Over the past months, we have noticed a few growing misconceptions around GHBLP’s plans for transitioning to a diversified power portfolio. In concert with the Sierra Club and West Michigan Environmental Action Council, a group with the name Grand Haven Energy Organization, which is not affiliated with GHBLP, has published a handful of “Did You Know” posts through social media, several of which are based on inaccurate assumptions. In the additional Frequently Asked Questions that follow, we seek to help answer these concerns as well as addressing some misleading statements.
1. How much was the Sims Power Plant used prior to its retirement in February 2020?
In calendar year 2016 and 2017, the JB Sims Power Plant produced approximately 90% of the BLP’s system energy requirements. The BLP reduced the plant’s contributions to our energy portfolio in 2018 and 2019, but JB Sims still produced about 54% of the system’s energy requirements. In January 2020, the last full month Sims was operating, it generated over 95% of the BLP’s system energy requirements.
2. Is the regional high voltage power grid 99.99% reliable?
“What is the risk of having a temporary disconnection from the grid? Yes, Network Integrated Transmission Service (NITS) from the regional high-voltage system is very reliable. The Midcontinent Independent System Operator suggests its network service is “99.99% reliable.” The BLP began receiving NITS on May 1, 2020.
However, when the BLP discusses “improving reliability to our customers,” we are focused on investments in our local distribution system and developing a diversified power supply portfolio with a sufficient capacity reserve margin.
3. After the February 2019 closing of the Sims plant on Harbor Island, the BLP has purchased all system power requirements from other sources. Have BLP customers experienced any difference in price or reliability?
Prior to the closure of Sims, the BLP’s 69 kV local transmission lines and its interconnects to the regional network needed to be upgraded, requiring about $6 million of investment, to ensure adequate and reliable power supply could be obtained remotely (and the Sims Plant could be closed and retired). While many may not have noticed a difference, BLP system reliability has improved because of these actions and our rates have not changed.
4. Has the BLP “stockpiled” cash in its reserve account since 2017? “What amount of money has been saved since the decommissioning of the Coal Plant?” and “If saving will not be used to reduce rates, what is the reason?”
The last payment on its Sims era utility revenue bonds was made on July 1, 2016. The reduction of about $7.5 million in annual debt service empowered the BLP to reduce rates by about 6%, restore cash reserves to recommended balances, reduce its unfunded liabilities, and implement its 5-year capital improvement plan to address its aging infrastructure, implement new technologies, and begin its transition to a more diversified power supply portfolio.
In other words, these savings, and the reserves they produced, have been designated for critical current and future operational and capital needs. If the BLP is forced to spend its cash reserves on more immediate needs and not issue revenue bonds to amortize some, or most of these costs, now, we would need to increase rates to maintain necessary cash reserves for continued operations and to fund the necessary five-year capital plan.
5. Why do other neighboring municipal electric utilities have lower rates than the GHBLP (particularly Zeeland BPW)? “How do GHBLP’s customer rates compare to other energy companies?” and “What if GHBLP customers’ bills were calculated using 2021 Consumers Energy Rates?”
The Zeeland Board of Public Works does maintain some of the lowest rates in Michigan, however, its customer base is also very different than that of BLP. Over 70% of Zeeland BPW’s retail sales are to its ten largest primary retail customers. This large customer concentration obviously allows Zeeland to maintain a much smaller distribution system with total retail sales more than 33% higher than the BLP. In other words, the much smaller Zeeland distribution system has almost equal sales to its top ten users as the BLP has to all its retail customers. By comparison, the BLP’s top ten primary electric retail customers comprise about 32% of system sales and BLP has more than twice as many smaller customers to serve.
With the closure of the JB Sims Power Plant, the BLP will be obtaining its wholesale power from the same State Joint Action Agency (JAA) as Zeeland, the Michigan Public Power Agency.
A recent 2021 rate comparison between BLP and Consumers Energy shows annual savings to BLP customers of more than $6 million per year. In the absence of the BLP, Grand Haven customers would not be served by Zeeland BPW, but most likely Consumers Energy.
*updated: In March, 2021 Consumers Energy filed a request with the MPSC for an additional rate increase, estimated to raise residential rates by 9%.
6. Why is the BLP not lowering rates further given its cash reserves have now been restored to recommended levels? “What amount of money has been saved since the decommissioning of the Coal Plant?” and “If savings will not be used to reduce rates, what is the reason?”
The BLP has reserves earmarked for unfunded liabilities (plant demolition, environmental remediation, and unfunded pension obligations) and a five-year capital expenditure plan that includes replacement of aging distribution infrastructure. Not only will these liabilities and capital plans consume excess cash over the next several years, the BLP is planning to issue debt to pay a significant portion of these capital funding requirements.
BLP rates, however, remain 6% below those charged in 2016. There have been no base rate adjustments since the reduction on July 1, 2016. While it is not expected for rates to be raised or lowered in the near future, the Board has determined it appropriate to complete the transition the organization has undertaken and thereafter evaluate if further rate reductions are then appropriate.
7. Is the proposed Operations and Technology Center and 12.5 MW Combined Heat and Power Plant necessary and is it worth the $27 million investment?
The BLP has proposed building a new Operations and Technology Center on the Sims site, adjacent to a 12.5 MW Combined Heat and Power Plant (CHP) at an estimated cost of approximately $27 million. Both the operations center and CHP plant, as well as other plans for the site, will provide valuable and necessary benefits to the community, including efficient snowmelt energy and peaking generation to protect Grand Haven from wholesale power cost spikes during periods of high demand.
Neither the proposed facilities on site, nor or its contents, will be “luxurious” or “unnecessary” in nature. While the design of the building’s exterior needs to aesthetically complement the waterfront, our partners at ProgressiveAE have value engineered the space to a relatively small footprint and plan to use cost-effective construction materials like precast concrete for most of the building envelope. The BLP has maintained facilities on this site for more than 60 years and will be vacating about ½ of the property for public use.
8. Several of the Board of Light and Power votes to move forward with the Harbor Island redevelopment plans have not been unanimous, why do some members feel differently than the majority?
The proposed plan is a balanced one, but some in the community would prefer we do much more, and generate more of our power locally, and some feel the BLP should do much less, and continue to purchase from others all our power supply (without any local resources) into the future. This diversity of opinion within the community is also represented on the BLP Board. The recommended plans, preliminarily approved by the Board’s majority, are designed specifically to meet the shared values of the community for affordability, reliability, and sustainability.
9. Why does the Board desire to continue to occupy the Sims site on the waterfront rather than relocate needed facilities elsewhere? See previous FAQ “Why build the proposed plant on the old Sims site?”
The BLP has occupied the Sims property for more than 60 years. As a result, the now rebuilt substation on site is the supply point for most distribution circuits serving the City of Grand Haven. The Sims Power Plant has always contained certain utility offices and workspaces, as well as power generating equipment – a so-called “second” 24 x 7 operations facility, to serve BLP customers in addition to its Eaton Drive Office and Service Center. As most know, the BLP also operated its Diesel Plant on Harbor Drive for this entire 60-year period, a property that is now being sold. In other words, for 60 years the BLP had three facilities providing service to the community (two of which were located within the downtown area). The BLP Service Center moved from Harbor Drive to Eaton around 1990.
The Board has unanimously suggested that at least one-half of the Sims property is “necessary to continue the operation” of the electric utility (consistent with Section 15.5 of the City Charter). The Master Plan for the redeveloped site was determined by Progressive AE to be the “highest and best use” of the property and the BLP’s proposed use consistent with a cost-effective long-term facility plan for the utility. Therefore, the utility’s footprint in the downtown area is being substantially reduced, not enlarged through the BLP’s current transition.
The proposed building’s design does not include a so called “rooftop terrace” as is shown in a stock photo displayed by opponents of the project on their website, the BLP General Manager does not have a waterfront corner office (or any office in the proposed designs for that matter), nor does the design include a board room as the Board will continue to use space at our Eaton Drive facilities for its public meetings, that was recently renovated for that purpose.
10. Why does the BLP need more “office space” if their workforce is being reduced?
“Office space” is an inaccurate characterization of all workspaces that will be housed in the operations and technology facility, to include the distribution system control room, metering and control technology workshops and garage space to house the department’s vehicles, training and conference space, power supply offices, inventory and storage spaces, IT and electrical spaces, and the engine hall and other spaces for the 12.5MW CHP and auxiliary equipment.
While the BLP is reducing its workforce from 73 to less than 50 through the transition and closure of JB Sims, its continued operations still require additional facilities beyond that possible within the existing Eaton Drive Office and Service Center. The facilities on the Sims site have historically played a critical role in the utility’s operations, beyond generation, throughout the last 60 years.
The new facilities will replace necessary workspaces that were previously housed in JB Sims and will provide for future facilities needs of the utility to meet its evolving mission to the community. Business continuity and emergency planning for a utility such as the BLP calls for some separation of facilities and equipment, not recommended to be collocated on a single site.
11. How can the 12.5 MW CHP/Peaking Plant make financial sense if it will only be used less than 5% of the time, only during high demand periods? See previous FAQ “How much of the community’s energy needs can the proposed combined heat and power generators provide?
The proposed Combined Heat and Power Plant will operate when it is less expensive to produce electricity from the plant than it is to buy it from the wholesale market (or it is less expensive to produce heat and electricity than to buy natural gas to heat the snowmelt system and power from remote sources). In today’s marketplace that amount of power “economically dispatched” would be about 5% of the system’s electrical energy needs. These operations will no doubt occur most often when prices and electrical demand is high. The “flexible” nature of the plant’s design, where it can stop and start quickly is of benefit as a “call option” to call upon during these times to avoid price spikes in unhedged wholesale energy prices becoming more apparent in a marketplace with increased use of “intermittent” renewable resources.
12. Is the BLP’s current distribution system aging and in need of investments and is it adequate to supply power to certain emergency loads from the CHP plant during a “loss of grid event?” See previous FAQ “Is the peaking plant an insurance policy for disconnection from the grid?”
The current BLP distribution system needs investment to improve reliability and meet the needs of our customers into the future (all our customers). This will take millions of dollars to accomplish over the next ten years (with or without new facilities on the Sims site). While the CHP plant could provide emergency power to some of our customers in a “loss of grid” scenario, the plant’s primary mission is to produce a portion of the system’s power needs when power is available from elsewhere, but the price is too high.
13. Will the CHP plant become obsolete, or financially “stranded,” before the bonds are paid off on the facility?
The Bond term is anticipated to be 20 years. The likelihood of the CHP plant assets becoming a “stranded asset” over this period, particularly in the projected capacity and resource adequacy marketplace is very remote, as recognized by GHEO consultants brought in to review the BLP’s economic feasibility assessment. Its benefits clearly outweigh these risks.
14. Is the natural gas fuel (and its volume) that is projected to be used in the proposed CHP plant, “more harmful to the environment” than was the coal (and its volume) used by the Sims Power Plant historically?
When the JB Sims Power Plant was generating most of the BLP system needs and selling power to the wholesale market, it was producing about 350,000-400,000 tons of equivalent Carbon Dioxide annually. The suggestion that this small natural gas CHP plant, producing less than 1/40 the equivalent Carbon Dioxide is “more harmful to the environment” is a misleading exaggeration, even when one considers the gas released during its extraction and transmission.
The BLP agrees that the goal of reducing natural gas released during gas extraction, transmission, and delivery should also be pursued by those responsible for these activities.
15. Why does the BLP plan to invest in a natural gas fired CHP plant when many are saying solar and wind generation is already cheaper? “Why would we not purchase 100% of the BLP’s energy needs from renewable sources?”
This is not an “either or” choice as some would suggest. The BLP is aggressively pursuing the addition of wind and solar into its diversified power supply portfolio, and the addition of a small quick start CHP plant “supplements and complements” the use of these intermittent renewable sources. The CHP plant will not displace any renewable energy on the grid, it fills the voids the renewable energy sources create from time to time given their intermittency (when the sun is not shining and the wind is not blowing) and will allow for higher percentages of renewable production, not less.
16. Why not just invest in battery storage in-lieu of any generation at all, as battery costs are coming down every year?
Batteries will help with the intermittent nature of renewable energy, particularly necessary daily balancing of generation and load. However, battery storage will not eliminate the need for dispatchable “peaking” generation. Some would suggest there is an “either or” choice between all batteries and a more balanced approach using battery storage and some dispatchable peaking generation. The BLP believes dispatchable peaking generation will no doubt be around for many years and it is making plans to incorporate some utility scale battery storage in the future, as costs become more competitive, on the Sims site in its master plan.
Again, the BLP is planning a balanced approach not completely swinging from one primary mode of generation (or storage) to another.
17. Isn’t power generated from renewable sources such as the sun and wind essentially free, as these sources have only maintenance costs after their installation costs are recovered? Fossil fuel plants have much higher variable operating costs as a result, right?
This is a misleading simplification of the realities of renewable energy. While the “fuel” costs for wind and solar may be free, they still have capital and variable operating costs (total costs for a 100% wind and solar power supply, particularly in Michigan, are not yet less than average costs within a more diversified portfolio). Wind and solar facilities also take up much greater parcels of land. The primary problem, however, with renewable generation is that the “free” fuel is not always available when the loads demand energy. Storing energy for reuse later remains an expensive endeavor, particularly longer-term storage to save renewable energy produced in one season until the next.
18. Why doesn’t the BLP simply continue to buy all its power needs from the wholesale market and “pause” from doing anything else for the next 5 years?
Effectively buying power “from the grid” is not accomplished without evaluating and incorporating longer-term transactions (out more than 5 years) using regular, on-going, frequent, and diversified transactions and prudent energy risk management practices to do so (like a 25-year small CHP plant or a 20-year renewable power purchase agreement). Not evaluating and implementing longer-term power supply transactions of any nature for five years would be like placing all your investments within your retirement accounts in only short-term CDs. The BLP has more “open positions” than most other entities in this marketplace (because it was so dependent on a single resource for so long). As such the BLP cannot wait five years to invest in any longer-term transactions – and the long-term transactions we do invest in need to be diversified to reduce risk.
19. Isn’t Michigan’s electric and natural gas transmission networks more winterized and robust than those in Texas? The problems they had there in February did not happen in Michigan, right?
Michigan’s high voltage network is no doubt different than that in Texas, but we too experienced price spikes, supply constraints, and higher power demands during the February, 2021 cold weather event. The CHP plant would have saved the BLP approximately $200,000 during the two-week period in February where prices were higher in MISO as well as ERCOT.
21. Wouldn’t money saved during a suggested five-year “pause” accrue, making it likely a future investment, of the nature of the CHP plant, could be made without incurring as much debt to the community? “Has the BLP fully evaluated all its alternatives with unbiased analysis and review of independent third-party industrial professionals to verify this course of action?” and “How much time has been spent in these reviews? Why not pause and do it again?”
Actually, the BLP’s power supply would be cheaper with the installation of the CHP over the next 20 years as has been determined by several outside unbiased industry professionals. Any suggestion otherwise is not consistent with the record. The whole premise of the “pause,” and the potential savings associated with it, is flawed, and is not based on any study at all.
22. Haven’t the BLP’s future integrated resources plans for power supply been developed using insufficient and antiquated information, by “biased” BLP staff, and consultants that the BLP has paid to give them the answers they wanted?
The Michigan Public Power Agency (MPPA), the BLP’s market participant in wholesale power transactions, use the same evaluation techniques and analysis measures for the BLP as they do for all other municipally owned electric utility agency members in the State. Our local CHP plant has been evaluated in the context of a greater diversified portfolio being developed by MPPA.
Representatives from MPPA have been to Grand Haven several times to explain this process and “best practices” used on our behalf over the last several months, including participation in one of GHEO’s community forums. The suggestion that MPPA’s market information or their analysis and recommendations are “insufficient” or “antiquated” are not supported by the facts or their presentations.
23. Why doesn’t the BLP’s plans account for emergencies or issues like the COVID crisis, high water levels, and significant recent changes in energy supply and distribution technologies?
As an electric utility, like so many other similar private and public entities, the BLP has spent enormous amounts of time and resources over the last year addressing COVID related issues. Our employees have been designated “critical infrastructure essential workers” and we have had to comply with all U.S. Department of Homeland Security requirements accordingly. BLP workers have had to come to work when most others could work from home, placing themselves at substantial risk so the community would continue to receive power without interruption. Why would anyone assume the BLP is not learning from these circumstances and incorporating such knowledge into its plans going forward?
The BLP has also had to deal with high water levels to the extent such water level interferes with the provision of electricity to the community, as you would expect us to. The BLP is also implementing significant changes regarding its use of technology and “best practices” in the production as well as the distribution of energy (as was verified in our recent Business Readiness and Risk Assessment performed by Hometown Connections). Again, what basis does anyone have to suggest otherwise?
24. Has the BLP been open and transparent with the community throughout its evaluation of the retirement of Sims and the development of a diversified power supply portfolio to replace it? Is this not a requirement of community owned utilities such as the BLP?
The BLP has been transparent above and beyond any requirements.
25. Has the BLP hired a PR firm to assist the BLP in engaging the community and addressing customer concerns regarding its transition plans following the retirement of the JB Sims Power Plant?
The BLP is planning a $47 million dollar redevelopment project and associated bond financing. Accordingly, there are many questions and concerns being publicly raised by some in the community. In alignment with meeting the community’s desires for more information, the Board voted to retain a communications firm to assist in addressing these issues with the public as the BLP’s existing staff needed additional hours and technical assistance to do so. The costs associated with this communications assistance represent approximately 0.1% of the project related costs.
26. Who is responsible and accountable for the dollars the BLP spends?
The rates and service levels of large private utilities like Consumers Energy are regulated by the Michigan Public Service Commission. The Boards of these private utilities report to distant stockholders, many of which do not even use the services these utilities provide.
Local municipally owned electric utilities, like the BLP are controlled by local governmental entities and are directly responsible to their customers in the community. They operate-not-for-profit, and in the case of the BLP, its five-member Board is elected by Grand Haven residents and operates under the oversight and direction of the City Council. This form of local electric utility oversight is used by over 2,000 public power systems throughout the country, and typically results in more reliable systems with lower rates, 15% lower on average.
27. Why doesn’t the BLP have a “community” energy efficiency plan as required by State law?
For those cities that have a “community energy efficiency plan,” the plan is normally developed and implemented through that City’s planning department (or a community “sustainability committee” of some nature), not its municipal electric utility, if they have one. The BLP maintains an “energy waste reduction plan” and a “renewable energy plan” consistent with State mandates for electric utilities.
State law does not place requirements on a “community” to do anything in these regards. There are State requirements placed on electric utilities that the BLP is “exceeding” for both Energy Waste Reduction (EWR) and Renewable Energy. State required annual reports are posted on the BLP’s website.
28. Isn’t the BLP required to report its coal ash (combustion coal residuals, or CCR) activities to EGLE and EPA and post them on its website? Has the BLP been found to be in non-compliance with applicable CCR regulations?
Yes, the BLP is required to post all required CCR reports and activities required under law on its website. The BLP has exceeded these posting requirements by posting additional recent communications between EGLE and BLP relating to CCR compliance.
In other words, the BLP’s open, transparent, postings in these regards have gone well beyond the law and that done by any other utility and any other site in Michigan.
The BLP has not been cited for non-compliance, while these activities are on-going.
The BLP is working with EGLE and EPA to close its Combustion Coal Residual (CCR) regulated impoundments and address all other environmental issues on the Sims site. Many site environmental concerns predate existing regulations and compliance measures and will likely be addressed under a site wide consent order (a site wide remediation plan that has yet to be proposed or accepted by EGLE).
29. Has grant funding been explored for the Sims site?
In 2019, the BLP contracted with Washington DC based Sustainable Strategies (S2DC) to complete a “Resource Roadmap” for both the Sims Power Plant site redevelopment and its Diesel Plant site redevelopment to identify, and “leverage funding” from 33 potential federal, state, and local government sources, philanthropic, and private sources. The BLP is working with identified parties in these regards to explore the resources identified by S2DC.
30. Is the interim snowmelt system working as expected? See previous FAQ “How are the peaking plant and snowmelt system connected; Can Grand Haven continue to have snowmelt without building power generation; Who is currently paying for servicing the boilers for snowmelt; If we build the proposed peaking plant, would the current snowmelt boilers be decommissioned?”
Except for a few minor start-up issues that have now been remedied, the snowmelt recently installed equipment is operating and functioning as anticipated within expected cost projections (as the BLP had provided to the City before its installation). These actual operating costs are higher than they were when Sims was the primary heat source, but less than they were expected to be this year given the relatively warmer winter temperatures and less than normal snowfall.
31. There is now an advisory petition being circulated asking City Council to conduct another “objective and independent” study to “assess and evaluate the Board of Light and Power’s proposed plan, consider its financial implications, environmental implications, and the changes taking place in renewable energy production and storage.” Have such studies not been performed and is there any reason to suggest those that performed these studies were not objective or independent?
Yes, many studies such as these to evaluate the BLP’s alternative power supply options upon the retirement of Sims have been conducted by multiple independent professionals in the industry since 2012. For the most part, they have all concluded the same general conclusion: that the BLP should be develop a diversified power supply portfolio working through the Michigan Public Power Agency with other similarly situated municipal electric utilities in Michigan. Any future local resource should be evaluated in the context of this broader portfolio, to supplement and complement remote resources elsewhere. This is exactly what the proposed 12.5 MW CHP plant is designed to do. Spending more public dollars conducting another such analysis, that will no doubt draw the same conclusions as previous studies is an unnecessary expense and an unwise waste of taxpayer (if performed under the direction of the City Council) or ratepayer (if paid by the BLP) funds.