Michigan agencies, outside groups question Consumers dam sale plan

State officials and outside groups are questioning Consumers Energy’s assertion that selling 13 hydropower dams to a private equity firm would benefit ratepayers
Company officials contend the $1.2 billion sale plan is cheaper than keeping or decommissioning the dams
Some question that math, accusing Consumers of inflating the cost of alternatives

State officials, ratepayer advocates and environmental groups are questioning Consumers Energy’s proposal to sell 13 hydropower dams to a Maryland private equity firm, arguing the company used faulty math to determine a sale is the cheapest option for ratepayers.

In filings Monday, some called on the Michigan Public Service Commission — a trio of appointed regulators tasked with vetting the plan — to reject the sale, while others proposed a host of conditions to protect ratepayers and the public from inheriting costs to maintain the century-old impoundments.

The concerns come as Consumers Energy looks to sell its unprofitable hydropower fleet to Confluence Hydro, a newly created subsidiary of the Maryland private equity firm Hull Street Energy.

Consumers wants to sell the dams for $1 apiece, then sign a 30-year contractto buy their electricity back at a premium price of $160 per megawatt-hour, plus a 2.5% annual price increase. Company officials say the arrangement, which will cost Consumers $1.25 billion, makes financial sense because it would cost hundreds of millions more to decommission the dams or invest in maintaining and repairing them.

RELATED:

In a statement provided to Bridge Michigan, Consumers spokesperson Katie Carey said the company stands by that estimate.

“The sale to Confluence Hydro is the most affordable option,” Carey said.

Neighboring communities that depend on the artificial lakes created by the dams have responded to the proposal with enthusiasm, seeing it as a way to secure the lakes’ future.

Morgan Heinzman, supervisor for Croton Township near the Croton and Hardy dams on the Muskegon River, called the dams “central to the Township’s identity, property values, and ability to maintain essential public services” in written testimony that advocated for the sale.

But others expressed concerns about high electricity costs stemming from the agreement, risks to public safety if new owners fail to invest the hundreds of millions of dollars needed to repair and upgrade the facilitiesand continued harm to rivers that are warmed and fragmented by the impoundments.

Michigan utilities have a history of selling or giving away unprofitable dams to more loosely regulated private owners that fail to maintain them, resulting in dangerous dam breaks and bankruptcies that shift repair costs to taxpayers.

In a filing Monday, Public Service Commission staff agreed with Consumers Energy that a sale is the cheapest option, but expressed “significant concerns” that the deal could lead to the structures becoming “stranded assets.”

That concern was echoed by representatives for the Michigan Attorney General’s Office and environmental and ratepayer advocates.

Those groups also challenged the accounting Consumers used to decide whether to keep, sell or decommission the dams, with two groups contesting the company’s claim that a sale is the cheapest option.

“There are serious concerns here that any Consumes Energy electric customer needs to be looking at,” said Rod Williamson, executive director of the Association of Businesses Advocating Tariff Equity, a group representing industrial power customers.

He described the proposed sale as the most profitable option for Consumers, but “the most expensive option” for its ratepayers.

Officials representing the Michigan Department of Natural Resources and a coalition of environmental groups also questioned Consumers’ math, contending among other things that the company vastly overestimated the cost of decommissioning the dams.

Decommissioning is the preferred solution for many river advocates because dams fragment, warm and alter the flow of rivers to the detriment of native coldwater fish and other organisms.

“Consumers has publicly acknowledged that these hydropower projects are economically marginal,” said Bob Stuber, executive director of Michigan Hydro Relicensing Coalition, one of several environmental groups opposing the sale. “So it begs the question: If Consumers is challenged to turn a profit from these projects, how will a private equity firm be able to do it?”

Beyond skepticism about Consumers’ cost estimates, intervenors raised concerns about how a sale could impact a host of other public concerns, from dam safety to future access to the 32,000 acres of land Confluence would obtain along with the dams.

Established in 2014, Confluence at one time owned 47 dams but has since sold all but one. Company officials have said they plan to keep the Michigan dams long-term, although the proposed sale doesn’t require them to do so.

Confluence intends to form 13 separate limited liability companies to own each of the dams, an arrangement company officials have described as routine but critics see as a way to avoid financial liability for the dams’ long-term maintenance or eventual removal.

In testimony to their bosses on Monday, staff with the Public Service Commission recommended requiring a “parent guarantee” through which Hull Street Energy would inherit responsibility for the dams in the event that subsidiaries go bankrupt.

A consultant for the Michigan Attorney General’s Office likewise recommended a host of conditions on the sale, including financial protections, restrictions on Hull Street’s ability to sell the dams and a requirement that land surrounding the dams be returned to the state if it ceases to be used for hydropower generation.

Commission spokesperson Matt Helms declined to comment on the testimony, a standard practice in pending cases before the commission.

Deliberations over the sale proposal are expected to continue for the next several months, with the Public Service Commission expected to reach a final decision as soon as September.

Thank you to our Michigan Environment Watch sponsors

Bridge Michigan Environment Watch is made possible by generous financial support from our sponsors. Sponsorship supports our independent journalism mission but does not constitute sponsor endorsement of individual articles or editorial content. Bridge Michigan journalism remains fact- and data-driven and independent at all times.

Please visit the About page for more information and to subscribe to Environment Watch. Interested in becoming a sponsor? Contact Emma Carr.

Michigan agencies, outside groups question Consumers dam sale plan

Related

We use cookies to measure our website traffic.