LANSING – Citing low demand for electricity, an abundance of cheap natural gas and new costly environmental regulations, Consumers Energy is scrapping its plans to build its first new coal plant in three decades and will mothball seven of its active coal-fired units by 2015.
The Jackson-based utility announced Friday it was canceling its plan to build a $2 billion, 830-megawatt coal plant near Bay City – a project it announced more than four years ago.
In May, it had announced it was deferring its plans for the plant, saying demand was down due to the recession and the advent of shale gas technology that has pushed down prices.
Consumers Energy spokesperson Jeff Holyfield said those remain the reasons why they are now canceling plans for the plant.
“Those make coal-fired power plants less economically attractive,” he said.
In July, the utility was granted an 18-month extension on its air permit for the plant by the Department of Environmental Quality. Mr. Holyfield said they will be sending DEQ a formal letter announcing their decision.
Environmental groups and others fought the proposed coal plant in Bay City from the beginning and are celebrating the news.
“We are really excited about that,” said Tiffany Hartung, with the Sierra Club of Michigan’s Moving Beyond Coal Campaign. “We’re glad to see they are making a final decision.”
Taking it off the table creates an opportunity for Michigan to grow its clean energy economy, she said. She noted this is now the 159th coal plant nationwide to be cancelled since 2001, out of more than 200 that have been announced.
Dave Waymire, spokesperson for the Customer Choice Coalition, said this was Consumers’ plan all along.
“This is only the formal burial of a plan that was hatched in 2007 to manipulate the Legislature and Governor (Jennifer) Granholm into killing competition and restoring monopoly power to the two major utilities,” he said.
He said his group provided data in 2008 to the Legislature that proved no new plants were needed, but said Consumers told lawmakers that they were until the law was passed and then started to backpedal. And ever since, the utilities have insisted the provision in the law limiting competition should be kept in place so they can make other investments, he said.
But Mr. Waymire said in states where there is competition, there is plenty of investment in utilities.
“It’s time for the Legislature to go back and restore competition,” he said.
Mr. Holyfield added the utility still plans to invest $6 billion in the state over the next five years, and that is only possible because of the 2008 energy law. Those include two new wind farms now being developed.
“We have plans in place to make sure we have enough adequate power to serve our customers,” Holyfield said.
The oldest units the utility has and is planning to mothball entered service during the Truman administration.
But Holyfield said it’s not the age of the units, but the pending state and federal environmental regulations that would make the units in Muskegon, Bay City and Erie no longer economical. In total, those units produce 950 megawatts of electricity.
Rep. Charles Brunner (D-Bay City) happened to be at the plant Friday afternoon for a scheduled “pizza and politics” event and was advised of the news as he was leaving to attend it.
“It’s very disappointing,” he said.
Brunner said he recognizes it was a business decision, but said it could have had a huge economic impact on the community.
Brunner said he was told by the utility that those employees in Bay City would be transferred to other facilities.
“They said they committed to helping those folks,” Brunner said.
Holyfield said because this is all still three years off, he is unsure of how many jobs could be lost.
He said if market conditions change or federal or state environmental regulations change, they could alter their plans for those units. Some could be converted to natural gas units or they could be decommissioned.
Hartung said she also hopes Consumers will put forward a transition plan for the communities affected that had relied on the tax revenue the units generated, as well as the workers employed there.
James Clift, policy director for the Michigan Environmental Council, said the decision will result in cleaner air and should reduce the need for high, annual rate increases on customers.
“We think it’s basically good news for ratepayers and the environment,” Clift said.
On mothballing the seven units, Clift said that is something his organization has been asking the Public Service Commission to do for years.
“It’s excess capacity the utility has been holding onto,” he said. “We knew they didn’t need the new plant, and they didn’t need all the ones they had.”
He said he expects Detroit Edison to be making a similar announcement in the not so distant future.
“We think this is just the first round,” he said.
Scott Simons, spokesperson for DTE Energy, said they have been looking at capacity issues, but have not made any decisions yet.
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