Ratepayers in Michigan’s Upper Peninsula could see up to a $24 million refund for costs they have paid to continue running a Wisconsin utility’s aging coal plant in Marquette, federal regulators ruled Thursday.
The Federal Energy Regulatory Commission (FERC) also found that Wisconsin Electric Corp. (WEC), which owns the Presque Isle Power Plant, altered invoices as it attempted to recoup certain costs from ratepayers, as Midwest Energy News reported last year.
FERC stopped short of ruling that WEC’s actions constituted fraud and manipulation, referring it to the commission’s Office of Enforcement “for further examination and inquiry as may be appropriate,” the order says.
“Today is a great day in our continuing efforts to lower power costs for Michiganders in the U.P.,” Michigan Gov. Rick Snyder said in a statement. “We stood for the Upper Peninsula and we won.”
FERC’s ruling is the latest chapter in the ongoing saga of the Presque Isle plant, whose fate was in limbo for years after WEC sought to close it in 2013. Due to reliability concerns, though, the Midcontinent Interconnection System Operator (MISO) has required the plant to stay online. Disputes over the plant — among several utilities, government agencies, cities and companies — span more than 20 dockets before FERC.
In December 2016, Michigan regulators approved the creation of a U.P.-specific subsidiary of WEC — Upper Michigan Energy Resources Corp. — to move forward with a replacement for Presque Isle. That utility plans a $275 million, 180-megawatt natural gas project to come online in 2019, with Presque Isle closing shortly after.
Over several years, though, WEC has collected System Support Resource (SSR) payments from Wisconsin and Michigan ratepayers to keep Presque Isle open. According to the Michigan Agency for Energy, the payments have totaled roughly $60 million, meaning Tuesday’s ruling could cut the total amount of payments by nearly half.
MISO now has 45 days to make a recommendation to FERC on how much of the $24 million should be refunded.
Michigan officials also hope it will lead to greater transparency in how MISO calculates the cost to continue operating aging plants for reliability purposes.
“We need to end this system of secret deals to keep this conduct from happening again,” Valerie Brader, executive director of the Michigan Agency for Energy, said in a statement. “I was extremely pleased with today’s FERC ruling, including the fact they will investigate further, and I call on them to quickly take action on changes that would allow the state to put these kinds of charges to the smell test before they end up on our citizens’ bills.”
As the cost allocation disputes proceeded with FERC, a group of entities in Michigan alleged in August 2016 that WEC employees fraudulently post-dated invoices with a consultant to effectively increase the amount of money that could be recovered for pollution-control investments at the plant. WEC sought $1.4 million for those investments.
In July 2016, an administrative law judge said altering the records was “manipulation” and that the costs were “unjust and unreasonable.”
In response, WEC contended that the costs for complying with Mercury and Air Toxics Standards were not recoverable all along and that changing the invoice was an internal error.
According to Thursday’s order, WEC’s “procurement department made an independent decision, without consultation with the legal department, to request that the consultant reissue the MATS Invoice dated after the receipt of regulatory approvals, but Wisconsin Electric argues that such an internal operating failure does not constitute manipulation because work could not begin nor invoice paid until the Replacement SSR Agreement was accepted by the Commission.”
The utility also argued that the issue should not have been recommended to the Office of Enforcement because it didn’t reflect “knowing, intentional, or reckless misconduct.”
It is unclear when FERC’s Office of Enforcement will rule on the fraud allegations.
WEC spokesperson Amy Jahns said in a statement: “We are thoroughly reviewing the order issued (Thursday). We will work closely with the Commission’s Office of Enforcement for a conclusion of the matters referred to that office.”