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Michigan to See Power Capacity Shortfall

DTE Energy’s CEO Gerard Anderson expressed concerns last week about a shortfall in Michigan’s power generation capacity during the company’s fourth quarter earnings call. While discussing the implications of the EPA Clean Power Plan, Anderson stated that his company and Consumers Energy, the state’s two largest electric utilities, are building to meet the needs of their owner customers, but that no one is building to meet demand from the retail market.

This echoes concerns expressed in October by the Midcontinent Independent System Operator (MISO). Platts reported that MISO projected a 3,000 MW capacity shortage beginning in 2016. In part, this estimate was so large because the owner of a 1,100 MW gas-fired plant in Michigan opted to interconnect to PJM, a transfer that will be completed in June 2016. MISO’s Clair Moeller stated that, “It’s not a lack of physical capacity but a lack of commercial deals to contract for that capacity.”

Implications for Retail Buyers

The capacity shortfall has the potential to lead to higher power prices over the next several years. If that happens, retail buyers that lock in long-term, fixed-rate pricing could benefit. Before taking this type of action, retail buyers should conduct their own analyses of energy markets and their energy needs and potentially consult with independent energy advisers that follow the Michigan power market.

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