Dive Brief:

• The Michigan Public Service Commission last Friday approved a new electric and natural gas utility to serve the state's Upper Peninsula, which has been the subject of longstanding reliability concerns. 
• The new company, Upper Michigan Energy Resources Corp., will serve about 40,000 customers formally served by subsidiaries of Wisconsin-based WEC Energy Group. The utility holding company and Michigan's attorney general struck a settlement earlier this year to create the new company, Platts reports.
• The new company is expected to ask for approval to build two 170 MW gas power plants next year to make up for the retirement of WEC's Presque Isle coal plant, which currently supplies the region.  

Dive Insight:

Michigan's scenic Upper Peninsula, sparely populated and transmission-constrained, has been the subject of capacity concerns for the better part of two years.

In 2014, mine operator Cliffs Natural Resources announced it was switching its power supplier away from a WEC company, taking 85% of the demand for the Presque Isle plant away with it. That prompted WEC to announce it would retire the plant, leaving U.P. residents without a reliable source of power. 

Michigan lawmakers responded by pressuring WEC to keep the plant open in the short term as a solution was devised. In August, stakeholders signed a settlement agreement allowing the retirement of the coal plant and the creation of the new U.P. utility, along with plans for two gas plants. 

The Michigan PSC approved that settlement this week, with Chairman Sally Talberg saying she "expects that creation of the Michigan-based utility [to] enable some 35,000 electric and 5,000 gas customers in the Upper Peninsula to have access to affordable, reliable and safe energy," according to Platts. 

Michigan as a whole also faces its own capacity issues, with recent numbers from grid operator MISO showing the state could face a 300 MW shortfall by June of next year. In response, the state and grid operator have devised a plan that would secure needed capacity three years in advance to ensure reliability.

That plan has yet to be finalized. Michigan's utilities are also pushing their own legislative proposals they say would ensure reliability, but critics say would eliminate the state's modest electricity choice program.