What to know about Michigan’s Consumers dams sale debate

Citing high costs and low revenue, Consumers Energy wants to sell 13 Michigan dams to a private equity buyer
The multibillion-dollar deal has stoked heated debate about costs, environmental impacts and public safety
Here’s what to know as a decision looms

State utility regulators could soon decide whether Consumers Energy can sell 13 of Michigan’s largest dams to a private equity buyer, in a decision that could have major implications for rivers, rural economies and energy bills.

The looming decision — which had been expected this week before Consumers requested a delay — follows years of deliberations about the aging impoundments in some of the Lower Peninsula’s most well-known rivers.

Proponents of the proposed sale see it as a way to preserve the vast recreational reservoirs created by the dams, which attract tourists and create valuable waterfront property.

Opponents contend the deal is too risky and expensive, and some argue dam removal would be better for taxpayers and the environment.

Here’s what to know as the Michigan Public Service Commission prepares to rule on the sale:

The backstory:

For years, Consumers has been looking to exit the hydropower business, citing mounting costs to maintain century-old impoundments in the Kalamazoo, Grand, Muskegon, Manistee and Au Sable rivers that provide little power.

After years of debating whether to keep, sell or demolish the dams, Consumers announced last fall that newly established firm Confluence Hydro had agreed to buy them for $1 apiece. In exchange, Consumers would ink a 30-year contract obligating its ratepayers to buy back the power at twice the market rate, plus a cut for Consumers.

Utility officials call the plan the cheapest option for ratepayers and a godsend for the small-town economies that depend upon fishing, boating and tourism opportunities created by the dams.

Related:

Confluence, a subsidiary of Maryland private equity firm Hull Street Energy, has vowed to modernize the dams to continue operating for decades to come.

Sale critics, including Gov. Gretchen Whitmer, Attorney General Dana Nessel and environmental and ratepayer advocates, argue loopholes in the deal would instead let Confluence pocket profits while delaying maintenance, ultimately leaving taxpayers with the bill.

They point to the Edenville, AuTrain and Cheboygan dams as examples of what could go wrong.

In June, an administrative law judge overseeing sale deliberations deemed the proposal “highly problematic” and urged the Michigan Public Service Commission to reject it.

The commission had been expected to decide the case this week, but no vote occurred after Consumers made a last-minute plea for time to negotiate with sale critics.

“There may be an opportunity for the parties to reach a constructive solution,” company lawyer Bret Totoraitis stated in the written request.

Sale critics contend the time for negotiations has passed.

“Consumers has no authority to unilaterally dictate the case schedule,” wrote Stephen Campbell, a lawyer for the ratepayer group Michigan Association of Businesses Advocating for Tariff Equity.

The proposal has divided river communities

On one side, small towns where economies and lifestyles revolve around boating, fishing and swimming in the vast lake-like reservoirs behind the dams. On the other, river lovers who favor removing dams to restore natural flows with more fish and colder water.

Perhaps nowhere is the debate more intense than on the Au Sable River, a nationally renown fly fishing destination where six of Consumers’ 13 dams are located.

Economic studies commissioned by Consumers found that the dams bolster property values and create hundreds of jobs in the tourism-dependent communities along the Au Sable. Removing them would reduce gross regional product by millions, according to the analyses by Public Sector Consultants.

Dam opponents have criticized the studies, noting that free-flowing rivers are also a tourism asset.

They argue the appeal of boating and fishing in reservoirs doesn’t justify the environmental harm inflicted by dams, which warm the water, block fish migration and trap sediment upstream.

While deliberations proceed, Consumers is delaying dam safety upgrades

The company was slated to begin a $350 million replacement of the Hardy Dam spillway last year, but now wants to push the start date back to December 2028.

The largest dam in Michigan, Hardy is 95 years old and doesn’t comply with federal standards requiring high-hazard hydropower dams to be capable of passing the largest possible flood.

Expanding the spillway would fix that problem. While Consumers officials have described the project as a “critical need,” they argue it’s not “feasible nor prudent” to start construction while sale talks are ongoing.

Some hydropower watchdogs fear the delay puts downstream communities at risk, while others see slim odds that a record-breaking flood will threaten the dam anytime soon.

The deal comes with a controversial $270 million payday

While Consumers would no longer own or operate the dams, its profits from the structures would skyrocket.

That’s because the deal includes a “financial compensation mechanism” through which Consumers would collect $270 million from ratepayers for buying back the dams’ power.

That’s on top of the $160-per-megawatt hour those same ratepayers would pay to Confluence Energy — an above-market price that’s supposed to cover maintenance costs and a profit margin for the company.

Critics of the arrangement have accused Consumers of “double dipping” on unwanted assets that have already generated untold millions in profits for the company.

Company leaders say they’re within their legal rights, citing a 2023 law that allows utilities to profit off renewable energy contracts.

In an effort to rally support for the sale plan, Consumers told regulators in July it’s willing to send the profits to a dam safety fund rather than pocketing them.

What happens next?

That’s not clear.

The three Whitmer appointees who sit on the Michigan Public Service Commission are not required to follow the administrative law judge’s advice, and have not offered a new timeline for their decision.

They could approve or reject the sale outright, or impose conditions that Consumers must meet to gain approval.

It’s also possible — though some say unlikely — that Consumers and its opponents could reach a settlement agreement that looks different from the current deal.

Company officials had previously refused to consider conditions on the sale, but now say they’re open to conditions that are “consistent” with the existing deal.

If commissioners approve the sale, opponents may appeal. If they reject it, Consumers has vowed to decommission all 13 dams.

Decommissioning can mean many things, from full removals to partial teardowns or mere operational modifications. Dam removal would require multiple layers of regulatory review, likely triggering intense deliberations about whether it’s the right approach for ratepayers, rivers and the public.

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