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Co-Op Coal Critic Sees Victory in a Defeat

Cherryland members reject previewing Rogers City plant cost

June 23, 2009 | By Glenn Puit
Great Lakes Bulletin News Service

  Cherryland Electric Co-op’s Tony Anderson (left) says the Rogers City coal plant cost estimates requested by Tom Karas (right) of Co-opConversations.org are unavailable until the project receives its permits.
TRAVERSE CITY—Emmy Lou Cholak showed up at the Cherryland Electric Cooperative’s annual members meeting earlier this month with one thing on her mind.

The gray-haired senior wanted to tell the member-owned utility that she was very concerned about the electric rates that customers like her would be forced to pay if Wolverine Power Cooperative, which is owned by Cherryland and three other northern Michigan retail co-ops, builds a 600 MW coal plant on the shoreline of Lake Huron in Rogers City.

“It seems to me that they (the cooperative leaders) are trying to hide it,” Ms. Cholak said of the proposed plant’s price tag. “It’s pretty clear that the costs are going to go quite high, and they are going to be perpetuated even after the coal plant is completed. That’s going to come down on us, the consumers.”

Ms. Cholak is part of a growing, albeit minority movement in Cherryland Electric Cooperative’s largely rural membership that is now asking questions about the plant.

When it first unveiled its then-vague proposal in May 2006, Wolverine said that the plant would cost about $1.2 billion. Two years later, however, a study commissioned by a plant opponent said that estimate was too low and predicted that co-op members’ electric rates would double to pay for the facility—a claim Wolverine officials have not challenged.

The study noted drastic changes in the economics of coal plants: increasingly nervous investors; soaring construction, transportation, and fuel costs; and the near certainty of tariffs on coal’s climate-changing carbon emissions. But Wolverine has not publicly updated its three-year-old cost estimate and refuses to do so until it receives final permits for the facility.

However, Tom Karas, whose Michigan Energy Alternatives Project commissioned the cost study, maintains that Wolverine must already have at least tentative current estimates. So Mr. Karas launched Co-opConversations.org several months ago to build co-op member pressure on Cherryland and Wolverine to reveal such estimates. And that is what brought Ms. Cholak, Mr. Karas, and other co-op members to Cherryland’s June 10 annual meeting, where they initiated a rare members’ motion requiring the utility to release the information.

The motion failed by a wide margin, but Mr. Karas insisted he was pleased with the outcome because it showed Cherryland officials that their members are watching.

“What (we are trying to) accomplish is to get financial information to the members who are the owners of this co-op,” he said after the meeting. “In the last three years, $18 million in member money has been spent developing this project, and nobody’s been told what it’s going to do to rates.”

Playing Defense
During the Cherryland meeting, which was held at Wuerfel Park in Traverse City so that members could attend a complimentary minor league baseball game afterwards, officials seemed to be on the defensive.

Cherryland refused to allow this reporter into the meeting—although it did allow another journalist to attend—apparently because of the association between the Michigan Land Use Institute, which operates the Great Lakes Bulletin News Service, and Mr. Karas, who organized a well-attended “Coal Night,” which the Institute promoted, two days before the meeting.

However, at Wuerfel, before the meeting, Cherryland General Manager Tony Anderson agreed to an on-camera interview with the news service, which also obtained an audio recording of the meeting's proceedings.

During the interview, Mr. Anderson repeated what Wolverine officials have said in recent months: “We are waiting to get our clean air permit from the state Department of Environmental Quality. Once we have that from the DEQ, we’ll figure a finite price.”

Mr. Anderson said the coal plant is part of a balanced generating strategy for Cherryland and Wolverine. He contended that burning coal is necessary in order for Cherryland to keep electric rates affordable, but did not mention studies that show that aggressive energy efficiency programs, combined with an increased reliance on wind, geothermal, and landfill gas, are more cost-efficient measures that also create more temporary and permanent jobs than building new coal plants.

“There’s not one silver bullet,” Mr. Anderson said. “You have to have a balance of renewables, energy conservation, coal, and nuclear to provide power reliably and that’s affordable. In Rogers City, you’ll see part of that plant, 20 percent of the fuel, could be biomass.”

But Mr. Anderson also did not mention that his company’s proposed plant would supply more power than the company needs for its Michigan customers or that, according to its preliminary DEQ permit, Wolverine intends to burn up to 70 percent petroleum coke—a fuel that presents more air, water, and ground pollution challenges than coal.

Baker: The Right Decision
During the members meeting, Wolverine CEO Eric Baker explained why he believes the Rogers City plant is necessary. Mr. Baker said that Wolverine, which buys electricity from several generators and distributes it to its four retail co-ops—Cherryland, Presque Isle Electric & Gas, Great Lakes Energy, and HomeWorks Tri-County Electric Cooperative—will see its long-term power-supply contracts end in 2011.

Mr. Baker, however, did not explain why he thought renewing the power purchase contracts would be expensive or difficult. He also did not mention reports from news organizations that power consumption around the country has been falling since before the current economic downturn began, nor a recent statement by a top federal energy official that the country likely does not and will not need more coal or nuclear power plants.

Wolverine’s CEO confirmed his company has spent $20 million of its members’ money on planning, promoting, and applying for permits for the big project—something the relatively small utility has never done before. And Mr. Baker did, at one point, agree with the basic point of Mr. Karas’ study: Coal used to be a cheap power source, but not any more.

“So, will the Rogers City project raise your rates?” Mr. Baker said. “The answer is yes, and it will also create a long-term power supply resource that’s much cleaner than traditional alternatives. In addition, Wolverine expects it will be less expensive than other alternatives it has studied.”

He acknowledged that Wolverine is pushing forward with the plant even though it has no information on how pending federal carbon legislation will affect costs.

“The implications of this legislation is very complicated, and no one knows several things: when it will be enacted, what form it will ultimately take, who will be the big winners and the losers, and what the final economic impact will be,” he said.

Mr. Baker referred those with cost questions to a several-hundred-page document Wolverine filed with the Michigan Public Service Commission days before the Cherryland meeting. A check of the document, entitled Electric Generation Alternatives Analysis Vol. I, however, revealed that it contains no plain estimates of what the Rogers City plant would cost.

Finally, Mr. Baker asserted that the decision to try to build the plant was the right one.

“Each of these decisions were fully discussed with the cooperative boards, the Wolverine board, and the Michigan Public Service Commission,” he said.

Victory in Defeat?
After the company’s presentation, Mr. Karas made a formal motion that “Cherryland’s Board of Directors fully disclose to the general membership, within thirty days of this date, the estimated cost of the plant and the estimated future effect of rates on this project.”

By his estimate, made after the meeting concluded (there was no formal vote count on the motion),25 to 30 percent of the members voted for the resolution.

Mr. Karas said after the meeting that he was happy with the vote given that Wolverine and its four retail co-ops spent three years telling members that building a new coal plant was the only viable option. He explained that Co-opConversation.org’s initial goals is to make members aware that they still do not know what the Rogers City plan will cost.

Veterans of the nationwide campaign to stop new coal plants confirm that pushing for more financial transparency from electric co-ops is difficult, but that cooperative members’ willingness to challenge their co-ops on such critical projects is starting to rise.

“It has certainly been happening more,” said Mark Kresowik of the Sierra Club’s national office. “People generally trust their cooperative management, but that can be to their detriment.”

The movement to pull co-ops away from coal is spreading, both in Michigan and in other parts of the country. Last October, for example, citizens in the Rogers City area raised similar questions about cost and transparency at the Presque Isle co-op’s annual meeting. Members voted down similar motions by similar margins, but campaign leaders said they viewed the votes as positive first steps.

In Georgia, co-op members managed to dramatically influence a coal plant project that was dogged by corruption allegations,while in Montana the struggle between environmental groups and an electric cooperative led to more awareness among cooperative members and the eventual defeat of a proposed coal plant.

Rural Kentucky, in the heart of coal country, offers another example. When an electric co-op proposed building its second coal plant in a decade, local teacher Randy Wilson ran for its board of directors. Despite being in a rural, conservative district, Mr. Wilson quickly gathered hundreds of signatures for his election bid. He said his fellow members are tired of their co-op relying strictly on coal.

“Nobody can afford it,” Mr. Wilson said of burning coal. “Everything hinges on coal. Coal for jobs. Coal for energy. But no one wants to talk about the fact that these (coal) reserves are dwindling and the cooperative leadership is not diversifying their energy portfolio. We are behind the eight ball.”

The movement has morphed as well into a willingness by average citizens to organize ballot initiatives to kill new coal plants. In Sever County, Utah, 1,500 people signed a ballot initiative demanding that voters there have a choice about a new coal plant. The measure passed, and the company proposing the new plant said it would look elsewhere or switch from coal to natural gas.

Meanwhile, back in Traverse City, Mrs. Cholak said she is proud of voicing her opinion to the co-op’s leadership: that they should head in a new direction.

“Coal plants are in the past,” she said.

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

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