Palisades contract may be terminated

Michigan Public Service Commissioners Norman Saari, Sally Talberg and Rachel Eubanks announce the decision Friday to allow Consumer’s Energy to terminate its power purchase agreement with Entergy when Palisades closes in 2018. The MPSC ruled Consumers is allowed to buy out the contract for $142 million instead of the requested $172 million.

LANSING — The future of Palisades still remains unclear as the Michigan Public Service Commission (MPSC) gave a ruling Friday that came with conditions.

The MPSC said Consumers Energy can buy out and terminate its power purchase agreement with Entergy Corp. for $142.1 million, about $42 million less than it had requested to buy out the contract.  

The decision was based on the commission’s estimate on the expected savings to customers.

The MPSC ruled Consumers is allowed to recover the $142.1 million through surcharges on electric customers’ bills over six years through a low-cost form of bond financing known as “securitization.” The original request was for four years.

“This securitization structure takes advantage of financial instruments uniquely available through Michigan statutes that help to reduce costs customers pay for certain expenditures,” Commissioner Rachael Eubanks said.

Chairwoman Sally Talberg said it was reasonable to have a lower amount so that the commission could ensure the savings would materialize for customers.

“The commission was not persuaded that Consumers Energy justified its request to recover from ratepayers the full $172 million payment,” Talberg said. “This is based in part on the uncertainty of Consumers’ plan to replace the power from Palisades with other sources and (on) expert testimony from staff and intervenors on how the savings would vary under different future scenarios and assumptions.”

The MPSC-approved total includes about $5.5 million in transaction costs, leaving $136.6 million for Consumers’ payment to Entergy. The original payment to Entergy would have been $172 million. 

It’s now up to Consumers and Entergy to decide if this ruling is acceptable. If the two entities agree it is, Palisades will close in 2018 as planned. 

In statements after the decision Friday, Consumers Energy and Entergy officials said they will review the recent commission ruling and will work together to consider the order.

“The outcome of this process will influence whether Entergy reconsiders the decision to permanently shut down Palisades on Oct. 1, 2018, or continues to operate the plant until spring 2022,” said Charlie Arnone, Palisades site vice president and Entergy’s top official at Palisades. “We greatly appreciate the continued patience of our employees and the local community in Southwest Michigan throughout this regulatory process, and we continue to focus on the plant’s safe and reliable operations.”

During the announcement of the decision Friday, Talberg said if the plant closes in 2018, electric reliability should still be maintained given available regional supplies of electricity, but stressed the importance of Consumers moving “expeditiously to finalize its plans to replace the energy and capacity from Palisades.”

The three commissioners, Talberg, Eubanks and Norman Saari said the decision was challenging. 

“This is a difficult decision for the commission given the far-reaching impacts,” Talberg said. “Palisades is a large source of emissions-free power that has been safely and reliably producing power 24/7 in our state. It also provides significant local benefits through good-paying jobs and tax revenue.”

Palisades employs about 600 workers and has been a part of the Van Buren County community. It began generating electricity in 1971. The plant generates 811 megawatts of virtually carbon-free electricity, enough to power more than 800,000 homes.

Saari said this order makes a very serious statement on the energy resources in Michigan and indirectly adds commentary on the national discussion on the future role of nuclear energy. 

“Nuclear plants on the east and west coasts are ceasing operations long before the laws of physics have stopped them from splitting atoms and generating electricity,” he said. “We now see that a plant in our home state is not immune to decisions based on shareholder reasoning and socio-economic value.”

He further said the decision by the MPSC is not to be taken as a comment as what should be powering Michigan’s future. 

“It’s not a declaration on how a local community should adjust to changing circumstances. It’s a simple yet complicated decision based on our legal requirement to rule on a financial proposal that impacts Consumers Energy rate payers,” Saari said.

To read the MPSC full decision on the case visit michigan.gov/mpsc and search case No. U-18250. 

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