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Board Minutes: Big Drop in Co-op’s Power Demand

Revelation comes as DEQ readies Rogers City coal plant decision

December 14, 2009 | By Glenn Puit
Great Lakes Bulletin News Service

Sacramento Muni
  The Sacramento Municipal Utility Department has a plethora of energy-saving incentives that their customers use to cut consumption to about half the national average.

One month after state regulators said there was no need for a proposed Rogers City coal-fired power plant, the member-owned utility pushing to build it saw a striking 14.6 percent drop in a key monthly measure of its customers’ energy demand.

The company, Wolverine Electric Supply Cooperative Inc., which wants to build a 600 MW coal- and pet coke-burning facility in a quarry near the Lake Huron shoreline, told the state in its permit application that it needed the plant because demand for electricity in its service area would continue to grow for decades to come.

But, according to minutes of the Wolverine board of directors’ October meeting obtained by the Great Lakes Bulletin News Service, Rick Kehl, the company’s vice president of accounting and risk management, reported that the cooperative’s peak electrical demand in September 2009 was 341 megawatts, as compared to 400 megawatts for September 2008—a 14.6 percent drop.

The news, which the company has not released publicly, comes at an inopportune moment in the company’s 30-month drive for permission from the Michigan Department of Environmental Quality to build the plant. The agency must include a “needs” assessment in its permit decision-making process, and the one provided to MDEQ in August by the Michigan Public Service Commission concluded that Wolverine does not need the electricity from a new plant.

The undisclosed demand drop seems to add credibility to the MPSC finding, although Wolverine strongly disputed the agency’s report when it was released. The company refuses to respond to inquiries from the news service about the proposed plant, which it calls the Wolverine Clean Energy Venture.

The 14.6 percent drop that the board first heard of two months ago was in “peak” energy demand. That differs from the total amount of electricity used during the same month—and utilities make their future plans based on both measurements. Wolverine maintains that it will soon need additional “base load” or continuous supplies of electricity to replace power supply contracts it has with downstate generators that begin expiring in the next few years.

Meanwhile clean-energy advocates in the state, who oppose the proposed Wolverine plant and an even larger, 930 MW coal plant proposed by Consumers Energy, say that new energy efficiency programs now being implemented in Michigan will further cut the need for new generating capacity.

For example, state legislation enacted last year requires utilities to use efficiency measures to cut their customers’ overall demand over the next five years. The Granholm administration launched a program that pays for weatherizing the homes of 30,000 low-income Michigan families. And the MPSC is about to inaugurate a program that would facilitate upfront, “pay as you save” financing for various home efficiency measures.

All three policies are expected to save ratepayer dollars, generate building-trade jobs throughout the state, and reduce the state’s “carbon footprint.”

Not Just Michigan
While the reported drop in Wolverine’s September demand numbers is unusually large, electrical demand has been declining in Michigan for at least three years. A similar story has also been unfolding nationwide—since well before the current economic crisis.

MPSC spokeswoman Judy Palnau told Michigan Public Radio that the commission didn’t expect any new electric demand anywhere in the state until at least 2022, which is why her agency also informed MDEQ that the even larger, 930 MW coal plant that Consumers Energy wants to build near Bay City is also unneeded.

"So, in light of that, both of these facilities were deemed unjustified or unnecessary, unless proved otherwise," Ms. Palnau said.

The Wall Street Journal reported in November 2008 that other utility executives were concerned about energy demand throughout the United States. One executive told the paper that there appeared to be a fundamental change going on.

“We’re in a period where growth (in electric demand) is going to be challenged,” Jim Rogers, chief executive of Duke Energy Corp., in Charlotte, N.C., told the paper.

However, Wolverine continues to press forward with its proposal. Three years ago the company pegged the cost of its project at $1.2 billion, but, despite persistent requests from some of its members, has not explained how the plant’s price tag would affect co-op members’ rates, nor revised is original cost estimates for the proposed plant.

A veteran of municipal financing and utility rate setting, Tom Sanzillo, of T.R. Rose & Assoc., determined in a now two-year-old study, commissioned by coal plant opponents, that the coal plant would double the cost of generated electricity for members of the four retail co-ops that own—and must purchase their power from—Wolverine. The company has yet to either endorse or rebut the study.

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