The Michigan Public Service Commission issued an order allowing Consumers Energy Co. to convert the coal-fired TES Filer City Station to burn natural gas, but the utility still needs regional and federal approvals before it can proceed.
The PSC in a Feb. 5 order approved a settlement agreement filed by Consumers Energy attorney Robert Beach on Jan. 19. The settlement allows the CMS Energy Corp. subsidiary to revise its power purchase agreement, or PPA, with the station to account for the conversion. The TES Filer City Station LP is majority-owned by CMS Energy and Tondu Corp.
The initial PPA was approved by the commission in 1987 and was for energy and capacity from the 60-MW cogeneration plant, which burns a mix of bituminous coal, waste wood and paper sludge to make electricity and steam. On May 4, 2017, Consumers Energy amended the PPA, making three main changes: to account for the conversion, establish a new payment amount, and extend the term of the contract for 15 years after the conversion. The converted plant is expected to have a net output of about 225 MW, according to a settlement agreement. It will also continue to produce steam. The revised agreement also allows the utility to recover the new payment amounts.
CMS Energy spokesman Brian Wheeler said the company still needs additional approvals before the project can move forward, including from regional grid operator Midcontinent ISO and the Federal Energy Regulatory Commission.
"We hope to start construction by mid-2018 if we receive all approvals, and operation of the converted plant would start by the middle of 2020," Wheeler said in a Feb. 6 email.
In its order, the commission concluded that the settlement agreement is in the public interest. Converting is expected to save customers about $45 million, on a net present value basis, over the 15 years of the extended contract, Beach said in the agreement.
Converting the plant would also help Consumers with a long-term objective of reducing the amount of coal-fired generation in its portfolio. The Filer City plant's primary source of coal in 2017, according to S&P Global Market Intelligence data, was Signal Peak Energy LLC's Bull Mountains Mine No. 1 in Musselshell County, Mont.
The agreement was signed by Consumers Energy and commission staff. Intervenors including the Residential Customer Group, which represents residential consumers; the Independent Power Producers Coalition of Michigan, representing competitive generators; and Michigan Department of the Attorney General Bill Schuette did not sign the settlement agreement but agreed not to object. (Michigan PSC Case U-18392)
