Consumers Energy is looking to sell its 13 aging dams to a private equity company.
The utility had considered three options for what do with the dams which are dotted across the Lower Peninsula: continue to operate them, decommission them or sell them. Consumers settled on the third option, announcing last year it had secured Confluence Hydro, a subsidiary of a larger private equity company, as a buyer.
"They say it will be be the best financial deal for their customers," said Carol Thompson, a reporter with The Detroit News who recently reported on how some nearby communities are feeling about the potential sale.
Some are concerned about what will happen to the dams and the land surrounding them if the Michigan Public Service Commission approves of the deal.
"Some of the groups that have opposed the sale are worried that what Confluence Hydro might really have their eyes on are the acres of land that are surrounding the dams," she said.
Confluence Hydro could pursue a federal process to shrink the amount of land considered vital for the dams' operations, making excess acres available for development or resale.
The company has said it plans to operate the dams in the long-term, and Consumers says it's created a deal that incentivizes Confluence to stay.
"Their proposal is to sell 13 dams for $1 each, and then buy the power back from Confluence Hydro ... Consumers, in this sale agreement, would agree to buy the power back at a pretty high price, about twice what is normal for hydro power," Thompson said.
"They see this as a win-win, where the dams, they will stay in place with another party taking over some of the the more costly stuff, like liability and maintenance."
But the state Department of Natural Resources has also intervened in the case before the PSC, saying commissioners should scrutinize the deal.
"Last month, DNR Director Scott Bowen said that he is concerned that these dams will eventually become the state's liability, just because a private equity company like Confluence Hydro wouldn't be regulated by the Public Service Commission the way that Consumers Energy is," she said.
The Michigan Public Service Commission will likely consider the sale later this year.
The Consumers Energy Foundation is a financial supporter of WKAR.
Interview Highlights
On why Consumers is selling the dams
Consumers Energy, a few years ago, went through a really long series of community listening sessions where they talked to the folks who live near their 13 dams throughout mostly western Lower Peninsula and northern Lower Peninsula. And they proposed these three scenarios for the future of the dams which were to continue operating them, which can be expensive because of maintenance and relicensing for these really big facilities, selling them or decommissioning and removing them, another expensive prospect, and they landed on a plan to sell the dams that they announced about this time last year. They say it will be the best financial deal for their customers.
On why people are worried about the sale
Some of the groups that have opposed the sale are worried that what Confluence Hydro might really have their eyes on are the acres of land that are surrounding the dams because the federal regulators that regulate hydropower do sometimes allow companies to shrink what they call "project lands." And so, if Confluence Hydro was allowed to shrink the project size, then they would have these additional acres in really, you know, some of Michigan's most beautiful natural areas available to sell.
On why Consumers says this is the right deal
[Consumers'] proposal is to sell 13 dams for $1 each, and then buy the power back from Confluence Hydro. And they need approval from the Michigan Public Service Commission to do that, and Consumers in this sale agreement would agree to buy the power back at a pretty high price, about twice what is normal for hydro power, and they say that price will then incentivize Confluence Hydro to maintain the dams and to operate them safely. So, they see this as a win-win, where the dams, they will stay in place with another party taking over some of the the more costly stuff, like liability and maintenance. At the same time, they'll continue to buy the power and use the power.
Interview Transcript
Sophia Saliby: Consumers Energy is looking to sell its 13 dams to a private equity company.
That sale has some concerned about what will happen to the dams and the land surrounding them.
Detroit News reporter Carol Thompson recently reported on how communities are feeling about the potential sale, and she joins me now. Thank you for joining us.
Carol Thompson: Thanks for having me.
Saliby: Let's start with why Consumers is selling its dams?
Thompson: Well, Consumers Energy, a few years ago, went through a really long series of community listening sessions where they talked to the folks who live near their 13 dams throughout mostly western Lower Peninsula and northern Lower Peninsula.
And they proposed these three scenarios for the future of the dams which were to continue operating them, which can be expensive because of maintenance and relicensing for these really big facilities, selling them or decommissioning and removing them, another expensive prospect, and they landed on a plan to sell the dams that they announced about this time last year. They say it will be the best financial deal for their customers.
Saliby: And who does the utility want to sell these dams to?
Thompson: The buyer is a company called Confluence Hydro, which is a subsidiary of a private equity firm based in Maryland called Hull Street Energy. And Hull Street Energy has been buying and selling and operating hydro power dams over the last decade.
According to its website, Confluence has said that they plan to operate the dams for the long term. Some critics of this sale are skeptical of that, and they point out that the company does also have a track record of selling dams, and that they just don't really trust some of the promises being made at this stage.
Saliby: In addition to that, I think another big issue coming up among nearby residents of all these dams where they are around the state are the acres of land surrounding each dam, because that's also quite extensive, which would come under ownership of Confluence Hydro. What are people worried about there?
Thompson: That does get to a sticky issue with this sale. A lot of the communities that are near the impoundments that are made by these dams want them to stay. They use them for fishing and swimming and for tourism.
But some of the groups that have opposed the sale are worried that what Confluence Hydro might really have their eyes on are the acres of land that are surrounding the dams because the federal regulators that regulate hydro power do sometimes allow companies to shrink what they call "project lands."
And so, if Confluence Hydro was allowed to shrink the project size, then they would have these additional acres in really, you know, some of Michigan's most beautiful natural areas available to sell.
Saliby: The state Department of Natural Resources is actually also involved in this. What's the concern from the DNR?
Thompson: So, the DNR has intervened in this case before the Michigan Public Service Commission, and they're really urging commissioners to scrutinize the sale agreement. Last month, DNR Director Scott Bowen said that he is concerned that these dams will eventually become the state's liability, just because a private equity company like Confluence Hydro wouldn't be regulated by the Public Service Commission the way that Consumers Energy is, so they would just have more agency to do whatever they want with the dams without any oversight from the state.
Another argument that the DNR gave, and also some critics have said is that Consumers is overestimating the cost of removing dams, which they say can tip the scale toward selling the dams and make that look like a better deal.
Saliby: And what is Consumers saying about all these concerns?
Thompson: So, Consumers says that this is the best financial option for their customers. Their proposal is to sell 13 dams for $1 each, and then buy the power back from Confluence Hydro. And they need approval from the Michigan Public Service Commission to do that, and Consumers in this sale agreement would agree to buy the power back at a pretty high price, about twice what is normal for hydro power, and they say that price will then incentivize Confluence Hydro to maintain the dams and to operate them safely.
So, they see this as a win-win, where the dams, they will stay in place with another party taking over some of the the more costly stuff, like liability and maintenance. At the same time, they'll continue to buy the power and use the power. But it's a pretty small amount of power that Consumers gets from its hydro power dams, it's only about 1%.
Saliby: Is Confluence Hydro saying, "No, we don't have any plans to sell the land, develop the land, decommission the dams?"
Thompson: Correct. Confluence Hydro says that they plan to operate the dams safely in the long-term and get them relicensed.
Saliby: So, the Public Service Commission has to approve all of this. Do we know when that'll happen?
Thompson: I believe they'll decide later this year.
Saliby: Carol Thompson is a reporter for The Detroit News. Thank you for being here.
Thompson: Thank you for having me.
