In a July filing with the Michigan Public Service Commission (PSC), the Republican attorney general said the decline in natural gas prices and continued move away from coal-fueled generation by many power plant operators “also has put downward pressure on coal prices. The cost of coal-fueled generation is forecast to drop slightly in 2016 to $25.37/MWh versus $26.13/MWh” when Consumers filed its 2015 power supply cost recovery plan with the commission.
However, he added, the amount of energy to be produced by Consumers’ fleet of coal plants is projected to decrease by more than 2.6 million MWh this year, or 33% from the amount forecast in 2015. This significant decline appears to be related to Consumers’ retirement in April 2016 of its “Classic Seven” older coal units representing about 950 megawatts of generation, the attorney general added.
In contrast, Consumers plans to operate its Jackson and Zeeland natural gas-fired plants more this year, even though 946-megawatt Zeeland Unit 3 has incremental costs higher than some or all of the utility’s coal units, according to the attorney general.
Although the operation of natural gas-fired plants at higher incremental cost would be justified when coal plants are operating at full load, “this does not appear to be the case” in Consumers’ 2016 plan, Schuette said.
In response to an information request from the attorney general, Consumers said its remaining five coal units — three at its J.H. Campbell baseload plant in West Olive, Michigan, and two at its Karn baseload plant near Bay City, Michigan — are planned to be operated at a capacity factor ranging from 55% to 70% this year “with plant availability at much higher percentages.”
The attorney general concluded, “the company has the capacity within its coal plants to generate lower-cost power instead of running some of its natural gas plants at a higher cost.”
Consumers, a CMS Energy Corp. subsidiary, disputed Schuette’s assertion that its 1.8 million customers could save money if the utility burned more coal than gas to generate electricity. The Jackson-based utility purchased Zeeland from LS Power Group in 2007. The PSC had not issued a final ruling on Consumers’ latest power supply cost recovery plan as of late July.