UPDATE: April 21, 2022: Consumers Energy will retire its coal-fired generation in 2025 under an agreement with the Michigan attorney general, Michigan Public Service Commission staff and key stakeholders.

The agreement, filed Wednesday for PSC approval, calls for Consumers Energy to add about 8,000 MW of solar and 550 MW of energy storage by 2040. The plan would allow Consumers Energy to recover from ratepayers $815 million to buy the 1,176-MW, natural gas-fired Covert power plant next year. In a change from Consumer Energy's original proposal, the utility won't buy about 1,000 MW of gas-fired generation from an affiliated company.

Dive Brief:

• Consumers Energy on Monday threatened to abandon plans to retire its coal-fired power plant fleet by 2025 if the Michigan Public Service Commission (PSC) approves a recommended decision the utility says would unravel core parts of its integrated resource plan.

• The recommended decision released March 7 fails to provide Consumers Energy with certainty it would be able to recover the costs of retiring its coal-fired power plants early or having the power supplies to replace them, the CMS Energy subsidiary said in a filing with the PSC on Monday.

• "Without satisfactory resolution of these issues, this proceeding will unfortunately conclude without an approved new resource plan and Michigan will have lost an opportunity to expedite its transition to clean energy, reduced emissions, increased reliability, and lower energy costs," the Jackson, Michigan-based utility said.

Dive Insight:

Consumers Energy in June released a plan to exit its coal-fired generation 15 years early and to be carbon neutral by 2040.

The key elements of the plan include shuttering two oil- and gas-fired units totaling 934 MW at its Karn power plant next year and its 1,388-MW coal-fired Campbell plant in 2025.

Last year, Consumer Energy's coal-fired power plants accounted for nearly a third of its power supply, according to CMS Energy's annual report filed Feb. 10 with the Securities and Exchange Commission. 

The utility intends to replace the retiring capacity with 2,180 MW of existing natural gas-fired generation, including about 1,000 MW from an affiliated company. It also plans to add about 8,000 MW of solar by 2040 through 500-MW annual solicitations.

Consumers Energy expects to spend more than $1 billion on the plan over the next five years starting this year, according to CMS Energy's annual report. The utility anticipates the plan will save its customers about $628 million. 

A PSC administrative law judge (ALJ) recommended the commission decline to approve cost recovery for Consumer Energy's planned purchase of the gas plants from its affiliates. If the commission approves the cost recovery, it should deny an "acquisition premium" included in the purchase price, the ALJ said.

The ALJ also called for requiring Consumers Energy to conduct additional analysis before being allowed to retire its coal-fired 788-MW Campbell Unit 3.

Consumers Energy said it would reject a decision that doesn't let it buy the gas-fired generation from its affiliate if the decision doesn't provide a "reasonable" alternative path to acquiring existing generation.

Consumers Energy said it will also reject an order with an "unrealistic expectation" that the utility take on a several-hundred million-dollar impairment to buy the affiliate units at a price far lower than the contractually agreed on price.

It is critical that Consumers Energy be able to recover about $1.5 billion in unrecovered book value related to the generating units it plans to retire early, according to the utility.

"Consumers Energy will therefore reject an order requiring a separate proceeding to determine the recovery methodology or otherwise not providing certainty of the recovery methodology in this proceeding," the utility said.

The utility also refuses to take on the $1.5 billion in unrecovered debt through securitization. "The company will not sacrifice its long-term financial health by significantly and adversely impacting its credit metrics," Consumers Energy said.

Consumers Energy will no longer enter into power purchase agreements for some of its power supply if it isn't granted a "financial compensation mechanism" for the contracts as requested, according to the utility.

"Without adequate assurance of cost recovery related to the early retirement of its remaining coal generating plants and without an adequate plan to replace the capacity and energy derived from those plants, Consumers Energy will run those plants until their previously planned retirement dates, keeping Consumers Energy and Michigan reliant on coal for nearly two decades," the utility said.

Comments on the recommended decision are due March 21.