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Critics Call Rogers City Coal Plant Study ‘Fluff’

Foes say Wolverine’s report lacks evidence, snubs alternatives, low-balls cost

July 2, 2009 | By Glenn Puit
Great Lakes Bulletin News Service

Rainforest Action Network
  NASA scientist Jim Hansen was arrested in West Virginia last month during a demonstration against the harmful coal-mining process called mountaintop removal.
Early last month, as part of its application for permission to build a large, coal-fired power plant near Rogers City, Wolverine Power Cooperative filed a massive, 500-plus-page document with two state agencies. Now the document, the final step in the lengthy application process, is drawing heavy criticism from coal plant opponents.

The document, called Electric Generation Alternatives Analysis, seeks to demonstrate to the Michigan Public Service Commission that the utility actually needs its proposed 600 MW plant’s electricity. It also seeks to demonstrate to the Michigan Department of Environmental Quality that the plant would be the most financially and environmentally prudent way to meet that need.

But despite the Wolverine document’s unusual length, critics who reviewed it for the Great Lakes Bulletin News Service insist the analysis is deeply flawed.

The critics, who are veterans of either coal plant litigation, state environmental and energy policy, or large-scale financial investments in utility projects, said the document lacks crucial evidence; pays too little attention to cheaper, more jobs-friendly and environmentally benign ways to meet future energy demands; and uses outdated information.

Faith Bugel, a senior attorney with the Environmental Law and Policy Center in Chicago, a non-profit that opposes Wolverine’s proposed plant, called the huge filing “a lot of fluff.”

“They make a lot of claims and come to a lot of conclusions without providing any documentation or evidence,” Ms. Bugel asserted.

Wolverine declined to comment for this story, as it has since the news service first reported on the proposed plant almost two years ago.

But in frequent public comments, company executives maintain that a new coal plant would provide a better deal for customers than continuing to purchase power from other utilities, which Wolverine has done for decades. The executives also claim that demand for electricity in the company’s service area—larges swaths of northern and western Lower Michigan—will continue to rise.

The company’s analysis, submitted to the state on June 8 and open to written public comments through July 9, repeats those same points.

But critics say the document ignores sharp shifts in the state and country that are drastically changing the state’s energy future.

Changing Times
Those shifts include Michigan’s severe recession, which has cut energy demand. They also include state legislation passed last October and administrative policies announced by Governor Jennifer Granholm in February that will also cut demand, bring more renewable energy online, and likely create thousands of new energy efficiency and clean-energy jobs in the state.

Change at the national level is also affecting Michigan, the critics say. The recently enacted American Recovery and Reinvestment Act is pumping money into energy-saving home weatherization and advancing wind, solar, and other clean-energy development; meanwhile, the U.S. House of Representatives just passed legislation that would impose fees on the copious amounts of heat-trapping gases emitted by coal plants.

The critics said that Wolverine’s analysis mostly ignores these and other sweeping changes in the American energy industry—including news reports of falling electricity demand across the country that began before the current economic crisis. Wolverine’s critics also point to a statement this spring by a top federal energy official that the country may never need another new coal or nuclear power plant.

These big changes foster doubts about Wolverine’s projections of its electricity needs.

“Their demand forecasts are too high,” James Clift, a policy director with the Lansing-based Michigan Environmental Council, said of Wolverine’s filing. “Wolverine fails to fully implement extremely cost-effective energy efficiency measures and therefore, this document leads to a suggestion of building an oversized power plant.”

And Tom Sanzillo, an investment banker and veteran public finance official, said the cost assumptions that Wolverine used in its analysis are so flawed that they undermine the entire document’s credibility—ranging from its projections of costs to its related assertion that building the plant is the best way to meet energy demand.

“They are wrong on construction prices, wrong on natural gas markets, wrong on coal prices,” said Mr. Sanzillo, a former deputy comptroller for the State of New York who has overseen audits, bonding, and other financial instruments involved in a wide variety of utility projects and operations in that state. “I would also say they are off on carbon prices for the future. In short, they have low-balled the cost of electricity from coal and overstated the price of natural gas. Garbage in and garbage out.”

Rising Demand?
In its report to the Public Service Commission, Wolverine said it expects that by 2015 it will have a “base load deficiency” because it expects residential electric sales to increase by 2.5 percent per year, and commercial and industrial sales to rise by 2.1 percent per year.

“Michigan needs additional base load generation,” Wolverine wrote to the MPSC, referring to the steady generation that burning fossil fuels provides.

The company buys, rather than generates, almost all of its power, from downstate and outstate generating companies. It then distributes that power to the four retail co-ops that actually own it—Cherryland Electric Co-operative, Great Lakes Energy, Presque Isle Electric & Gas Co-op, and HomeWorks Tri-County Electric Co-operative.

Since it first announced plans for its new plant three years ago, Wolverine has argued that its contracts with power suppliers will expire early in the next decade, and that it now makes sense for the company to build its own coal plant to meet what it says is a rising demand for electricity.

“Two comprehensive Michigan studies have been completed within the past four years: The Capacity Needs Forum and the 21st Century Energy Plan,” the Wolverine analysis adds. “Each study concluded that well over 3,000 MW of Michigan’s aging coal generation fleet would need to be replaced by 2025 and that Michigan should immediately commence construction of at least one base load coal-fired power plant.”

But the problem with that statement, according to the Wolverine opponents who reviewed the filing, is that it uses data gathered almost four years ago, prior to the severe recession that has eviscerated Michigan’s manufacturing sector and is now plaguing the rest of the country, too.

In fact, many observers within and outside of Michigan’s energy industry agree that electricity demand in Michigan will, at best, be flat for much of the next decade due to the recession, to the shift by many customers to energy efficiency, and to state and federal policies that will soon begin further lowering energy demand in Michigan and the U.S.

Falling Numbers, Rising Efficiency
For example, Consumers Energy, Michigan’s second-largest electric utility, filed documents with the Michigan Public Service Commission in November 2008 forecasting a 5 percent decline in sales through 2018. Detroit Edison, Michigan’s largest electric utility, predicted an even steeper drop.

Martin Kushler of the non-profit American Council for an Energy-Efficient Economy told the news service earlier this year that while the Michigan 21st Century Energy Plan was once a valid study, it badly needed to be “updated with current data.”

Frank Zaski, a retired auto executive who was a member of the 21st Century Energy Plan’s Energy Efficiency Task Force, said there is no way utilities can rely on energy demand forecasts from the plan, given the outdated data.

In his own comment letter to the public service commission about Wolverine’s report, Mr. Zaski used recent state and federal documents and state utility case filings to discredit it. His letter asserts that the company does not need a coal plant and can continue to purchase outstate power for the foreseeable future—thanks to long-term falling electricity demand, particularly in Michigan.

“No one today would make an investment based on such an old forecast,” Mr. Zaski said. “Would someone recommend buying more stocks today because a 2006 forecast once said the Dow Jones Industrial Average would be at 16,000 in 2009?”

Mr. Sanzillo, who last year analyzed Wolverine’s initial coal plant permit application and predicted it would at least double co-op members’ electric rates, also shrugs off the firm’s predictions of increases in both residential and commercial consumption.

“I still do not see real evidence in this report of demand increasing,” he said of the analysis. “If you look closely, they are using outdated information. Their current numbers have to be in the toilet. The significance is that any new demand they are showing as of the date of commercial operation will probably not materialize. They need to show the new bottom that has been caused by the recession.”

Ms. Bugel said the demand projection errors by Wolverine are profound and gave short shrift to how effective energy efficiency measures are at cutting demand and reducing costs for utility customers.

“They completely overlook energy efficiency,” the attorney said. “Energy efficiency is always cheaper than buying electricity and can be delivered at half the cost of electricity. Energy efficiency saves customers money because the electricity bill savings are greater than the efficiency measure cost. Yet Wolverine makes unsubstantiated claims about energy efficiency measures it says its customers have already taken.  

“There is so much capacity for energy efficiency that is completely overlooked in its filing,” she added.

With the Michigan Public Service Commission accepting public comments on Wolverine’s filing until Thursday, July 9, Ms. Bugel said she hoped Michigan residents would write to the regulatory agency and urge them to reject Wolverine’s application.

“Members of the public should be filing comments opposing this plant, pointing out that it is not needed because there is no growth in demand for electricity,” Ms. Bugel said. “The plant will burden consumers with costs of construction, possible additional costs due to a carbon tax or cap-and-trade scheme, and all the pollution and negative air quality impacts. In addition, it will reduce the market for renewable energy and energy efficiency in Michigan, and the associated jobs in those fields.”

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

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