Agreements that lay the groundwork for eliminating a costly utility rate payment for Upper Peninsula families and job providers, while providing the region with long-term, cost-effective energy reliability and ensuring the U.P.’s energy independence were announced recently by Gov. Rick Snyder, Attorney General Bill Schuette, Wisconsin Energy Corp. (We Energies), Upper Peninsula Power Co. (UPPCO), Invenergy, and Cliffs Natural Resources Inc. (Cliffs).

The proposed solutions meet two key policymaking goals: 1) protecting U.P. ratepayers from years of costly System Support Resource (SSR) payments for the Presque Isle Power Plant in Marquette, and 2) providing replacement electric generation in the U.P. to avoid a likely federal mandate to pay $500 million or more to remain dependent on out-of-state coal plants.

“This is a critical development for the Upper Peninsula and our entire state,” Snyder said. “The solution these agreements advance ensures reliability, rids the U.P. of years of unaffordable charges, improves the environment, and most of all gives the U.P. the power and ability to adapt to the future.”

“Our primary goal is to protect U.P. families from unreasonable rate increases to the greatest extent possible,” Schuette said. “We remain committed to vigorously opposing any short-term rate increases due to the costs of maintaining the Presque Isle Power Plant, but this agreement will help avoid long-term burdens on U.P. ratepayers while increasing energy reliability and the opportunity for future economic growth.”

While the effect on different U.P. electric customers will vary widely, they will see a reduction on their bills after the SSR payments cease, which likely will be in July.

Without protection from SSR payments, residents could be asked to pay about $150 more a year, and businesses could pay tens of thousands – or millions – more per year, depending on their location and energy use.
The four agreements in principle are as follows:

  •  UPPCO and We Energies. The electric utility businesses now owned by We Energies and Integrys (doing business as Wisconsin Public Service Corp.), including the Presque Isle Power Plant, would be sold to UPPCO, meaning a single U.P.-based corporation would provide electric service to a majority of the U.P. UPPCO indicated that it will “step into” existing rates, except that the SSR will be terminated.
  • UPPCO and Cliffs. Upon acquisition of the Presque Isle Power Plant, which is expected no later than July, the SSR payments would be terminated and UPPCO would not seek an SSR. Cliffs would purchase a significant majority of its power from UPPCO until the Presque Isle Power Plant’s retirement, anticipated in 2020 due to new federal air emission requirements impacting coal generators statewide.
  •  Cliffs and Invenergy. Invenergy would build, own and operate a new natural gas-powered, combined heat and power facility, located on Cliffs’ site to supply electricity and steam to Cliffs and excess energy to other local utilities. Initially dubbed the “U.P. Cogen Project,” the proposed facility is planned to open before the retirement of the Presque Isle Power Plant, and is expected to resolve long-term reliability concerns by providing clean, cost-effective and highly efficient generating capacity for Cliffs, while having some excess power for other utilities.
  • Regarding settlement between We Energies, Gov. Snyder, Attorney General Schuette, the Michigan Public Service Commission (MPSC) staff, and Cliffs Natural Resources. The parties have agreed to notify both the Federal Energy Regulatory Commission and the MPSC of their position of no objection to the merger of Wisconsin Energy and Integrys Energy Group, conditional upon the above agreements being approved.

While all of the agreements have a number of contingencies and are subject to further refinement, the governor said he is very optimistic about bringing these transactions to fruition and getting federal and state approvals.

“Expansion of UPPCO is consistent with our business strategy and with our commitment to the U.P. and Michigan in general,” said Barbara Siehr, UPPCO CEO.

“As the biggest employer and consumer of electricity in the Upper Peninsula with our Empire and Tilden mines, we reaffirm our commitment to the state and the U.P., and look forward to finalizing the remaining details in cooperation with all the work group participants,” said Lourenco Goncalves, Cliffs chairman, president and CEO.

“Invenergy is pleased to partner with Cliffs and the state of Michigan to develop, build and operate a new clean-energy facility in the Upper Peninsula, adding to our clean energy investments in Michigan,” said Michael Polsky, Invenergy’s president and CEO.

Gale Klappa, chairman/CEO of We Energies, said the agreements are a “tremendous step forward” that will benefit U.P. customers for decades.

Stakeholders also said they will also continue engaging other businesses and community leaders to refine cost-effective, short and long-term solutions to the U.P.’s electricity issues.