Michigan restructuring law spurs new power plant

Saturday's passage of electric industry restructuring legislation in power-short Michigan set in motion a flurry of activity. Three days after Gov. John Engler signed the bill Saturday, DTE Energy Co. subsidiary Detroit Edison Co. cut electric rates, and Panda Energy International Inc. reported plans to build a 1,000 Mw gas-fired electric generation station near Grand Rapids.


Kate Thomas
OGJ Online

Saturday's Passage of electric industry restructuring legislation in power-short Michigan set in motion a flurry of activity. Three days after Gov. John Engler signed the bill Saturday, DTE Energy Co. subsidiary Detroit Edison Co. cut electric rates 5% as required by the new law, and Dallas's Panda Energy International Inc. reported plans to build a 1,000 Mw gas-fired electric generation station near Grand Rapids.

Scheduled to be completed in the fall of 2004, Panda said the Tallmadge merchant power plant will be one of the first to be built in the state since 1990. Panda Senior Vice-Pres. Garry Hubbard indicated privately-held Panda's decision to enter the Michigan market was influenced by Gov. Engler's call for additional energy resources. Today, the state has only a 5% electrical reserve, compared to the 15% reserve margin that is often considered standard, he noted.

"We agree there is a real need for additional generation capacity in the state," Hubbard said. "With Michigan's low reserve margin, they could well see brownouts this summer. Panda will not be able to help reduce brownouts this year; however, we look forward to helping reduce this deficit when our plant comes on line in 2004."

The plant's power will be distributed through the Consumers Energy Corp. Tallmadge substation into East Central Area Reliability (ECAR), the regional electric grid. To meet the facility's cooling needs, an average of 6.5 million gpd of water will be supplied through an existing 46-in. line from Lake Michigan. Because of the size of Panda's water purchases, area residential and business users will receive up to a 50 % reduction in their water rates.

Restructuring law
Ending nearly 5 years of discussion, hearings, and review of the merits and methods for restructuring the state's electric utility industry, a special session of the Michigan legislature adopted the legislation this past weekend�including the rate reduction�to accomplish restructuring.

DTE Energy Chairman Anthony F. Earley Jr. said the result reflects the "voices of many different entities and does not provide an unfair advantage to any individual stakeholder. Michigan will now join 24 other states in the nation in adopting electric restructuring legislation."

He said Detroit Edison customers began benefiting from a 5% reduction in their electricity bills Monday, effective immediately.

Earley noted the legislation is important because it will deliver to Michigan's electric customers better reliability in the future and customer choice of electric suppliers. At the same time, he said, it presents significant challenges for the state's electric companies in managing their business during a period of lower rates.

Dearborn's CMS Energy Corp. Chairman William T. McCormick Jr. said the legislative action removes uncertainty and includes several provisions that will benefit its regulated subsidiary Consumers Energy Co., including full stranded cost recovery and the ability to build new generation under a market power test without requiring divestiture of existing generation assets. The law also includes a rate freeze for all customers until 2004; a rate cap that extends to 2005 for small business customers and 2006 for residential electricity users; choice for all customers by 2002; upgrades in the electrical transmission system; anti-slamming and anti-cramming provisions; and a fund to assist low-income customers.

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