Michigan Attorney General Dana Nessel
The days of Indiana Michigan Power overcharging for electricity produced by its Rockport power plant may be ending, as Michigan regulators have rejected more than $10 million in costs the company tried to pass on to consumers.
“The Commission found that the costs of energy generated by the Rockport plant were well above other long-term supply benchmarks,” the Michigan Public Service Commission ruled April 11.
American Electric Power (AEP), the parent company of (I&M), has announced that its plans to close the plant in 2028, even though repeated analyses have shown the plant continues to lose money. AEP keeps running Rockport at will, sending its power to the grid and crowding out cheaper electricity.
AEP needs the revenue generated by Rockport to pay off the $235 million in low-interest municipal bonds the company sold to finance pollution control devices on the 40-year-old plant. If Rockport closes early, AEP would have to pay off the bonds with income from other operations or float another bond issue at higher rates than the .75 percent to 3.025 percent rates of the current bonds.
Rockport’s costs rising
The plant, located in the small town of Rockport, Ind., on the Ohio River, has consistently been rated one of the least efficient in the United States. In 2016, the Sierra Club’s Beyond Coal Campaign said it would cost “billions” to keep the plant’s two units operating.
A 2021 report by the Energy Innovation think tank said Rockport is the most expensive to run of the nation’s 10 largest coal plants, with a cost of $61 per megawatt-hour of electricity generation. By comparison, it would cost $35.17 per MWh for solar generation or $33.90 per MWh for wind generation in the same area, the Energy Innovation report said.
Expert testimony before the Michigan PSC placed Rockport’s costs even higher.
Devi Glick, an analyst working for Michigan Attorney General Dana Nessel, determined that the cost of Rockport power purchased by I&M in 2020 was $122.24 per MWh. Those cost rose to $129.60 per MWh in 2021, according to a filing by Nessel with the PSC.
“Simply put, Michigan customers should not have to pay for the cost of Rockport power when cheaper electricity is available on the market,” the Sierra Club argued in a September 2023 filing.
I&M’s coal cost reporting makes it difficult to determine exactly how much its coal costs. Unlike many plants, which report the cost of their fuel directly to the U.S. Energy Information Administration, I&M reports the costs of the coal it obtains from the Powder River Basin in Montana and Wyoming to the CCT Center in Illinois and then to Rockport.
Meanwhile, Rockport directly reports the amount and costs of the coal it uses from mines in the Eastern United States, primarily Kentucky and West Virginia.
Not only does Rockport lose money on the electricity it generates, but federal records show the plant generated about half of the amount of power in January 2024 that it did in January 2018.
How to pay off Rockport’s debts
Rockport has been plagued for years by pollution problems. It has been targeted by the Environmental Protection Agency and the Justice Department for more than 20 years and gone through at least five modified consent decrees aimed at lessening its sulfur dioxide and nitrogen oxide emissions.
To keep the plant running, I&M agreed to install pollution control devices to reduce the amount of pollution. It sold tax-free municipal bonds with lower interest rates to help pay for some of the devices.
I&M officials have testified that those bonds are paid off by revenues earned by selling electricity generated by the Rockport plant. Without that income, I&M and AEP would have to find another way to pay off the bonds.
I&M and AEP did not respond to questions from Checks & Balances Project about their bond debt, how they would pay off their debt without Rockport’s income and how they calculate their coal costs.
Until last week, bond rating agency Fitch gave positive ratings to Rockport bonds, noting that “the regulatory regimes in Indiana (80% of rate base) and Michigan (20% of rate base) are supportive.” Fitch did not respond to questions about how it views Rockport’s debt after the Michigan decision.
Ray Locker is the executive director for Checks & Balances Project, an investigative watchdog blog holding government officials, lobbyists, and corporate management accountable to the public. Funding for C&BP is provided by Renew American Prosperity and individual donors.
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