Key facts
- An administrative law judge recommended Michigan reject Consumers Energy's proposed sale of 13 dams to Confluence Hydro.
- The judge cited concerns about public safety, financial commitment of the buyer, and potential future liabilities for taxpayers.
- The proposed deal involves selling the dams for $1, with ratepayers agreeing to buy back power at a premium and Consumers receiving a $270 million profit.
- Critics argue the sale could lead to neglect of aging, high-hazard dams and shift repair or decommissioning costs to taxpayers.
- Consumers Energy and its potential buyer, Confluence Hydro, expressed disappointment but stated the recommendation is not legally binding.
- The Michigan Public Service Commission is expected to make a final decision on the sale by September.
An administrative law judge has recommended that Michigan regulators reject Consumers Energy's proposed sale of 13 hydroelectric dams to Confluence Hydro, a private equity firm. Judge James Varchetti concluded in a 312-page recommendation that the deal is 'highly problematic,' inconsistent with the public interest, and poses risks to public safety and ratepayers.
The proposed transaction involves Consumers selling its aging dams, located on the AuSable, Grand, Kalamazoo, Manistee, and Muskegon rivers, for $1. In return, Consumers' 1.9 million ratepayers would enter a 30-year contract to buy back power at twice the market rate and provide Consumers with a $270 million profit. Critics estimate the total cost to ratepayers could reach $3.4 billion, or approximately $1,800 per person.
Varchetti's recommendation highlights concerns that the buyer may not be financially committed to the dams' full lifecycle needs, potentially leaving taxpayers to cover future liabilities such as decommissioning costs. The dams, averaging 106 years old, are described as unprofitable, generating a $152 million annual loss, and many are classified as high-hazard, meaning their failure could cause significant loss of life and property damage. The Hardy Dam, the largest, requires a substantial spillway upgrade.
Confluence Hydro, a subsidiary of Hull Street Energy, has stated its intention to modernize and safely operate the facilities, citing a track record with similar assets. However, opponents, including Michigan Attorney General Dana Nessel and the Michigan Hydro Relicensing Coalition, are wary of the deal's complex corporate structure, fearing it allows Hull Street to profit while avoiding liability for upkeep. They argue this structure could repeat a pattern of utilities offloading unwanted dams to private owners who neglect maintenance.
Consumers Energy and Confluence Hydro expressed disappointment with the recommendation but emphasized that it is not legally binding. Consumers maintains the sale offers significant cost savings compared to repairing or demolishing the dams and will continue to advocate for approval. The Michigan Public Service Commission, appointed by Governor Gretchen Whitmer, is expected to render a final decision by September.