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Consumers Energy settlement paves the way for more renewables

An agreement that Consumers Energy Co. reached with Michigan regulators on its plan to meet energy and capacity needs through 2040 sets the stage for the utility to eliminate coal as fuel source, add thousands of megawatts of solar to its system and significantly cut carbon emissions, the utility said March 25.

Consumers Energy in June 2018 filed an integrated resource plan, or IRP, calling for the utility to retire its remaining coal-fired capacity by 2040 and meet future demand with a mix of energy efficiency, renewables, battery storage and demand response. The CMS Energy Corp. subsidiary said the deal, born out of negotiations with a number of stakeholders including Michigan Attorney General Dana Nessel, will enable the coal phase-out and the addition of 5,000 MW of solar by 2030, both of which were a part of the initial IRP proposal. The settlement, which needs approval from the Michigan Public Service Commission, would also allow the utility to cut carbon emissions by more than 90% by 2040, the company said.

The settlement, filed with the PSC on March 23, includes provisions detailing coal unit retirements, cost recovery for demand response efforts and how the utility will procure new capacity in the future. It also maintains the utility's plan to retire two aging coal-fired units at the Dan E Karn generating complex in Bay City, Mich., in 2023. According to S&P Global Market Intelligence data, the units have a combined nameplate capacity of 544 MW and have been operating for decades. The first came online in online in 1959 and the second in 1961.

The deal also calls for Consumers Energy to study the retirement timeline for two coal-fired units at the J.H. Campbell power plant in its next IRP, which is to be filed in June 2021. The analysis, among other things, will evaluate potential retirement dates for units 1 and 2 as early as 2024 and as late as 2031. The utility has planned to retire the units in 2031 and a third coal-fired unit at the plant in Ottawa County, Mich., in 2039, according a July 2018 earnings presentation.

The two older units, with a combined nameplate capacity of 644 MW, have been operating since the 1960s.

The deal allows Consumers Energy to recover in future rates a little more than $21 million in demand response capital costs and nearly $9 million in voltage-reduction costs the utility will incur starting this June through June 2022.

Another provision of the agreement states that Consumers Energy will acquire new capacity through a competitive bidding process, with at least 50% coming from power purchase agreements, or PPAs, and the rest owned by the utility. The deal prohibits Consumers Energy affiliates from bidding on the portion of the company's new capacity acquired from PPAs.

Signing onto the agreement were the attorney general, commission staff, the Sierra Club, the Association of Businesses Advocating Tariff Equity and the Independent Power Producers Coalition of Michigan, among others. (Michigan PSC Case No. U-20165)