Utility Consultant Suggests Basing Electric Capacity Plans On Idea That Carbon Caps Are Coming

A document that Consumers Energy filed with state regulators last month describing its future electricity generation plans shows a consultant hired by the company used modeling that assumed there will be some sort of federally mandated “carbon tax or trading program” as early as the mid-2020s. Consumers Energy is one of Michigan’s two largest electricity producers, and as such, an artificial constraint on its capacity to generate electricity would have consequences across the state.

Even if no carbon restrictions are imposed by a government or regulatory agency, rate-payers will likely still be affected because Consumers Energy is planning to restrict its use of carbon emitting generation, though it isn’t including a “price on carbon” in future-looking plans. Among other things, it could result in the company having less capacity to meet demand, potentially leading to higher rates and a heavy reliance on electricity produced in other states.

The electricity utility was required to by the Michigan Public Service Commission to model 30 and 50 percent reductions in carbon-emissions by 2030 according to Consumers Energy spokeswoman Katie Carey. The models, Carey said, did not require the utility to assume a carbon tax or trading program to reach carbon-emission reductions.

“The model selected non-carbon emitting resources to replace retiring generation based solely on the economics presented to the model,” Carey said in an email.

Consumers Energy is seeking the Michigan Public Service Commission’s approval for changes to how it produces and delivers electric power. A big part of its plans is to retire all of its coal burning generating plants by 2040. Of all electricity-generating facilities, coal-burning ones would be the ones most heavily affected by restrictions such as a carbon tax or cap-and-trade arrangement. Natural gas plants would also feel the effects.

These changes would be critical for residential and business customers because coal and natural gas are the main fuel sources our statewide electric grid relies on for its “baseload capacity." Unlike renewable energy sources, they are available regardless of whether the wind is blowing or the sun shining. Without adequate baseload capacity the grid becomes less reliable.

According to the document filed by Consumers Energy, there are currently no constraints on carbon dioxide emissions from Michigan electric generation plants. But in August 2015, the federal Environmental Protection Agency released a rule called the “Clean Power Plan” that would have imposed such restrictions. The rule would have effectively made it impossible to build new coal-powered generation plants.

The Supreme Court deemed the plan unenforceable in 2016, and the Trump administration is in the process of repealing it.

Pace Global, which provided an independent review of Consumers Energy’s recent integrated resource plan, stated that it anticipates “an eventual, moderate national price on carbon.” The review also stated that “Consumers does not include a price on carbon emissions in its BAU outlook.”

Editor's Note: This story was changed to more accurately reflect Consumers Energy's views on carbon restrictions. A comment from Consumers Energy was also added.