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Cherryland Candidates Question Proposed Coal Plant

Campaigns push for more cost, rate, and ‘development’ fund data

May 17, 2010 | By Glenn Puit
Great Lakes Bulletin News Service

  Dan Paulson and Maureen Charbonneau say they want more transparency from Cherryland co-op about a proposed Rogers City coal plant. The incumbent candidates declined interviews.
TRAVERSE CITY—For four years, Wolverine Power Supply Cooperative and its partners, including Cherryland Electric Cooperative, have stood by their estimate that the coal-fired power plant they want to build in Rogers City would cost $1.3 billion.

But co-op officials have never publicly responded to two authoritative studies that challenge that number and warn of soaring electricity rates if the plant is built.

One study, by T.R. Rose & Associates, asserts that, by the time the 600 MW coal plant is finished, it could double the electric rates of the co-ops’ approximately 225,000 members. The other study, by Synapse Energy Economics, says that Wolverine, the plant’s lead developer, used a low plant construction cost estimate in an attempt to help it win regulatory approval.

In fact, officials from Wolverine, Cherryland, and other members of the Wolverine “family,” which provides power throughout northern and central Lower Michigan, refuse to publicly estimate the cost of electricity from the proposed Rogers City plant, despite pressure from member of both Cherryland and Presque Isle Electric and Gas Co-op.

Co-op executives also refuse to reveal how they have spent more than $20 million in their members’ money while planning, promoting, and seeking state permits for their project, which the state says is unneeded, and which is still awaiting approval

Now, however, two members of the Cherryland co-op, Maureen Charbonneau and Dan Paulson, are challenging two incumbents for seats on Cherryland’s board of directors. Both candidates promise to take a closer look at the proposed plant’s financial ramifications, while Ms. Charbonneau says she will seek specific information on how the co-ops spent the $20 million.

Other co-op members have also enlivened the contest by posting a video to Co-opConversations.org, a national clearinghouse for co-op reform efforts. It supports the candidates’ push for greater financial transparency.

Meanwhile, the two board members holding the seats that Ms. Charbonneau and Mr. Paulson are trying to win declined phone and email requests from the Great Lakes Bulletin News Service for interviews for this article. The two incumbents, Melinda Lautner and John Olson, have posted biographies on Cherryland’s Web site.

A ‘Hard Look’
In her interview with the news service, Ms. Charbonneau saidthat someone at Cherryland must ask tough questions about exactly what the coal plant will cost ratepayers.

She also said that Wolverine, which is partially owned by Cherryland, must tell its customers in clear, plain language how much they would be paying for their electricity over the coming years if the plant were built. And she added that those numbers must be released now, so that members can make a well-informed decision on the proposal.

“A coal plant that would cause electric rates to double would get members' attention, but by then it will be too late,” Ms. Charbonneau said.

The other Cherryland board challenger, Dan Paulson, told the news service that he, too, has questions about the proposed plant’s costs and effect on ratepayers. He said that, if elected, he would work with fellow directors to make an informed decision about the plant.

“We certainly need to take a hard look at this,” he said.

Mr. Paulson, a longtime green builder in the Grand Traverse area, said the Cherryland board has a great responsibility when deciding on the coal plant. That is particularly true, he said, because Cherryland and the other co-ops in the Wolverine group are not regulated like traditional, for-profit utilities.

Unlike investor-owned companies, whose primary mission is to turn a good profit for investors, Mr. Paulson said that a non-profit utility coops’ primary goal is to serve its members.

He said that means ratepayer costs, service to the member-owner, and concerns about the ratepayers’ “quality of life” come first.

“It puts a greater responsibility on them,” Mr. Paulson said.

Warning: Sticker Shock Ahead
But Wolverine, a “generation and transmission” co-op that purchases power from downstate power plants and passes it along to “distribution” co-ops like Cherryland, has been tight-lipped about the proposed plant’s costs ever since its initial announcement of the project, in May 2006. Critics have tried, without success, to obtain updated numbers.

They point out that Cherryland and the other distribution co-ops actually own Wolverine, so local co-op member-ratepayers—not the companies or private investors or stockholders—must cover all of the plant’s costs, as well as pay the higher rates that the Rose and Synapse studies say are inevitable. That is because the distribution co-ops— Cherryland, Presque Isle Electric & Gas Co-Op, Great Lakes Energy, and HomeWorks Tri-County Electric Cooperative—must buy all of their electricity from Wolverine, no matter its price, for the next 40 years.

The news service has found ample evidence that members of the Wolverine co-op family will likely experience painful sticker shock if the plant is built: New coal plant projects across the country are sparking significant rate increases.

For example, WE Energies, based in Milwaukee and supplying power to portions of Michigan’s Upper Peninsula, recently finished a new power plant that was built to meet energy demand forecasts made years ago, before the economic downturn. WE customers have seen a 41 percent increase in rates since construction started on the new, 1,200 MW plant.

"They overestimated the growth in demand at the time they proposed it,” Katie Nekola, energy program director at Clean Wisconsin, a non-profit organization, told theMilwaukee Journal Sentinel. “That's what we said at the time, and it certainly turned out to be true. Now people are paying for an enormous power plant that isn't needed."

Reports from South Dakota and Wyoming indicate that residents there are facing a minimum 20 percent rate increase due to a new Black Hills coal plant, according to the Sierra Club.

Coal plants are driving big rate increases even in coal country. For example, East Kentucky Power, a local rural electric cooperative that recently built two new coal plants, will up its rates for the third time in three years, this time by 7 percent.

Construction Overruns
Other coal plant projects around the country are encountering the type of construction cost increases that Wolverine’s critic warn against.

For example, the cost of Duke Energy Carolina’s Cliffside coal plant project increased by 80 percent between the summer of 2006 and June 2007, and overall rate increases of 18 percent are now being handed down on North Carolina ratepayers. The projected construction costs of Wisconsin Power & Light’s Nelson Dewey 3 coal plant increased by 47 percent between February 2006 and September 2008, leading to cancellation of the project.

And the estimated cost of AMP-Ohio’s proposed Meigs County Coal Plant nearly tripled between October 2005 and 2008. Ohio Citizen Action, a non-profit opposed to the plant, reports AMP-Ohio saw a 37 percent cost increase in projected construction costs in 2009 alone, and the project, if built, could cost $4 billion.

Wolverine may be facing a similar problem. Last summer, the Michigan Public Service Commission, in determining that there was no need for the power from the Rogers City plant, pointed out that, in paperwork submitted to the agency, Wolverine’s “assumption for the installed cost of baseload generation is listed at $2,200 per kilowatt hour.”

The Synapse report, however, found “it would have been more reasonable for Wolverine to...(estimate a) cost of $3,500 per kW to $3,800 per kW in its economic analyses”—a roughly 60 percent increase from its 2006 projection.

Mum’s the Word
Wolverine and Cherryland, however, refuse to speak with the Great Lakes Bulletin News Service about the coal plant project.

Officials from both companies—as well as from the Presque Isle co-op, which has also been the target of some member pushback over the cost of and need for the plant—also refuse to respond to requests from co-op members to disclose how they are spending $20 million in a member-financed development fund that has so far collected $70 million via monthly customer charges.

Recently, Wolverine sought and received permission from the Federal Energy Regulatory Commission to continue to collect more money for the fund, which it uses to promote, plan for, and seek permitting of the Rogers City coal plant.

Tom Karas, director of the Interlochen-based Michigan Energy Alternatives Project, a founder of Co-opConversations.org, and a frequent collaborator with the Michigan Land Use Institute on coal and clean energy issues, said he has tried for two years to get more information about the development fund, but is repeatedly rebuffed.

“When you spend other people's money for them, you ought to explain how you spent it,” Mr. Karas said. “We have a documented list of attempts to get a detailed accounting that the Michigan Public Service Commission says we are entitled to, yet Wolverine's answer to a member request seems to be 'you will have to sue us to get the information you are entitled to.’  

Ms. Charbonneau said that, if she is elected to the Cherryland board, her top priority would be public disclosures of those expenditures.

“It’s unacceptable for member-owners,” she said.

Glenn Puit is a policy specialist for the Michigan Land Use Institute. Reach him at glenn@mlui.org.

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