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Cliffs misses mark in backing proposal

Guest op-eds

September 16, 2012
Rick J. White , The Mining Journal

To borrow a well-known phrase, "There they go again "

In a recent column, Mr. Kochevar, the general manager of the Michigan operations for Cliffs Natural Resources, criticized the Michigan Public Service Commission for allowing We Energies to recover certain costs of keeping the lights on for homes and businesses in the Upper Peninsula.

Much of his column was devoted to points that have been repeatedly presented by his lawyers to the Commission, the agency charged with protecting electric consumers. After thorough and deliberate review, Mr. Kochevar's points were soundly rejected by that agency - not once, but four times.

The only new development in the column was a call for state legislation to close a purported loophole. We've looked pretty hard to find that loophole and, frankly, there is none. Rather than closing a loophole, the legislation he calls for would overturn commission decisions that Mr. Kochevar simply doesn't like. Those decisions found it reasonable and prudent to include a portion of the costs of new power plants in our Michigan rates.

Some history may be helpful here. We Energies operates an integrated electrical system to provide affordable and reliable power to all of its Wisconsin and Michigan customers.

A few years ago, we advanced our Power the Future plan to meet the projected energy needs of our customers in Wisconsin and Michigan through the construction and leasing of four state-of-the-art gas and coal-fueled power plants - plants that are among the cleanest and most efficient in the country. The two new 545-megawatt gas-fueled units at our Port Washington Generating Station site were placed into service in July of 2005 and May of 2008. The two 615-megawatt units at our Oak Creek Expansion site were placed into service in February 2010 and January 2011.

Since we operate an electric system across two states and electrons don't stop flowing at the state line, we needed regulatory approval in both states to recover the costs to finance, build and operate these new facilities. After extensive hearings during which customer representatives and others participated, regulators in Wisconsin approved the Power the Future project.

However, under Michigan law, it was only after these plants were placed into service that we could seek approval for cost recovery. We followed those rules-by seeking on several occasions-the needed regulatory approval for cost recovery by applying first for the gas-fueled facilities and later for our coal-fueled facilities.

The Michigan Public Service Commission conducted extensive public hearings on each of our requests during which Mr. Kochevar's employer and its lawyers actively participated.

Cliffs Natural Resources offered testimony and presented legal arguments to state regulators that focused in part on the reasonableness of our approach in constructing these needed new power plants for our system. After carefully considering all the arguments, the Michigan Public Service Commission found the decision to build and lease these plants to be reasonable and prudent and approved a portion of the costs for inclusion in Michigan rates. In no instance have Michigan regulators ever indicated that our efforts to construct these facilities relied up on a "loophole," as Mr. Kochavar suggests. Why? Because there is no loophole.

To put it simply, the legislative proposal now supported by Mr. Kochevar and Cliffs Natural Resources is completely unnecessary since the Michigan Commission already has full authority to review the reasonableness of the costs charged by public utilities - protecting Michigan customers.

This legislation seeks to overturn earlier Commission decisions well after those decisions have been made and well after customers have begun to receive the benefits of these efficient new power plants.

Enacting Mr. Kochevar's proposal would also send a strong, negative signal about the climate for capital investment in Michigan. This type of signal can only move Michigan backward, harm our customers and result in higher costs for financing the investments that will be needed in the future.

Here's the bottom line. The Cliffs Natural Resources' proposal is a solution in search of a problem. To suggest that the Michigan Public Service Commission is not looking out for electric consumers in the Upper Peninsula and that legislation is needed to ensure their protectionis simply wrong.

Editor's note: Rick J. White is vice president of Corporate Communications of We Energies.



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