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Deal could help people in the Upper Peninsula avoid costly energy bills

Jan 14, 2015

The state of Michigan, several energy providers, and a mine operator have all agreed in principle on a plan that could put a stop to costly rate payments for people in Michigan's Upper Peninsula.

Utility bills in the Upper Peninsula were expected to jump by 30%. That's in a region where annual wages are much lower than the national average.

An old power plant is the root of the problem

The problem revolves around the Presque Isle Power Plant in Marquette. The coal-burning power plant is the biggest supplier of energy in the U.P.

In 2013, the power plant lost one of its biggest customers - an iron ore mining operation run by Cliffs Natural Resources. Cliffs decided to get power from another source. And the Presque Isle power plant also faced costly environmental regulations aimed at cleaning up its smokestacks.

The combination of losing a major ratepayer and stricter regulations led the plant's owner (Wisconsin Energy Group) to the decision to close the plant.

No so fast

But the utility operating the power lines said the power plant needed to stay open to maintain the health of the electric grid in the U.P.

So the question was: who pays to keep it open?

Right now, the cost of keeping the old power plant open has been spread out among people in the Upper Peninsula and in Wisconsin - regardless of whether they get any energy from the plant. Wisconsin officials argued that people in Wisconsin shouldn't have to pay. They said the cost of keeping the plant open should be on the ratepayers in the U.P.

After a lot of arguing over who should pay, federal energy regulators agreed with Wisconsin. So ratepayers in the U.P. were facing a huge hike in their energy bills.

Some small businesses were looking at an increase of $700 a month - Lake Superior State University said their bills were going to go up by $400,000 a year - and the typical homeowner was going to see their bill go up by around $30 a month.

The increases were supposed to go into effect on Dec. 1, 2014, but have since been delayed.

Legislators allowed mine to choose new energy provider

Keith Matheny of the Detroit Free Press has a good write-up on what led to all of this. It includes the fact that all of this was made possible by a 2008 bill passed by the Legislature that no one seems to remember.

The bill allowed mining companies in the U.P. to switch energy providers.

No one interviewed by the Free Press could recall what lawmaker in particular was behind the exemption, but it was resoundingly passed by the Legislature.

Dasho noted it was in a law helping shape the state's renewable energy portfolios.

"There were other issues people were worried about," he said. "And when somebody slipped in there that mines could change their provider, nobody really cared about that in 2008. In 2013, the mines make that change and everybody goes, 'Uh-oh.' "

It was last year when Cliffs opted to change energy providers to Integrys Energy Services Inc. of Chicago. The loss of the mines meant We Energies lost about 85% of its Upper Peninsula load demand.

People and businesses in the U.P. who were going to be stuck with big utility bills called their representatives.

As Andy Balaskovitz wrote for Midwest Energy News, the U.P. was facing an energy "crisis."

“We’re in a crisis right now,” said state Rep. Scott Dianda, who represents an area northwest of Marquette on the Keweenaw Peninsula. “We need to have reliable power up here. That’s the number one thing — reliable, reasonable rates for power.”

Dianda’s colleague, Democratic state Rep. John Kivela from Marquette, added: “It is our biggest issue in the Upper Peninsula, without question. It’s that dire.”

That brings us to this week's announcement.

Gov. Rick Snyder's office announced a tentative deal to avoid a future of high utility bills for people in the U.P.

The governor's office noted that the agreements have "a number of contingencies and will be subject to further discussion," but Snyder said he's "personally very optimistic" that the deals will be made.

There are four agreements on the table. More detail can be found on the press release from Gov. Snyder's office.

  1. The Wisconsin Energy Group will sell the Presque Isle Power Plant to the Upper Peninsula Power Company. UPPCO plans to take over operations no later than July 2015 and will keep current rates except it will terminate the extra rates people in the U.P. are paying to keep the plant afloat. 
  2. Cliffs Natural Resources (the mining company) will agree to "purchase a significant majority of its power from UPPCO until the Presque Isle Power Plant’s retirement, anticipated in 2020."
  3. Another power company, Invenergy, would build and operate a natural gas power plant on Cliffs’ site. It would supply electricity and steam to the mine and excess energy to other local utilities. It would start operating prior to the closing of the Presque Isle Power Plant.
  4. Gov. Snyder, Attorney General Schuette, and the Michigan Public Service Commission agree to drop their objection to a merger that the Wisconsin Energy Group wants with another energy company – Integrys Energy Group – their opposition would be dropped on the condition the other agreements work out.      

The agreements are expected to be finalized this spring.

But even after these agreements are made, people in Michigan's Upper Peninsula face challenges ahead in how and where they'll get their energy. People in the U.P. already pay a lot to heat and light their homes and businesses. It's a big place, and moving electricity and gas into homes that are spread around the peninsula is expensive. There are some groups pushing for more decentralized, alternative sources of power for the region.