Consumers Energy dam sale raises accountability fears

Although the recent update from Consumers Energy and Confluence Hydro announcing the formation of a $275 million Dam Safety Fund was a positive development for the sale, questions of accountability still remain regarding the sale of the 13 hydroelectric dams in Michigan to Confluence Hydro.

Tracy Ruell, a Mecosta County resident, said she appreciates that Consumers and Confluence are listening to public concerns and are willing to make some changes. However, the news release still does not address the accountability issue.

“That is a big concern from everyone I speak to about the sale,” Ruell said. “People want clarity about who will be responsible for these dams once they leave the hands of Consumers Energy.”

She said that people are worried about the fact that each dam is being set into its own LLC, and who will be responsible if those LLCs fail.

“We are talking about people’s lives, their land, it’s their livelihoods that are on the line,” she said. “I see what they (Consumers) are trying to do, but I don’t know if it is going to satisfy the accountability issue.”

Brian Wheeler, Consumers Energy media relations specialist, said the use of LLCs is common in the energy industry and not unique to what Confluence Hydro is proposing.

“Confluence Hydro will be subject to the same regulations and expectations from the federal operating license that Consumers Energy operates under today,” Wheeler said. “Confluence Hydro has said they plan to relicense the dams, a process that will take a decade or more. The sale includes a 30-year power purchase agreement that provides an incentive for Confluence Hydro to continue to operate the dams safely and reliably.”

Ruell said that the Michigan Attorney General’s Office offered a suggestion to the Michigan Public Service Commission regarding the sale of the dams, that the contract include a clause stating that if one of the LLCs were to fail, the dam would come under the ownership of the equity firm, Hull Street Energy.

“That seems reasonable,” Ruell said. “It does seem that they are softening a little and making some adjustments, I just don’t know if it is going to be enough to address the accountability issue.”

Wheeler said that the negotiated contract with Confluence Hydro offers the best path forward for the dams.

“We have told the MPSC, which is reviewing the sale, that we are not open to renegotiating the sale,” he said. “If it is not approved, we will decommission the dams.”

He added that decommissioning would mean the full removal of the structure, a process that could take up to 20 years for all 13 dams.

Residents have expressed concerns about the recreational and economic impact of decommissioning dams.

Paul Haan, executive director for the Muskegon River Watershed Assembly, an organization that has been involved in dam removals along the Muskegon River Watershed, said that if the dams are removed, it will certainly impact the community, but if the project is planned out carefully, the negative impact can be mitigated.

“I nor the MRWA are real estate professionals, but at face value and from past experiences with other dam decommissioning, it is clear that any landscape-scale change like draining an impoundment will impact the real estate market for a period of time, however, the negative impact can be reduced through careful planning,” Haan said. “A textbook example of a decommissioning that has seen resilience in the local real estate market can be found in the removal of the Brown Bridge Dam, a former hydroelectric facility on the Ottawa Boardman River in Grand Traverse County. This was the largest dam decommissioning and removal to date in Michigan. Property values in the area were resilient, and after 12 years, have more than recovered.”

He added that undoubtedly the recreational use of the river would change with the removal of an impoundment.

“It is shortsighted to only focus on the loss of the impoundment-based recreation and not recognize the opportunities created by the presence of a free-flowing river,” Haan said. “The economic impact of a free-flowing river can be significant as new economies are established. Further, the cost of maintenance and liability protection can be retired and those dollars reinvested in local communities in new and creative ways.”

Haan said that the rivers are a natural system and should function as such, and that dams are major contributors to the degradation of a naturally functioning and self-maintaining Muskegon River.

“Naturally functioning rivers are the healthiest and the ideal state,” he said. “We recognize that such things do not come without impact on local communities and economies, therefore, we value careful, proactive planning where local communities are fully engaged.”

“As is the case with all human built infrastructure, at some point in time, decommissioning or full replacement will be required,” he added. “The challenge is navigating from where we are now to a future that honors the health and history of the community and the river.”

The MRWA sent a letter to the MPSC stating that they had significant concerns regarding the proposed sale of the dams and urging the MPSC to “apply heightened scrutiny to ensure that public safety, water quality, ecological integrity and long-term stewardship are fully protected.”

“These facilities directly affect upstream and downstream property owners, recreational users and the overall ecological health of the river system,” the letter states. “The catastrophic dam failures on the Tittabawassee River … resulted in widespread environmental damage, destruction of private property, displacement of residents and extraordinary taxpayer costs. These dams were privately owned, out of compliance for years, by an owner that filed bankruptcy leaving the state with the bill for replacing the dams after their failure.”

The MRWA states in the letter that the MPSC “must be assured, through enforceable financial mechanisms and binding obligations, that any future owner has both the capacity and the commitment to maintain (the dams) safely and responsibly over the long term.”

The letter goes on to say that the commission must ensure that any transfer of ownership strengthen, rather than weaken, requirements for monitoring, mitigation, transparency and compliance.

“Without firm, enforceable safeguards, the proposed sale risks locking in or exacerbating these impacts for decades to come, undermining decades of restoration and conservation efforts undertaken,” it states.

The MRWA also states in the letter that it is concerned about the proposed transfer of 32,000 acres of riverfront land, including 8,000 acres at Hardy Dam, that are currently protected under Consumers Energy’s licensing agreements.

“These lands provide public access and recreational opportunities, support trails such as the Dragon Trail at Hard Pond, and includes parks, scenic corridors and natural areas that are essential to the character, beauty and ecological health of the Muskegon River,” the letter states. “Currently, these lands are largely protected from development. Under the proposed sale, however, they would be conveyed to Hull Street Energy with no clear assurances that they will remain permanently conserved. The potential loss of these lands to development would represent an irreversible impact on recreation, habitat and community identity along the Muskegon River.”

When asked about the potential impact on The Dragon Trail at Hard Pond, which Consumers Energy was an active participant in establishing, Wheeler said that the removal of the impoundment would have “no direct impact.”

The recent news release from Consumers Energy and Confluence Hydro states that Confluence Hydro will commit to not reducing land in the forthcoming relicensing processes “unless doing so serves the public interests.”

“It is interesting that they say that they won’t sell the land unless it benefits the people,” Ruell said. “Let’s say they have to sell the land to use a portion of the proceeds to raise funds to fix some of the other dams. Is that a benefit to the people?”

Wheeler said that the $275 million Safety Fund is being established to help the state in the case of safety issues that may unexpectedly arise with the dams. He said that Consumers sees the fund as “addressing a hypothetical situation.”

“We are confident Confluence Hydro will own and operate these dams safely and reliably,” he said. “Consumers Energy has been working for years to find the lowest-cost approach for our customers that also protects communities around the dams. This sale does that. We have found a buyer that is knowledgeable, experienced and determined to keep those dams operating safely for at least the next 30 years. This is the best outcome for the dams’ neighbors and all of Michigan.”