BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION

Transcription

1 BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION Electric Generation Alternatives Analysis for Proposed ) Permit, to Install No , for an Advanced Supercritical ) Case No. U Pulverized Coal Boiler at the Karn-Weadock Generating ) Station ) COMMENTS OF INTERNATIONAL TRANSMISSION COMPANY d/b/a ITCTRANSMISSION And MICHIGAN ELECTRIC TRANSMISSION COMPANY, LLC On June 5, 2009, the Michigan Public Service Commission ( MPSC or the Commission ) issued a notice ( Initial Notice ) in the above-referenced docket seeking public comments on Consumers Energy Company s ( Consumers ) Electric Generation Alternatives Analysis ( EGAA ) for Proposed Permit, to Install No , for an Advanced Supercritical Pulverized Coal Boiler at the Karn-Weadock Generating Station. Pursuant to the Commission Initial Notice, International Transmission Company d/b/a ITCTransmission and Michigan Electric Transmission Company, LLC ( METC ), (collectively, ITC Companies or ITC ) hereby offer these Comments for the consideration of the Commission. In support thereof, the ITC Companies state as follows: I. COMMUNICATIONS AND SERVICE All communications and correspondence with respect to this proceeding should be served upon the following individuals: Emmanuel B. Odunlami Kwafo Adarkwa ITC Holdings Corp. ITC Holdings Corp Energy Way, Fifth Floor Energy Way, Fifth Floor Novi, MI Novi, MI T: T: F: F: [email protected] [email protected]

2 II. THE ITC COMPANIES ITCTransmission is an independent, stand-alone transmission company engaged exclusively in the transmission of electric energy in interstate commerce. Transmission service over ITCTransmission facilities is provided by the Midwest Independent Transmission System Operator, Inc. ( Midwest ISO ) pursuant to the Midwest ISO s Open Access Transmission, Energy and Operating Reserve Markets Tariff ( Tariff or ASM ). METC also is an independent, stand-alone transmission company engaged exclusively in the transmission of electric energy in interstate commerce. Transmission service over METC facilities is provided also by the Midwest ISO pursuant to the Midwest ISO s Tariff. The ITC Companies are subsidiaries of ITC Holdings Corp., which invests in the electric power transmission grid to improve electric reliability, improve access to power markets, and reduce the overall cost of delivered electric power. Through the ITC Companies, ITC Holdings Corp. operates regulated, high-voltage transmission systems in the Lower Peninsula of Michigan and in portions of Iowa, Minnesota, Illinois and Missouri. 1 III. COMMENTS A. There Are Defined Roles For Both Generation and Transmission In Michigan s Future Energy Landscape, And Both Generation and Transmission Development Must Be Evaluated Thoroughly To Provide The Optimum Energy Direction For The State. On June 5, 2009, Consumers Energy filed, the subject matter of this proceeding the EGAA in support of its application for a permit to install a new 830 MW coal-fired 1 ITC Holdings Corp., through ITC Midwest LLC, operates regulated, high-voltage transmission systems in Iowa, Minnesota, Illinois and Missouri. 2

3 Advanced Supercritical Pulverized Coal boiler, and the associated equipment at the existing Karn-Weadock Generating Station. Consumers Energy Company stated in the EGAA that a new baseload generating unit is needed to meet future customer demand in a prudent, reliable and cost effective manner and to eventually replace a number of its aging generating plants. 2 As stated in the Commission Initial Notice, on April 1, 2009, the MPSC entered into a Memorandum of Understanding ( MOU ) with the Michigan Department of Environmental Quality ( MDEQ ), which clarifies the MPSC s and MDEQ s role and responsibility regarding the evaluation of electric generation alternatives in connection with an application to construct new coal-fired electric generating plant. Under the MOU, the MPSC will: 1) provide technical assistance to the MDEQ on all matters related to the need for electric generation in the state, as it relates to the analysis that looks at alternatives to coal-fired generation; and 2) review the alternative analysis to assess whether energy efficiency, renewable energy, or other alternatives meet future electricity needs. 3 In essence, under the MOU, the Commission through the MPSC Staff ( Staff ) will review the alternative analysis for the proposed coal-fired electric generating plant and assess whether there are other alternatives to meet Michigan s future electricity needs. 4 As recognized by Consumers Energy Company in its EGAA, increased transmission capacity into Michigan could increase access to economic energy from other parts of the Midwest ISO; and likewise, increased transmission capacity within Michigan may also be an economical means of reducing transmission congestion and 2 Consumers Energy Company EGAA, p 3. 3 Initial Notice, p 1. 4 MPSC Opinion and Order, Case No. U-15958, Issued April 30, 2009, p 4. 3

4 increasing west to east power flows. 5 As the owner of the transmission system in the proposed plant location, ITC is the responsible entity to lead the effort in determining transmission options. Further, the singular focus of the ITC Companies on the construction, ownership and operation of electric power transmission systems places the ITC Companies in a unique position to provide insight on the electric transmission options for the electric utility to meet Michigan s projected electric power requirements and would welcome the opportunity to do so at the appropriate time. Without having the opportunity to participate in the EGAA study, it is not possible for the ITC companies to fully comment on whether costs, alternatives or options of long term power purchases from internal state resources or external resources in the Midwest ISO market could affect the need for a proposed plant. The ITC Companies believe that there are distinct roles for generation (including renewables), transmission, and energy efficiency in Michigan s future energy landscape. The ITC Companies believe that improvements and upgrades to the transmission system enhance the reliability of the State s electric system overall and improve the ability of the State s utilities to import less costly power from other parts of the country, particularly within the Midwest ISO. Thus, to provide the best energy direction for the State, a comprehensive examination of all pieces of the energy portfolio is critical. B. The AEP-ITC 765kV Transmission Project Was Not Studied In The Context Of An Alternative, Or A Transmission Option, To The Proposed 830 MW Coal-Fired Generating Plant. At page 39 of the EGAA, Consumers Energy Company stated that the BEI modeling... also considered the potential role of transmission expansion in helping to 5 Consumers Energy Company EGAA, p 39. 4

5 meet future demand and potentially reducing generation requirements. Consumers further stated that the Midwest ISO evaluated the proposed AEP-ITC 765 kv project as means of increasing transmission into Michigan and that under the Midwest ISO benefit/cost ratio analysis, the project failed to meet the economic test to justify the $2.4 billion investment. 6 The ITC companies believe that Consumers statements above are misleading because the statements imply that the Midwest ISO studied or evaluated the AEP-ITC 765 kv transmission project as an alternative to Consumers proposed 830 MW coal-fired generating plant. Contrary to Consumers Energy Company s statements, the AEP-ITC 765kV project was not studied in the context of an alternative, or a transmission option, to a generation project such as the proposed Karn-Weadock facility. Furthermore, the Midwest ISO benefit/cost analysis only determines if a project qualifies for regional cost sharing. This analysis considers changes in adjusted production cost and Locational Marginal Prices ( LMP ) to determine benefits of a studied facility. Projects such as the AEP-ITC 765kV project, with in-service dates projected several years into the future, require a benefit cost ratio of greater than 3:1. Currently, no project has passed the 3:1 benefit/cost ratio under the Midwest ISO s Regional Expansion Criteria Benefits ( RECB ) II methodology. Actually, the Midwest ISO in its targeted study on the AEP- ITC 765kV project stated that the benefit/cost ratio of 3:1 for long term large scale transmission projects could be unreasonable. 7 The RECB II methodology also does not consider longer term benefits of Extra High Voltage ( EHV ) transmission since the benefits are only evaluated on a 10 year 6 Consumers Energy Company EGAA, p Midwest ISO Targeted Study Preliminary Technical Report AEP-ITC 765kV, p 25. 5

6 basis rather than looking at benefits that might accrue beyond the 10 year mark. The RECB II methodology does not take into account many other benefits that an Extra High Voltage project like the proposed AEP-ITC 765kV might produce, such as: societal benefits of reducing carbon emissions; the economic benefits of reducing energy losses; and congestion relief. The Midwest ISO has noted the need for a broader set of value metrics and stated in its Targeted Study that, to fully capture the value of the proposed long-term project, a broader set of value metrics should be under consideration for justification. 8 Indeed, the Midwest ISO in its letter dated May 19, 2009 to Consumers Energy stated: there continues to be a need for increased capacity resources and transmission capacity to meet the market needs of the Midwest ISO. 9 Thus, ITC agrees with the Midwest ISO that there continues to be a need for transmission infrastructure additions to integrate new generation, including renewable resources, and a wider set of metrics should be utilized to fully gauge the benefits of transmission projects, and indeed, all future EHV projects. C. Michigan Customers Should Not Incur Additional Generation Costs That Do Not Provide Demonstrable Benefit. Consumers Energy has testified many times of the need for a cost- benefit study in developing transmission projects. Recently, Consumers testified before the U.S. House Energy and Commerce Committee, Subcommittee on Energy and the Environment that it supports transmission development if the benefits exceed cost by a reasonable margin. 10 Likewise, Consumers reiterated this position in its EGAA stating that specific 8 Midwest ISO Targeted Study Preliminary Technical Report AEP-ITC 765kV, p 7. 9 See EGAA Appendix. 10 See June 12, 2009 Testimony of David W. Joos on behalf of Consumers Energy before the U.S. House Energy and Commerce Committee. 6

7 transmission project should be subject to thorough cost-benefit scrutiny. 11 Notwithstanding Consumers position of the need for a cost-benefit study for transmission projects, the instant filing is devoid of any cost-benefit study that demonstrates the margin by which the benefits of the proposed 830 MW coal-fired plant exceed the costs (billions of dollars) to be incurred by Michigan ratepayers. ITC believes that billions of dollars in investment such as the proposed plant should likewise be subject to a cost-benefit analysis that other alternatives would be measured against. As correctly recognized by Consumers in its filing, Michigan s economy has been in a state of free fall due to the unprecedented collapse in the manufacturing sector, spearheaded by a decline in auto sales. To that extent, and without any supporting costbenefit study, ITC is not sure if the proposed 830 MW coal-fired plant will, apart from escalated Capital and Operations and Maintenance costs, benefit Michigan ratepayers. The ITC companies believe that generation should not be planned for the growth of a particular utility, but rather for the good of the State Michigan customers. Further, considering the projected load growth in Michigan, 12 the statutory mandate of 500 MW of renewable energy capacity by 2015 for utilities with more than 1 million customers, including energy efficiency and demand management programs, ITC believes that modest transmission upgrades could facilitate the purchase of the needed power from in-state resources or the Midwest ISO market. However, ITC believes that the Commission is the appropriate body to determine the need for the proposed 830 MW coal-fired plant; and as such, ITC takes no position at this time. 11 Consumers Energy Company EGAA, p Between 2008 and 2009 electric load has fallen by about 2500 MW across the state. 7

8 IV. CONCLUSION ITCTransmission and METC respectfully request that the Commission consider the comments herein in the instant proceeding. Respectfully submitted, DATED: July 7, 2009 /s/ Emmanuel B. Odunlami Regulatory Counsel ITC Holdings Corp Energy Way, Fifth Floor Novi, MI (248)