News Analysis

Fortnightly Magazine - March 15 2000

State regulators say they won't bargain under "threat of blackouts," but their complaint only highlights how the power is shifting.

The Michigan Public Service Commission is concerned about power supplies this summer - so much so that for the third year in a row it has ordered electric utilities in the state to file plans assessing their generation and transmission capacity for the upcoming summer.

But if that's the case, then why did the PSC complain of "eleventh-hour" coercion when Detroit Edison proposed to dig its coal-burning River Rouge plant out of mothballs (it's been off line since 1980) and convert and restart it by June 1 as a 225-megawatt gas-fired merchant plant facility, owned by an affiliate and removed from the rate base to insulate ratepayers from costs?

With legislative committee hearings underway in mid-February and many tough choices still ahead for Michigan on electric utility restructuring, perhaps the PSC's concern betrayed its diminishing influence over wholesale power planning, as much as any real danger posed by Detroit Edison's repowering proposal.

Certainly, in many of those states that have completed or nearly completed the process of industry restructuring, the regulators have been seen to shift their focus from adequacy of generation to efficiency of the distribution wires network. In those states, the question of "reliability" has more to do with the frequency and duration of service interruptions than with the larger questions of whether power production will prove adequate to meet consumer needs.

In those states, the talk is not of reserve margins and shortages, but of SAIDI, SAIFI, CAIDI, CAIFI and now MAIFI, the latest addition to the reliability lexicon.

An Eleventh-Hour Threat?

Could electric users in Michigan be left in the dark this summer? That was the gist of testimony by David W. Joos, president and CEO of Consumers Energy on Feb. 9 before a Michigan Senate Committee regarding proposed S.B. 937 that would implement electric restructuring in that state.

According to Joos, the PSC should be nervous: "The state of Michigan's electric reserve margin is projected to be only about 20 percent of what regulators have historically recommended."

But was Joos simply using scare tactics to help pass restructuring legislation?

The Michigan PSC reports that in recent years, the generating reserve margin in Michigan has fallen below 10 percent, raising concerns about the summer peak demands.

In recent assessments of generating and transmission capacity, the American Electric Power subsidiary, Indiana Michigan Power, has said it should have adequate generation resources to meet the projected demand for the summer 2000 peak. But regarding transmission adequacy, it has admitted that "certain outages coupled with extreme weather conditions and/or power transfer conditions can potentially stress the system to beyond acceptable limits." Detroit Edison predicted it would have adequate resources to meet customer demands throughout the summer. But it said it would have to purchase about 2,100 MW to supplement its own generation resources, and noted that forward wholesale energy prices in the region for the summer continue to remain high. Consumers Energy also says it is prepared for the summer demand,