CMS Energy faces challenge of replacing coal-fired power

CMS Energy has said it expects to need at least 1000 MW – and possibly as much as 2500 MW – of new capacity over the coming decade in order to replace coal-fired power generation that is set to be retired. The company is also facing expiring power purchase agreements.

Plans for the currently dormant Thetford natural gas-fired power plant project in Michigan may need to be revived to meet these generation requirements, according to company officials.

CMS has announced plans to shut over 900 MW of its “classic seven” coal units in April 2016. In total, the company has roughly 8000 MW of generation capacity, most of it coal fired.

During a conference coal, CEO of CMS, John Russell, told analysts that he believes the legislature may eliminate Michigan’s controversial retail-open-access programme, while expanding the renewable portfolio standard in 2015.

In 2008, lawmakers passed P.A. 295, comprehensive energy legislation that rolled back electric choice. It imposed a 10% shopping cap on the total load of CMS and DTE, while ushering in a 10% by 2015 renewable energy requirement.

CMS and DTE opposed the choice proposal then, and continue to do so six years later.

"In 2015, we see the possibility of an increase in the RPS, continuation of energy efficiency goals, regulatory improvements and the potential elimination of retail open access," Russell said.

New capacity will be needed, both he and CFO Tom Webb said, to offset the retirement of older coal plants and replace existing PPAs with Entergy's Palisades nuclear plant and Midland Cogeneration Venture that are scheduled to expire early next decade. Both Palisades and MCV are located in Michigan.

If electric choice goes away, CMS' capacity needs may increase. "With the possibility of customers returning to bundled service, the capacity needs may be even larger," Webb said. "If we build 1000 MW of new capacity, we likely will need to build or secure 2500 MW just to replace EPA-related plant closures," he added.

Environmental Protection Agency (EPA) rules are set to cause many utility companies to retire at least some of their older coal generation. Some industry professionals have called the EPA legislature a “war on coal”.

Russell, in response to a question from analyst Dan Eggers of Credit Suisse, suggested reviving the 700 MW Thetford combined-cycle project in the Flint area is a strong possibility.

"The Thetford site is ready to go," he noted. "We do have expandability. We have gas and electric transmission. We have older units on site."

Earlier this year, CMS placed the $700 million project on hold after it agreed to buy a 540 MW gas-fired generator in Jackson for $155 million. AlphaGen currently owns the combined-cycle/peaker and is operating it on a merchant basis.

Russell added that, over the next few years, CMS probably will rely on market purchases of perhaps 400 MW to meet growing load requirements.

Edited from various sources by Sam Dodson

Read the article online at: https://www.worldcoal.com/power/25042014/cms_energy_faces_power_shortage_755/