WEC Losses It's Biggest Customer, YOU NEED TO KNOW THIS
Curious how the Wall Street business news isn't picking this up. Here's the Milwaukee Journal article.
Upset over four rate hikes in five years, We Energies’ largest customer has signed on with a new electricity provider to power two iron ore mines in Michigan’s Upper Peninsula.
Cliffs Natural Resources Inc. has notified We Energies that it will begin buying electricity from Integrys Energy Services, a retail electricity provider that markets electricity in states that have opened up their power markets to competition, spokesman Dale Hemmila said.
Cliffs spent $120 million with We Energies last year, according to a Cliffs filing with the Michigan Public Service Commission.
“The reason really comes down to a cost figure,” said Hemmila. “Over the last five years we’ve seen our rates through We Energies increase by roughly 110%. With Integrys we will see a reduction in energy costs in the magnitude of tens of millions of dollars."
Cost savings are projected at 17% to 26% under the multi-year deal the mines have signed with Integrys, Hammila said.
The mines’ change of electricity providers was disclosed by Wisconsin Energy Corp. Chairman Gale Klappa during an investor conference call Wednesday afternoon. Klappa said the change would not have any impact on the Milwaukee utility company’s 2013 earnings.
“We're evaluating our options for mitigating this loss of load for 2014 and beyond,” he said.
In response to a question from an investment analyst, Klappa said. “We simply have to look at the future of the Presque Isle Power Plant up in the Upper Peninsula.”
The utility tallied up the impact of the recent customer departures on a web site that tracks customer choice in Michigan. Of 2.5 million megawatt-hours of sales in the Upper Peninsula last year, about 56% are now poised to leave We Energies.
The future of that power plant has been up in the air in the past. The utility was considering a plan to shut the Presque Isle coal-fired power plant in Marquette because of more stringent air pollution rules being imposed by the U.S. Environmental Protection Agency.
The potential shutdown spawned a series of proposals — which generated controversy — that would have seen new power lines built to supply electricity to the Upper Peninsula, at a cost of nearly $1 billion.
Instead of shutting it down, We Energies last year struck a deal with Michigan-based Wolverine Power Cooperative to keep the plant running and in compliance with EPA regulations. That would be accomplished by Wolverine investing up to $140 million in environmental contol equipment to reduce air pollution generated by the power plant – and Wolverine taking an ownership stake in Presque Isle.
The power plant employs 160 to 170 people.
The mines employ about 1,600 people in the Upper Peninsula, including about 340 who returned to work this week to restart the Empire mine, which has been idled for several months, Hemmila said.
But that restart is temporary, as the Empire mine is scheduled to close next year, Hemmila said. The outlook for the Tilden mine, which is the larger of the two mines, is more stable because Cliffs recently signed a long-term deal to supply iron ore to a key customer through 2024, he said.
We Energies has not seen significant customer defections under the Michigan electric choice law until now. A number of smaller customers, including a paint store and bank branch, have recently notified they are signing on with alternate suppliers, Klappa said.
"We are the last utility that I'm aware of in Michigan to see customer switching,” said Klappa. “From 2002 up until June of this year, we hadn't lost a single customer in the Upper Peninsula.”
We Energies' primary operations are in Wisconsin, a regulated state that does not allow competition, as well as Michigan, which has opened up a portion of its market to competition.
Under Michigan’s utility choice law, the number of customers that can move to a new supplier is capped at 10% of a utility's sales. However, a legislative change in Michigan in 2008 exempted the mines from that 10% cap.
Pretty interesting. WEPCo has talked about shutting down PIPP for a long time. Nearly all the power went to Cliffs Mining. They lose the contract to Integrys (that has no generation interest in the region). The transmission provider has fallen short of wheeling power to the area on several occasions. Now WEPCo has no customer and no reason to maintain the plant (even when Wolverine Power wants to partner); so they announce the closing of the site. MISO throws the nix on the decision because of potential regional voltage collapse. So WEPCo is forced to maintain a site that's not economically viable, to provide power to a competitor that will discount the same to a it's former customer. The only way to make this work is if the costs are distributed to other customers. The winners are Cliffs, the employees of the plant and the taxpayers of Marquette County. In effect- de-regulation means more regulation. Agreed... this is a great WSJ article.