Energy applied in January for a third amendment to its long-running agreement with National Energy of Lincoln in northeast Michigan. The utility proposed early termination of an earlier amendment that had extended PPA for the plant’s 18 megawatts (MW) of electricity to 2027, which would result in closure of the plant on May 31, 2024.

The plant in McBain, Mich., can produce enough power for about 14,000 average homes. It employs about 20 workers and use 225,000 tons of wood each year as fuel.

Meanwhile, Consumers applied in June 2023 for a similar early termination of its power purchase agreement with Cogeneration Michigan Associates Limited Partnership’s Cadillac Plant, from July 2028 to May 31, 2024.

The Commission rejected Consumers application for early termination of the National Energy of Lincoln PPA and a settlement agreement regarding the utility’s application for early termination of its PPA for the Cadillac plant.

“The Commission’s order today raised concerns about the claimed potential savings given that testimony in both cases indicated Consumers would turn to volatile electricity markets to replace some of the energy output and capacity lost with the shutdown of the plants,” it said in a press release. “The Commission found relying on unpredictable markets for replacement supply outside of a comprehensive Integrated Resource Planning process in this manner entailed an unacceptable level of risk.”

Consumers proposed to replace the National Energy of Lincoln plant with a 33.6 MW solar facility and the Cadillac Plant with a 67 MW solar facility. But testimony indicated that, on their own, the two solar facilities would not be able to replace all the electric capacity from the biomass plants without supplemental purchases from electricity markets. That’s of concern because the regional transmission organization that covers much of Michigan, the Midwest Independent System Operator, has warned of tightening supplies.

Given those concerns, the Commission said it wasn’t persuaded Consumers should abandon energy and capacity commitments locked in via earlier versions of the PPAs absent a more holistic review through an amendment to the company’s integrated resource plan, which was last approved in June 2022.