Lack of power generation in Michigan may cost Coldwater power customers a lot of money over the next year.

Coldwater Board of Public Utilities Manager Jeff Budd warned his board in a memo for Wednesday’s May virtual meeting that the financial impact for the upcoming planning year is $2.3 million.

“This will cause a reduction in our financial reserves and an increase to the power supply cost adjustment paid by our customers,” he said.

This is the result of a complex series of regulation and operation of the power grid under federal rules for the Midcontinent Independent System Operator – know as MISO. It is an independent, not-for-profit organization that delivers $29 billion of electric power across 15 U.S. Midwest and southern states and the Canadian province of Manitoba.

The lower peninsula of Michigan, known as MISO Zone 7, fell 123 MW short of procuring expected resources within its own borders for the next 12 months beginning June 1.

As a result, under MISO's FERC approved rules, approximately 1,150 MW of load at the wholesale level in lower Michigan will pay an additional $257.53/MW-day. This is 6 percent of the zone capacity.

This price set by MISO, called CONE, represents the estimated annualized capital cost of constructing a 237-MW combustion turbine plant.

MISO Manager of Capacity Market Administration Eric Thoms said Zone 7 has frequently been "very tight, capacity-wise."

Thoms also emphasized to stakeholders that CONE is function of MISO's FERC-accepted Tariff, and most load-serving entities in lower Michigan would not be exposed to the added cost. This includes 91 percent of the state’s power providers.

Just who is included in the 6 percent will be discussed by the Michigan South Central Power Agency Board Thursday at its May virtual meeting.

Thoms also said Zone 7 was impacted by a new rule this year that prohibits resources from offering into the auction if they will be on outage for longer than 90 days of the first 120 days of the planning year. Thoms estimated that the rule impacted 200 to 300 MW of resources in Zone 7.

"Being that Zone 7 was tight on a razor's edge … the outage policy contributed to the zone not being able to meet its local clearing requirement," he said.

Michigan is closing down its coal-fired generation with the major firms Consumers Energy and DTE moving toward renewables such as solar and wind turbines.

MSCPA has asked MISO for consideration of a 50MW gas plant planned for Newton Road. The Michigan Public Power Agency is also considering a twin 50MW plant at the same location. A MISO decision is not expected until November.