Consumers Energy relied on “flawed” integrated resource plan (IRP) assumptions in picking its own new-build, 700-MW Thetford power plant project over other alternatives, like an existing 1,100 MW (nominal) power plant of New Covert Generating Co. LLC.
That was the contention of Gary Vicinus, who works for the Pace Global consulting business of Siemens Industry, in Oct. 28 testimony filed at the Michigan Public Service Commission. Consumers Energy is seeking PSC approval to build 700 MW of new gas-fired, combined cycle capacity at its Thetford power site.
Vicinus, testifying on behalf of New Covert, noted that New Covert’s facility, located in Van Buren County in the Consumers Energy service territory, came into service in 2004. It is a gas-fired, combined cycle facility that has been significantly underutilized since it was built, he added.
Vicinus said that analysis shows that there are several lower-cost alternatives to the Thetford new-build project, including Consumers buying the New Covert facility. He said New Covert offered to sell the plant to Consumers in response to a Sept. 30 Consumers request for proposals (RFP), with the offer price redacted from the public version of his testimony. He did say the offer price was comparable to the $750m pricetag for the 700-MW Thetford project. He also said this new offer price was lower than one New Covert offered to Consumers in response to the utility’s June 2012 RFP.
Before Consumers began preparing its 2013 integrated resource plan (IRP), the utility improperly “screened out” any possible purchases of existing plants, Vicinus wrote. He said that contrary to a contention by Consumers, the Mitsubishi 501G turbines at the New Covert plant are as reliable as those to be used at Thetford.
Midland complains about a Consumers rejection of its plant expansion
Filing somewhat similar Oct. 28 testimony was the Midland Cogeneration Venture Limited Partnership (MCV), which owns an existing gas-fired power plant in Michigan and had been looking to sell capacity from an expansion project to Consumers under a power purchase agreement (PPA). MCV is planning to construct a 640-MW natural gas combined cycle facility to be co-located with MCV’s existing 1,633 MW natural gas combined cycle facility.
Kevin Olling, MCV’s Vice President of Energy Supply and Marketing, wrote: “The MCV expansion project is essentially at the same point of progress as Consumers Energy’s Thetford Project with regard to the development of both the electric transmission and gas pipeline infrastructure requirements and costs. If the MCV infrastructure costs are not adequately developed to allow for further consideration, then neither are Consumers Energy’s infrastructure costs under review in the case. Remarkably, Consumers Energy was able to prepare a detailed financial analysis of the proposed Thetford Plant in this case notwithstanding the same unknowns. Because Consumers did not evaluate the MCV long term PPA offer fully, they have been in no position to refute MCV’s position that the offer represents a lower cost option.”
Olling noted about transmission interconnects for both projects: “MISO completed their Feasibility Study on April 12, 2013, and approved MCV to proceed in the interconnection planning process. At this time, MCV has requested that the interconnection request be ‘parked’ until such time as we make final generation equipment selections and secure a PPA or PPAs. At that time, MISO will have to complete the feasibility study that will produce a total cost estimate for the network upgrades required to complete the interconnection. Consumers Energy admits that such a study for the Thetford Project will not be completed until August 2014. It is rather remarkable that Consumers Energy could conclude that the MCV Expansion Project would not have the infrastructure costs for the transmission interconnection adequately addressed when the proposed Thetford Project is in the same ‘parked’ status but appears from Consumers Energy’s perspective to be adequately addressed.”
As for gas supply, Olling said that on May 6, Great Lakes Gas Transmission confirmed that it had adequate available capacity and delivery capability to sustain the minimum pressure requirements necessary to deliver up to 19,583 Mcf per hour or up to 470 MMcf per day at the MCV interconnect, or enough natural gas to supply both the 640 MW expansion and the existing 1,633 MW facilities running at 100% load factor continually at a cost much lower than the alternative quoted by Consumers to upgrade its gas interconnection with MCV.
He said that based on the filing information of Consumers Energy and the term sheet of MCV’s PPA proposal, the MCV proposal could save customers almost $115m on an equivalent MW basis. Asked if a Consumers statement that it has won some equipment cost reductions for Thetford makes a difference, Olling responded: “MCV’s proposal was based on equipment costs similar to those used to develop Consumers Energy’s cost estimates. MCV also plans to competitively bid for its Expansion Project components. MCV is likely to realize the same lower costs Consumers Energy now forecasts, enabling MCV to reduce the price of the PPA accordingly.”
Renaissance Power was also rejected by Consumers as a Thetford alternative
Another gas-fired power plant operator with an Oct. 28 complaint was Renaissance Power LLC, an affiliate of LS Power Development LLC with an existing plant at Carson City, Mich.
Carolyne Murff Wass, employed by LS Power Development as Senior Vice President, Asset Management, said the company has offered to sell its plant to Consumers both last year and this year. “The [PSC] should deny Consumers’ request for a certificate of necessity for the proposed Thetford Generating Station,” she wrote. “The Renaissance facility is a proven generating resource that has operated reliably since achieving commercial operation. The facility is located in MISO Zone 7 and is interconnected to the Michigan Electric Transmission Company’s (‘METC’s’) transmission system. Further, the Renaissance facility would satisfy Consumers’ desire for more efficient, environmentally preferable gas-fired combustion turbine capacity to replace its older, less efficient, and less environmentally desirable coal units.”
That is a reference to seven older, smaller coal units that Consumers plans to deactivate, and possibly retire, in 2016 due to clean-air needs under the Mercury and Air Toxics Standards.
“Renaissance Power has offered to sell the capacity of the facility to Consumers at very favorable prices, and Renaissance Power has also offered to sell the facility itself to Consumers at a favorable price,” Murff Wass added. “Additionally, Renaissance Power has offered long-term PPA options wherein Renaissance Power has agreed to upgrade existing simple-cycle turbines to combined-cycle turbines with duct firing capabilities with a guaranteed heat rate and plant performance standard. In summary, Renaissance Power has offered Consumers options that fulfill the capacity need supplied by the proposed Thetford plant at a significant savings and less risk to Consumers and thus to Consumers’ customers.”
Notable is that Renaissance Power is currently permitting that conversion from simple cycle to combined cycle operation at the Michigan Department of Environmental Quality.
The Renaissance plant is a natural gas-fired facility with a net average annual capacity of approximately 716 MW. The plant presently consists of four Siemens-Westinghouse 501FD2 simple-cycle combustion turbines. The units achieved commercial operation between 2002 and 2003.
Under a proposal to Consumers, Renaissance Power committed to converting three F-class simple-cycle peaking units to combined-cycle configuration thereby providing Consumers with 785 MW of base (summer) capacity and 895 MW total (summer) capacity with duct firing. Renaissance Power would assume the risk of construction and guarantee to Consumers’ a baseload heat rate of 6.95 MMBtu/MWh. Renaissance Power offered 20-, 25- and 30-year terms for the agreement starting June 1, 2017.
The Renaissance facility is interconnected to METC’s transmission system via a 345 kV transmission line into the Nelson substation. The plant is interconnected to DTE Gas Co. formerly known as Michigan Consolidated Gas Co. (MichCon) through a nine-mile lateral into the New Haven Compressor Station.
FirstEnergy was turned away with its own power offer
Sharon Noewer, employed by FirstEnergy Solutions Corp. (FES) as the Director of Competitive Market Policies, said in Oct. 28 testimony that Consumers Energy (CE) failed to adequately consider open-market power options.
“In its IRP, CE categorically excluded reasonable methods of procuring energy and capacity that would result in cheaper generation resource alternatives as compared to the Thetford Plant,” she wrote. “Further, in instances where CE has solicited offers for the supply of energy and capacity, the Company’s solicitations were inadequate.”
She added: “FES contacted CE to discuss a flexible PPA in order to satisfy—either in whole or in part—the capacity need identified in the CON Application. No further discussion occurred as CE declined to entertain discussions of an alternative to the Thetford Plant.”
She noted that PPAs offer Consumers Energy much more flexibility in a regulatory environment that is undergoing significant changes. PPAs can be structured to better mitigate these risks or, at a minimum, to avoid having to make a 30-year decision at a moment when significant uncertainties remain unresolved, she said.
This article was published, with permission, from our sister website, GenerationHub.
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