Michigan Public Service Commission Orders American Electric Power To Either Renegotiate Its Coal-Plants Contract Or Charge Its Shareholders for The High Costs of Coal

June 22, 2023: The Michigan Public Service Commission (PSC) issued its final order in Indiana Michigan Power Company’s (I&M’s) Power Supply proceeding.  The PSC held that I&M, a subsidiary of American Electric Power, was charging its Michigan electric customers for the cost of power from two coal plants that exceeded market value: Clifty Creek, in Indiana, and Kyger Creek, in Ohio.  The PSC held that either I&M should renegotiate its contract with the Ohio Valley Electric Corporation (OVEC)— the operator of Clifty Creek and Kyger Creek— or I&M should itself pay for the losses associated with operating these coal-burning plants and not its Michigan customers.

In these Power Supply cases, the Michigan PSC reviews a regulated utility’s proposed fuel and energy purchases costs over a projected five-year period.  Here, the Michigan PSC reviewed I&M’s proposed costs for the years 2022-2026 and, relying on Sierra Club testimony, found that the OVEC plants cost far more than reasonable alternatives for power.  The PSC warned I&M that it would not allow recovery of OVEC costs in excess of market value without a good faith effort to renegotiate its contract that could allow the plants to retire.  

The Michigan PSC decision is an important milestone in Sierra Club’s multi-state campaign to retire the OVEC coal plants.  The OVEC plants have lost money in the regional electric market for a decade, but their retirement has been blocked by corruption.  The OVEC plants are owned by a consortium of utilities in the Ohio River Valley and, one of now-former owners, FirstEnergy, bribed the Ohio legislature to bailout these plants in what has been called “worst energy bill of the 21st energy century.”  While the Ohio officials involved in the OVEC bailout are now in jail, the subsidies for these plants remain Ohio law.  Sierra Club has focused its efforts on calling for the repeal of the Ohio subsidies and, separately, through litigation forcing the utilities that own these plants to share in their market losses.  By requiring the OVEC owners to suffer the economic losses from these plants and by imposing further environmental requirements on the OVEC plants through defense of rules like USEPA’s Good Neighbor Plan, Sierra Club expects to force the retirement of Clifty Creek and Kyger Creek.

Sierra Club was represented by Environmental Law Program attorneys Kristin Henry, Tony Mendoza, and Megan Wachspress and private attorney Christopher Bzdok of the firm Olson, Bzdok, & Howard, P.C.  We were assisted by expert witnesses, Devi Glick of Synapse Energy Economics and Jeremy Fisher, an in-house Sierra Club power systems expert.