27 May 2010

Consumers Energy Suspends $2.3 Billion Coal-Fired Power Plant near Bay City

Bay City News

HAMPTON TWP. — Consumers Energy is halting a project to build a $2.3 billion coal-fired power plant on the shores of Saginaw Bay in Hampton Township.

Officials from the company announced today that Consumers is deferring - not canceling - plans for the 830-megawatt plant that was expected to create 1,800 construction jobs and more than 100 permanent jobs when the facility went online in 2017.

Officials said the decision to put off the project was made because of reduced customer demand for electricity and forecasted lower natural gas prices, among other factors.

"It's a combination of customer demand just being lower and significantly lower natural gas and electricity prices," said David G. Mengebier, senior vice president of governmental and public affairs for Jackson-based Consumers Energy.

Mengebier said the company, in 2009, generated 900 megawatts of energy less than it projected. He also said original projections for the amount of energy the company will generate in 2017 - when the new plant was to become operational - were 700 megawatts above what the company now believes it will generate, based on customer demand.

"We continue to believe that new clean coal generating capacity will be in the long-term best interests of our 1.8 million electric customers as part of a balanced energy portfolio," John Russell, president and CEO of Consumers Energy and its parent company, CMS Energy, said in a statement.

"But, the current timetable for the new unit isn't consistent with today's market conditions. Based on the latest market dynamics, we have determined that it is in the best interest of our customers to defer development of the new plant at this time."

Mengebier said the deferment has nothing to do with opposition from the Natural Resources Defense Council or other environmental groups that oppose construction of a new coal-fired plant.

"They'll claim victory, but the fact is ... it had nothing to do with whether to build this plant or not," Mengebier said."It had everything to do with what are the market conditions and how do they affect the economics of this project and the timing of it?"

Consumers Energy announced plans to build the new plant at its Karn-Weadock Generating Complex in 2007 and received its air permit for the project from the Michigan Department of Environmental Quality in December.

The NRDC filed a lawsuit in Ingham County Circuit Court in March challenging the air permit.

As part of the permit process, Consumers agreed to shutter up to seven of its oldest, less efficient coal-fired power plants in Michigan when the new plant in Hampton Township came online.

Mengebier said the company will now take another look at those plants to determine their future and whether to retire, mothball or upgrade those facilities.

Meanwhile, Mengebier said Consumers Energy plans to invest $730 million from 2011 to 2015 to make environmental upgrades to the Karn-Weadock plant based on future clean air and clean water legislation.

He said that work, and other future projects at the plant, is expected to create and retain more than 4,300 jobs through 2018.

Mengebier said coal still will be a part of Consumers Energy's future.

"I think that there is a consensus in this state for building new clean coal plants," he said. "I think it will be part of Michigan's future."

Local politicians want to believe it will still be a part of Bay County's future, too.

"We obviously want to see this move forward," said State Rep. Jeff Mayes, D-Bay City, who has been an avid supporter of the project.

"We also know there's a significant investment in Michigan regarding energy today, not only in terms of green energy in the region and around the state, but also anticipated in transmission."

Mayes said when it comes to the construction of the plant, under the energy laws we are under, it puts any investment under greater scrutiny.

"The demand for power has dropped off more between 2000 and 2008 than anticipated," said State Sen. Jim Barcia, D-Bay City, who also supports the project. "It doesn't mean it's a death sentence for the plant but it certainly extends the time frame in which Consumers Energy will pursue this."

Barcia said he believes the company is doing what it believes to be the best thing for its customers and the future of energy in Michigan.

Michael Seward, president of the Bay Area Chamber of Commerce, reiterated that there will still be investment in Bay County from Consumers Energy and today's announcement is not a death knell for the proposed plant.

"We have to remember this is a deferment and they aren't canceling the program," Seward said. "There's still going to be a very large investment in the area in Karn-Weadock."

Russell said Consumers Energy will continue monitor customer demand, fuel and power prices and other market conditions, but has set no timetable for a future decision about the project.

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