Business not as usual
Utility adjusting to changes as new generation comes online
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Pictured is the new Marquette Community Solar Garden at the Marquette Board of Light and Power, which offers BLP customers the opportunity to purchase one or more solar panels and have the energy it produces credited onto their utility bills. The program qualifies for the federal Residential Renewable Energy Tax Credit, officials said. (Journal photo by Mary Wardell)
Tom Carpenter, acting executive director of the Marquette Board of Light and Power, describes how the three new dual-fuel reciprocating engines at the Marquette Energy Center operate as he stands in front of one of the engines in July. (Journal photo by Mary Wardell)
MARQUETTE -- The Marquette Board of Light and Power has been busy wrapping up construction on two major projects, setting its budget for the 2018 fiscal year and nailing down long-term rate and energy supply planning -- particularly regarding the potential shutdown of the Shiras coal-fired power plant, which garnered concern at a recent Marquette City Commission meeting.
The budget was approved unanimously by the BLP Board of Directors on Tuesday.
No electric rate increase is planned for the new fiscal year beginning Oct. 1.
BLP Board Chairman Tom Tourville said, based on the latest rate study, the utility is also "on a path for October of 2018, a year from now, for that budget to be at another zero rate increase."
Acting Executive Director Tom Carpenter said this was a challenging budget to map out, due to the brand new generation facilities. With budget projections based on estimates from studies and external data, the budget may need to be adjusted throughout the year, he said.
The board also unanimously approved change orders from Miron Construction for the Marquette Energy Center totaling close to $157,000.
The MEC was completed almost $3 million under budget and has been in commercial operation since Aug. 24.
Carpenter said in an email the initial budget for the natural gas generation facility was estimated at $65 million and the current budget came in at $62.3 million.
Construction on the Marquette Community Solar Garden wrapped up this week, with final checks underway, Carpenter said. The renewable energy resource could be online as soon as Monday, he said.
To date, about 320 of the 480 panels have been purchased by customers.
The cost is a one-time payment of $399 per panel with energy produced by the panels credited back into the customer's bill. The panels comply with a 30 percent federal energy tax credit.
In an update to the city commission, BLP Board Chairman Tom Tourville said the panels generate 320 watts per panel, and the project cost was almost $300,000.
Tourville said it's an opportunity for the city and all or part of the nine surrounding townships to participate in clean, renewable energy without having to install panels on their rooftops.
Regarding the MEC, in addition to the lower-than projected cost, Tourville said the BLP was able to take advantage of a lower interest rate, in total allowing the utility to bond $67 million instead of the originally planned $77 million.
The MEC's three new dual-fuel Wartsila reciprocating engines offer the BLP opportunities for "staging our assets, controlling our power supply costs, and purchasing power from the grid, as well as selling some power to the grid," Tourville said.
The engines, which can switch between natural gas and fuel oil, are capable of coming online within two minutes and can reach full load within five minutes, Tourville said.
Since a coal plant takes 11-12 hours to come online and that much time to cool down, the BLP has never had the opportunity to buy power from the grid when it was cheaper, but only bought from the grid when the plant broke down, Tourville said.
This option to source from the grid will lead to cost savings, Tourvillle said, especially with improvements to the grid expected in 2020, as well as Semco reliability improvements.
The BLP recently wrapped up two studies incorporating the MEC, one long-term power supply analysis completed by engineering firm Burns and McDonnell and a rate study by USF.
The power supply study analyzed a variety of operating scenarios and cost projections. The final recommendation indicates Shiras Unit 3 won't be cost-effective long-term.
"When you fold in the long-term financial policies started last fall, when you fold in the power supply analysis study and our UFS rate study, the bottom line, honestly, long-term," Tourville said, "Continuing to burn coal is not strategically or economically in the best interest of the BLP or our ratepayers. That's really where we're headed to long-term."
City commissioners balked at the news.
Commissioner Mike Conley said: "Hearing about the possibility of the closure of Shiras 3 is a sea change from when you came to us two years ago and you said, 'No,' that we need this for reliability."
Conley called it a "180-degree" change and wondered about the cost of "'mothballing' it for a future date," saying the city can't have two power plants "dead on the water."
Conley referred to the expected closure of the Presque Isle Power Plant in 2020.
The long-term viability of the Shiras facility is being impacted by market conditions and environmental regulations, according to the Burns study. Shiras Units 1 and 2, which are older, are both retired. The study recommends placing the 34-year-old Shiras Unit 3 in an out-of-service status as the most economical power supply option evaluated.
"My message tonight is not to spell gloom and doom, the sky is falling, Shiras is closing," Tourville said. "Unit 3 has 20 years of life left in it, it sure does, but when you map out what it's going to cost for this 34-year-old coal plant to live 'til it's 54, the costs to maintain that don't go up steadily, they go up exponentially, … (and) not just because of federal laws."
Mayor Pro-Tem Tom Baldini said he checked his old notes from two years ago, and remembers being told the price tag to decommission Shiras would be over $30 million and that the grid could not be relied upon.
Tourville invited the city commission to set up a work session to discuss issues in greater depth. Uncertainty in environmental regulations will be another topic of concern.
The two governing bodies are aiming to meet in October.
Mary Wardell can be reached at 906-228-2500, ext. 248. Her email address is mwardell@miningjournal.net.