Solar developers claim Michigan utility is illegally blocking projects

The formal complaints with state regulators allege Consumers Energy is violating federal PURPA rules.

While Consumers Energy has received widespread praise for its long-term commitment to solar power, two national developers claim the company is illegally blocking their projects ready to be built.

Cypress Creek Renewables and sPower — a subsidiary of AES Corp. — have filed formal complaints with state regulators against Consumers Energy for allegedly violating state and federal law when it comes to purchasing power from independent producers. The developers claim Consumers is blocking billions of dollars in near-term investment.

The complaints come as the utility attempts to settle its long-term energy plan with environmental and other groups.

While Consumers says it plans to add 5,000 megawatts of solar to its portfolio by 2030, Cypress Creek says it’s ready to immediately build nearly 2,000 MW in Consumers’ service territory.

The complaint is filed by more than 250 “qualifying facilities” of Cypress Creek, or subsidiaries behind individual solar projects.

sPower claims Consumers is holding up the development of six planned projects, four of which total 75 MW in net capacity. sPower’s complaint was filed on March 19. Cypress Creek’s was filed on April 5.

The dispute is over the developers’ attempt to secure power contracts under the federal Public Utility Regulatory Policies Act (PURPA), which requires utilities to purchase power from independent producers if it can be produced cheaper than what the utility can do it for, known as the avoided cost. Developers say Consumers has a “must-buy obligation” to purchase the power, and has unilaterally put projects on hold in violation of orders from the Michigan Public Service Commission.

Cypress Creek’s attempted contracts have been “repeatedly rebuffed,” the complaint says.

“Consumers’ unlawful conduct has already delayed the Cypress Creek [qualifying facilities] planned development of solar energy facilities by over six months and continues to thwart such development and the goals of PURPA and Michigan’s energy policies to the great detriment of the Cypress Creek [qualifying facilities] and the public interest,” the complaint says.

sPower makes similar claims about the stalled development over six of its planned projects.

Consumers says the avoided cost rates approved by the Michigan Public Service Commission in October are now out of date, and entering into contracts with Cypress Creek “would result in more than a billion dollars in excess costs for Consumers Energy’s customers,” according to Katelyn Carey, a spokesperson for the utility. “The position of Cypress Creek forces our customers to pay for unnecessary energy and capacity — all at higher prices.”

She added that the utility is processing hundreds of interconnection requests submitted by developers since 2017. In a separate case before the Public Service Commission, Consumers is requesting partial relief from regulators, since the “unprecedented volume of interconnection requests has posed a challenge for the company,” Carey said.

‘Collateral attack’

Cypress Creek has developed more than 2,250 megawatts of solar in more than a dozen states. It has 1,876 MW under development in Consumers’ service territory. sPower operates more than 1,400 MW of utility-scale solar projects across the U.S. and has six projects under development in Consumers’ territory.

Consumers has said it’s been overwhelmed by the amount of interest from solar developers who are seeking to connect thousands of megawatts of solar power to Consumers’ system. Federal PURPA rules requiring utilities to enter into contracts has complicated the process and has been the subject of multiple Public Service Commission and court rulings for more than a year.

In October, the commission issued a ruling meant to address the situation, allowing for up to 150 MW of PURPA projects under previously approved avoided costs that include energy and capacity. Beyond that, developers would have to agree to lower rates for only the energy of their projects.

sPower and Cypress Creek are attempting to build projects within the 150 MW limit. Cypress Creek wants to develop beyond that, saying the energy-only rates are still competitive and would make projects profitable.

Consumers says it hasn’t moved forward with contracts for the 150 MW because the Public Service Commission’s Oct. 5 order is still being challenged. “In addition, Consumers Energy has petitioned [the commission] to rescind the rates set forth in that case because even [the commission] has described those rates as ‘stale’ and ‘woefully out of date.’”

However, the developers claim Consumers is acting unilaterally by not processing the contracts, as if the commission had made the order itself.

sPower’s complaint asks the commission to reject Consumers’ request for interconnection relief “as the collateral attack that it is.”

Cypress Creek says that even if the commission rescinds previous orders at Consumers’ request, the developer is still entitled to contract for projects under federal law.

Long-term plans

Consumers is simultaneously seeking approval of its 20-year integrated resource plan that calls for 5,000 MW of new solar by 2030. Consumers has included the 150 MW in its long-term energy plan, and that rates “will be decided by [the Public Service Commission] in ongoing PURPA-related matters,” Carey said.

While solar and environmental groups say the goal is laudable, Cypress Creek says it’s ready to build projects now.

Cypress Creek and the Solar Energy Industries Association are only a few entities that are opposed to a proposed settlement agreement over Consumers’ integrated resource plan. The Solar Energy Industries Association opposition hinges on Consumers’ treatment of independent producers like Cypress Creek.

“This issue is integrally related to Consumers’ proposal … to transition away from the Commission’s current implementation of PURPA to a new regime based on competitive solicitations,” the association says in an April 8 filing. “Recognition of the legacy rights of [qualifying facilities] under the prior regime is a key element of that transition.”

In late March, the utility announced the agreement with support from multiple environmental groups and ratepayer advocates.

The Michigan Energy Innovation Business Council, whose members include utilities and solar developers, has been neutral on the settlement agreement. The commission has until June 10 to rule on the settlement agreement.

While there is wide agreement over Consumers’ long-term plan for solar power, the sPower and Cypress Creek complaints show a dispute over a short-term build-out.

Consumers maintains that developers will have a chance to competitively bid for projects in the future.

Speaking at an April 23 conference in East Lansing, a Consumers official said independent power producers will be a vital component in the company’s long-term plan.

“We are trying to be more and more inclusive in working with third parties with solutions,” said Brandon Hofmeister, Consumers’ senior vice president of governmental, regulatory and public affairs. “We will work with lots of third parties to provide solutions that customers want.”

Kevin Borgia, Cypress Creek’s Midwest policy director, said in an interview: “We can move prospectively to a new regime and paradigm, but first we have to deal with contracts that began under what is still currently the existing paradigm.”