LANSING – An agreement has been reached between Cliffs Natural Resources and WEC Energy Group to provide the Upper Peninsula with long-term electric supply, the state announced Monday.

The new agreement, if approved, would result in 170 megawatts of new natural gas-powered generation across two sites in the U.P., a statement from Governor Rick Snyder‘s office indicated. In addition, the plans would allow for the retirement of WEC Energy Group’s Presque Isle Power Plant in Marquette by 2020 as provided for in the 2015 merger settlement agreement.

“Many parties worked together to develop alternatives to provide the U.P. an affordable, reliable, and environmentally protective solution,” Snyder said. “The solution being proposed today is extremely promising, especially given the ability to easily adapt to changing demands.”

In January 2015, Snyder and Attorney General Bill Schuette had reached several agreements with utility companies in the U.P. in the wake of a decision by the Federal Energy Regulatory Commission regarding a tariff that would’ve significantly impacted those customers (See Gongwer Michigan Report, January 13, 2015).

There were four agreements in principle:

  • We Energies sold its business, including the Presque Isle Power Plant, which supplies energy for most of the UP, to Upper Peninsula Power Company (UPPCO);
  • Cliffs would purchase a significant majority of its power from UPPCO until the plant’s retirement;
  • A company named Invenergy would build, own and operate a new, natural gas-powered, combined heat and power facility on Cliffs’ site to supply electricity and steam to Cliffs, with excess going to other utilities; and
  • Snyder, Schuette, the state’s Public Service Commission, Cliffs and We Energies would notify FERC and the PSC of their position of “no objection” to the merger of Wisconsin Energy and Integrys Energy Group (now known as WEC Energy Group).

The agreement applauded Monday requires approval from the PSC, but the establishment and operation of new generating facilities would resolve long-term reliability concerns associated with the planned retirement of Presque Isle Power Plan and preclude any need for additional or unnecessary transmission costs borne by Michigan ratepayers, the governor’s office said.

“When I began my service with the state of Michigan in the fall of 2011, there were discussions of PIPP’s closure as soon as 2017, but no generation solution was in the process of development and costs were predicted to be enormous,” Valerie Brader, executive director of the Michigan Agency for Energy, said in a statement.

“I am very grateful to all the private partners who met over a series of years to explore alternatives,” she said. “Residents and businesses of the U.P. will now be able to examine an option that is more adaptable, affordable, reliable, and environmentally protective than appeared possible just a few years ago.”

Pending regulatory approvals, commercial operation of the facilities is expected to begin in 2019, a year before Presque Isle’s retirement, as had been agreed upon.

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