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Frequently Asked Questions

FAQs Summary

In the page below, we’ve provided deeper answers to some of the most frequent questions we’ve received to date. If you don’t find what you’re looking for, please reach out with your question or comment on the Your Voice page.

Portfolio Development & Local Generation

How much of the community’s energy needs can the proposed combined heat and power generators provide?

The proposed capacity of the Combined Heat and Power (CHP) plant is 12.5 MW.  This capacity fully utilizes the current natural gas pipeline capacity to this site. The current average system load is about 34.2 MW and the peak summer system load is about twice the average load (68 MW)

GHBLP’s strategy for this generating resource is to operate it during periods of high wholesale market prices when its operational cost is less expensive than the market and during times in the winter when coupled combined heat and power snowmelt operations are less expensive than purchasing natural gas for the dedicated hot water boilers and system power from other sources separately.

Is the peaking plant an insurance policy for disconnection from the grid?

The peaking plant does provide some protection to power critical services in the rare case of disconnection from the regional transmission network. However, it will not be capable of providing 100% of the community’s needs. Its primary purpose is providing a “financial hedge,” or a financial insurance policy, against higher costs during specific times in the year.

What is the risk of having a temporary disconnection from the grid?

Disconnection from the grid is a possibility for all communities, though highly unlikely. The network high-voltage electric transmission system is designed and operated to a 99.99% reliability standard (or an engineered design that will result in no more than a single outage in ten years). In the unlikely event of a temporary interruption, the proposed peaking plant could provide some emergency back-up for critical services up to the rated capacity of the units.

Why would we not purchase 100% of the BLP’s energy needs from renewable sources?

GHBLP is incorporating a greater amount of renewable generating options in its power supply portfolio. However, this represents more “intermittent” generation, so there remains a need for quick-start, flexible generation when the wind unexpectedly stops blowing or the sun stops shining. Renewable energy costs and storage options are also becoming less expensive every year. Buying 100% now locks in that higher cost over the life of that asset. Part of managing a diversified portfolio is to not buy everything at one time, just like the “dollar cost average” in your diversified investment portfolio. Learn more: https://grandhavenpower.org/energy-sources/

Technology Center

How are the peaking plant and snowmelt system connected?

A reliable, nearby source of heat is necessary to power the snowmelt system. The proposed Combined Heat and Power (CHP) generators have a heat-rejection rate that pairs ideally with recently purchased hot water boilers and have been determined to be the most-effective approach to heating the snowmelt system. Learn more: https://grandhavenpower.org/plan/

GHBLP’s strategy for this generating resource is to operate it during periods of high wholesale market prices when its operational cost is less expensive than the market and during times in the winter when coupled combined heat and power snowmelt operations are less expensive than purchasing natural gas for the dedicated hot water boilers and system power from other sources separately.

Can Grand Haven continue to have snowmelt without building power generation?

If the proposed CHP plant is not built on the former J.B. Sims site, recently purchased natural gas water boilers could be used to run snowmelt indefinitely. However, running the equipment alone is not as economical as a long-term solution. Learn more: https://grandhavenpower.org/plan/

Who is currently paying for and servicing the boilers for snowmelt?

GHBLP initially used its construction line of credit (Bond Anticipation Notes) to pay for the snowmelt equipment and interim installation. Only the actual operating fuel and pumping costs, and the carrying costs on this short-term debt, are now being billed to the City (and a portion of these costs are subsequently allocated to the Downtown Merchants).

If we move forward with the CHP plant, the snow melt equipment will be financed long-term through revenue bonds issued for the CHP Plant and will be reimbursed to GHBLP over the life of the bonds by the City and downtown merchants under a new contract for such services. The operational costs, however, under this scenario will be less given the savings associated with the more efficient production of “heat and power” combined.

If we do not move forward with the CHP Plant, the City will be required to reimburse GHBLP’s short-term borrowings and cover all snowmelt operating costs associated with the stand alone equipment. This will be at a significantly higher cost to the City and the downtown merchants than before because snowmelt will no longer be operated with excess heat from the J.B. Sims power plant.

If we build the proposed peaking plant, would the current snowmelt boilers be decommissioned?

No, they will be moved into the CHP facility and paired with the RICE units. The boilers would also support the CHP Facility, providing the necessary heat to the RICE units to keep them warm for quick start operations. Learn more: https://grandhavenpower.org/plan/

Why build the proposed peaking plant on the old Sims site?

There are many reasons why the proposed CHP facility would be best located on the former Sims site. GHBLP interconnections or ties to the ‘grid’ or ‘network transmission system’ run through the Sims site, along with most of the distribution circuits for the City, a new substation, and the snowmelt system. Additionally, Harbor Island has been the central “hub” of the distribution system for the last 60 years and is critical to efficient system operations. This did not change with the retirement of Sims. The cost and logistical difficulty associated with building elsewhere makes relocation prohibitive. Learn more: https://grandhavenpower.org/plan/

Environmental Remediation

Are there opportunities for recreation at the former Sims site?

The Sims site is approximately 25 acres. Under the Master Plan developed by ProgressiveAE, the BLP would retain the northern half of the site and the southern half would be returned to the City for public or conservation use with much of the site restored to wetlands. Learn more: https://grandhavenpower.org/environmental-restoration/

Are there opportunities for redevelopment of the area near the J.B. Sims site?

At the present time, GHBLP plans to retain the northern half of the site for future utility operations that also incorporates space for future solar development and installation of future technologies, potentially battery storage. The remainder of the site contains sensitive wetland areas that will require ongoing monitoring, likely preventing redevelopment for residential or commercial purposes. 

The historical uses of the site as a former city dump as well as additional ‘made land’ of ash from the first two units of the Sims Plant make the site undevelopable for other opportunities. Environmental cleanup will take many years and a long-term monitoring program will be required likely for the next 30 years. Learn more: https://grandhavenpower.org/environmental-restoration/

How will we pay for the plant?

The redevelopment of the Harbor Island site will have no immediate impact on customer rates. GHBLP reduced rates by approximately 6% overall in 2016 and 2017 and is committed to hold rates steady throughout the transition process.  Adequate debt service coverage is provided by our current rates to pay anticipated annual debt service for the estimated project costs of approximately $47 million. The project will be financed through tax-exempt bonds, likely over a 20-year period.

GHBLP is required to pay for capacity regardless of whether it is owned or contracted through regional partnerships. Anticipated similar volumes of wholesale purchased capacity are projected to cost more over the expected life of these assets. The proposed CHP plant is a small portion of GHBLP’s total resource adequacy requirement, and as such the risk of this investment becoming “stranded” is very low.

Would there be a bond needed to pay for it?

Yes. Electric revenue bonds would be used to fund the entire redevelopment “Project” as defined in our Notice of Intent and is now estimated at $47 million. GHBLP and the City Council may also choose to bond less (a lower portion of the project costs). They are expected to make this decision mid-year 2021.

What amount of money has been saved since the decommissioning of the coal plant?

The BLP has, and will continue to pay substantial unfunded liabilities brought about partially as a result of the retirement of Sims, such as plant demolition costs, site environmental remediation and wetlands mitigation costs, and retiree pension and health care legacy costs that have exceeded the savings of power purchases to date. The BLP has already drawn over $9 million dollars as of December 31, 2020 to pay for project and transitional costs. These transitional costs, particularly environmental remediation costs on the Harbor Island site, will likely consume a significant portion of the savings next year as well. 

Our long-term projected operational savings primarily come from reduced fixed power plant costs, and reduced wages and benefits from fewer system employees. These costs are not necessarily immediate in nature. The Board has also committed to reinvest a portion of the savings generated by reduced power supply costs to end-of-life and outdated distribution system assets for increased long-term value for its customers.

If savings will not be used to reduce rates, what is the reason?

GHBLP reduced rates by approximately 6% overall in 2016 and 2017 and is committed to hold rates steady throughout the transition process. There is no doubt that over the long-term, our costs will be lower by purchasing most of our power rather than generating it locally. As a result, GHBLP’s rates are no doubt lower than they would have been had we continued to operate J.B. Sims. 

How do GHBLP’s customer costs compare to other energy companies?

While generally, Michigan rates are above those in neighboring states for many reasons, rates from GHBLP in all customer classes are lower than Consumers Energy, and above the municipally-owned utility average. GHBLP lowered average rates in 2016 and 2017 by approximately 6% cumulatively, and has committed to retain rates constant through this power supply transition to gain rate competitiveness in comparison to other municipally-owned systems.

What if GHBLP customers' bills were calculated using 2021 Consumers Energy rates?

GHBLP customers, holistically, would be paying $6.6 million MORE per year on CECo’s 2021 rates. 

In other words, if these 14,713 GHBLP customers were billed under Consumers Energy’s current applicable rates, they would pay on average 14.5 cents/kWh (about 18% more on average than they pay under current applicable GHBLP rates).

Put another way, our community saves about $550,000 per month on average under GHPLP’s current rates as opposed to Consumers’ similarly applicable current rates each and every month! That is $6.6 million per year in savings for our community!

For the full comparison and cost breakdown, read our blog.

Process

Has the BLP fully evaluated all its alternatives with unbiased analysis and review of independent third-party industry professionals to verify this course of action?

Yes. GHBLP has gone through a lengthy process contracting third-party recommendations from Burns & McDonnell, a nationally-recognized power planning consulting firm, for our power supply plan and subsequent initial project definition report, which recommended ‘right-sizing’ to a smaller-scale project suitable for the natural gas supply at Harbor Island. We have since worked with ProgressiveAE and Power Engineers Collaborative (PEC) to create a new master plan for a project that aligned with desires of the community for local-ownership, sustainability, reliability, stable rates, and the constraints associated with the Sims site.

How much time has been spent in these reviews? Why not pause and do it again?

GHBLP has been planning, reviewing and analyzing this transition for over five years since beginning the rollout of the 2016 strategic plan. The amount of due diligence invested is appropriate given the relatively small capacity investment under consideration. Conducting further large studies on this matter would not be wise stewardship of our customer’s money. See more on the process at Our Process – Grand Haven Power Plan.

Additionally, a pause in this transition at this point in time has not been the recommendation of any of the independent professionals we have used for this purpose. GHBLP already paused to re-evaluate the initial redevelopment project as defined by Burns & McDonnell when it was found to be cost prohibitive. The now “right-sized” plant design as developed by ProgessiveAE and PEC has been determined to be a good “community” fit to cost effectively accomplish the diverse goals associated with the redevelopment of the site.       

The process of planning and evaluating the system’s integrated resource plan and other new technologies truly never stops. The industry and the wholesale marketplace are in continual evolution. Participating “in the market” at all times is a risk management and diversification strategy (again, a so-called dollar cost averaging strategy). GHBLP is in the process of updating our five-year strategic plan in the spring of 2021, and will continue to investigate new power supply alternatives, emerging technologies such as energy storage, and greater adoption of Distributed Energy Resources (DERs) owned by customers going forward.