October 15, Kavita Kale Executive Secretary MPSC 7109 West Saginaw Highway 3rd Floor Lansing, MI Re: MPSC Case No.

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1 Dykema Gossett PLLC 00 Renaissance Center Detroit, MI Tel: () -00 Fax: () - John A. Janiszewski Direct Dial: () -0 Direct Fax: (00) - JJaniszewski@dykema.com October, 0 Kavita Kale Executive Secretary MPSC 0 West Saginaw Highway rd Floor Lansing, MI Re: MPSC Case No. U-0 Attached for filing in Case No. U-0, please find Midland Cogeneration Venture, LP s and Proof of Service of same. Thank you. Respectfully, DYKEMA GOSSETT PLLC John A. Janiszewski California Illinois Michigan Minnesota Texas Washington, D.C.

2 STATE OF MICHIGAN BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION In the matter of the application of ) CONSUMERS ENERGY COMPANY ) for approval of its integrated resource plan ) Case No. U-0 pursuant to MCL 0.t and for other relief. ) ) TESTIMONY OF EMILY S. MEDINE ON BEHALF OF MIDLAND COGENERATION VENTURE (MCV)

3 TESTIMONY OF EMILY S. MEDINE ON BEHALF OF MIDLAND COGENERATION VENTURE (MCV) I. INTRODUCTION AND SUMMARY 0 0 Q. PLEASE STATE YOUR NAME, TITLE AND BUSINESS ADDRESS. A. My name is Emily S. Medine. I am a Principal in the consulting firm of Energy Ventures Analysis, Inc. ( EVA ). My business address is 0 N. Moore Street, Suite 00, Arlington, Virginia 0-0. Q. PLEASE DESCRIBE YOUR WORK EXPERIENCE AND EDUCATIONAL BACKGROUND. A. I have been with EVA, an energy consultancy formed in, since. EVA engages in a variety of energy-related projects for private and public sector clients. Prior to EVA, I worked for Consolidation Coal Company (now CONSOL Energy ). I received a Bachelor of Arts degree from Clark University in and a Masters of Public Affairs from the Woodrow Wilson School of Public and International Affairs at Princeton University in. My education and experience are set out in Attachment ESM-. Q. PLEASE DESCRIBE EVA. A. EVA is a consulting firm that engages in a variety of projects for private and public sector clients related to energy and environmental issues. EVA also has a subscription business and currently produces about publications, the frequency of which range from weekly to annual. In the energy area, much of our work is related to analysis of the electric utility industry and fuel markets, particularly oil, natural gas and coal. Our clients in these areas include coal, oil and natural gas producers, electric utility and Rebuttal On Behalf of MCV Page of -0-. ID\JANISZEWSKI, JOHN - \0000

4 0 0 industrial energy consumers, and gas pipelines and railroads. We also work for a number of public agencies, including the U.S. Department of Justice, the U.S. Department of the Interior, state public utility commissions, as well as intervenors in utility rate proceedings, such as consumer counsels and municipalities. Another group of clients include trade and industry associations. EVA has provided testimony in numerous state public utility commissions. Principals in the firm have also filed testimony in a number of cases in both state and federal courts, as well as before the Federal Energy Regulatory Commission. Q. WHO ARE YOU TESTIFYING ON BEHALF? A. My testimony is on behalf of the Midland Cogeneration Venture (MCV). Q. WHAT IS THE PURPOSE OF YOUR TESTIMONY? A. My testimony is to provide an overview of the current and future role of MCV in providing capacity and energy resources to Consumers Energy, the reasons why the Consumers Energy (Consumers) Integrated Resource Plan (IRP) should not be accepted as offered, and portions of the IRP that should be approved. I do not address the PURPA issues including competitive bidding or Energy Waste Reduction, Demand Response and Conservation Voltage Reduction. Q. ON WHAT BASIS DID CONSUMERS FILE AN IRP? A. On December, 0, Public Act of 0 (Act ), an amendment to Public Act of and Public Act of 00, was signed into law and became effective on April 0, 0. Section t() of Act, MCL 0.t(), requires that each electric utility, whose rates are regulated by the Michigan Public Service Commission (MPSC), file IRP within two years from the effective date of Act. The MPSC set the deadline for Consumer to be June, 0. Q. PLEASE SUMMARIZE THE FINDINGS OF YOUR REVIEW. Page of

5 A. Finding #: Consumers stated in its IRP that if it did not receive 00 percent approval of its IRP that it would retain a right to withdraw the IRP. This position is inconsistent with industry practice. Further, the statute lays out the process. The IRP can either be accepted or denied. If denied, the utility can submit revisions to the IRP within 0 days from the final order denying the IRP to the MPSC for approval. The MPSC then has 0 days to approve or deny if the revisions are minor or 0 days if the revisions are material. If the MPSC denies the IRP, recovery of any financial commitments made by the utility pursuant to the IRP are not assured. 0 0 Finding #: Finding #: Consumers appears to believe that approval of its IRP is approval for a long-term resource plan. The statute makes clear that only the costs for specifically identified investment in an approved integrated resource plan that are commenced within years after the commission s order approving the initial plan, amended plan, or plan review are considered reasonable and prudent for recovery purposes. The statute also states that a utility shall file an application for review of its integrated resource plan not later than years after the effective date of the most recent commission order approving a plan, a plan amendment, or a plan review. In other words, approval is limited within these constraints. A critical element of the IRP is the assumed exercise of a five-year option in the MCV PPA which appears to be a constructive extension. Consumers upon questioning indicated this not to be the case. Given the need for MCV to plan and make sufficient investments and given Consumers reliance on this extension in the IRP resource plan, it seems appropriate that Consumers confirm that such inclusion is constructive extension if the IRP is approved. This is not a legal review. The statute PA-0.htm speaks for itself. Page of

6 0 Finding #: Finding #: Finding #: The Company has not demonstrated that early retirement of Karn & is justified. The economics presented by the Company are inconclusive and qualified. Further, the analysis did not reflect the acknowledged offers to reduce rail rates and it was not based upon the AEO natural gas price forecast as required. The early retirement of Karn & is expected to have a negative impact on the payments to MCV, which Consumers refer to as the non-utility generation (NUG) cost. Consumers acknowledges its NUG costs to be lower without the Karn units. Consumers strategy to over-build in the 0 to 00 period because of concerns related to the transition plan is ill-conceived. Consumers should consider other options such as a further extension of the PPA (or a new PPA) with MCV for the 00 to 0 period. As currently configured, there is no indication in the IRP that Consumers considers MCV as a resource option after Finding #: There is a disconnect in the IRP related to the over-build in 0 to 00 period. The IRP is not showing a decline in generation from either the remaining coal units or MCV suggesting the dispatch of these units does not change with the capacity additions during this period. Finding #: The IRP assumes the MW Filer City coal plant is closed and replaced with a MW natural gas plant, resulting in an increase of approximately 0 MW. In August 0, FERC did not approve of the revised PPA upon which the capacity assumptions are based which makes this increase in capacity uncertain if not unlikely. The MW s are derived from Exhibit A- (STW-) of the Direct Testimony of Company Witness Walz. Page of

7 0 0 0 Q. PLEASE SUMMARIZE YOUR RECOMMENDATIONS. A. Recommendation #: The MPSC should not approve the Consumers IRP as submitted. MSPC should be directed to incorporate at a minimum the changes outlined in the recommendations below. Recommendation #: The resource outlook should reflect Filer City continuing to operate under its existing PPA through only the original term of the agreement. Recommendation #: The Medium retirement analysis should be updated using expected delivered coal prices and the AEO natural gas price forecast and should not be limited to specific retirement years. To the extent the updated analysis concludes a different retirement schedule is appropriate, the new retirement schedule should be incorporated. Recommendation #: In modeling future resource options, MCV should be considered in a manner similar to Consumers-owned generation. Recommendation #: To the extent that the Consumers IRP continues to reflect an exercise of the extension option in the MCV contract, Consumers should be required to acknowledge this is a constructive exercise of that option. Recommendation #: Consumers should evaluate the change in dispatch of MCV and the Campbell units as a result of the over-build during the 0 to 00 period. Q. HOW IS THE REST OF YOUR TESTIMONY ORGANIZED? A. My testimony is organized as follows: Review of MCV and the role it has played in the Consumers generation profile Page of

8 Review of Consumers IRP Role of MCV in Consumers IRP The Medium analysis II. MIDLAND COGENERATION VENTURES Q. WHAT IS MCV? A. MCV is a natural-gas fired cogeneration plant which produces up to 00 MW of electricity and up to. million pounds per hour of industrial steam. MCV s primary electric customer is Consumers, of which 0 MW of capacity and associated energy has been dedicated under a long-term power purchase agreement. MCV also sells electricity and industrial steam to The Dow Chemical Company under long-term arrangements. MCV is a registered generator owner and operator in MISO and offers its available capacity, energy and ancillary services into the MISO energy markets. Q. WHEN WAS MCV BUILT? A. Midland was intended to be a nuclear power plant. Owned in its entirety by Consumers Power, construction on the Midland nuclear plant which began in the late 0s was troubled. When the project was reportedly percent complete, Consumers Power abandoned it citing construction problems, massive cost overruns, and a changing regulatory environment largely as a result of the accident at Three Mile Island. Conversion of the plant started in after agreements between Consumers, Dow Chemical and others with approval by the MPSC. First electricity was produced in 0. Q. WHAT IS THE OWNERSHIP OF MCV? A. Consumers owned a percent share in MCV until 00. When MCV was established six other companies owned the remaining percent. In 00, MCV was purchased by the Swedish private equity firm of EQT Infrastructure and the U.S. energy investment group Fortistar. In late 0 MCV was purchased by Borealis Infrastructure. In 0, the Global Strategic Investment Alliance (GSIA) purchased percent. In 0, Borealis Page of

9 0 0 0 Infrastructure was renamed OMERS Infrastructure Management, Inc. OMERS is one of Canada s largest defined benefit pension plans. Q. WHAT IS THE RELATIONSHIP BETWEEN MCV AND CONSUMERS? A. MCV and Consumers are parties to a power purchase agreement (PPA) under which deliveries began in 0 and run for years. Consumers reports in its 0 FERC Form filing that Consumers is obligated to to purchase,0 MW of electricity. According to the Form, the MCV PPA, as amended and restated, provides for: a capacity charge of $0. per MWh of available capacity a fixed energy charge based on Consumers annual average baseload coal generating plant operating and maintenance cost, fuel inventory, and administrative and general expenses, a variable energy charge based on the MCV s cost of production when the plant is dispatched a $ million annual contribution by the MCV to a renewable resources program an option for Consumers to extend the MCV PPA for five years or purchase the MCV Facility at the conclusion of the MCV PPA s term in March 0 Q. WHAT HAS BEEN THE PERFORMANCE OF MCV? A. As shown in Exhibit ESM-, over the last eight years, MCV has sold on average. million gigawatt hours of electricity per year of which the vast majority was sold to Consumers under the approved PPA. file:///c:/useremedine/downloads/ ()%0().pdf, page. Page of

10 0 Exhibit ESM-. Historical Performance of the MCV PPA PPA Capacity (MW) PPA Availability.%.% 00.0%.%.%.%.%.% PPA Capacity Factor.%.%.%.%.0%.%.% 0.% Energy Delivered (GWh),,,,,,0,, Source: MCV In 0, MCV reported it could expand capacity at the plant by adding two new gas turbines and a steam turbine. site remains a very economic site to build future capacity. While the expansion as discussed has not proceeded, the Q. WHAT HAS MCV S CONTRIBUTION TO THE ECONOMY OF THE STATE OF MICHIGAN? A. MCVs contribution has been significant in multiple respects. MCV has paid local and state states taxes of approximately $ million for the years 0-0. second largest taxpayer in Midland County. MCV is the MCV provides direct employment for approximately 0 full-time equivalent positions, of which are employed by MCV; the others are contractors on site daily, including local craft laborers. Page of

11 III. REVIEW OF CONSUMERS IRP Q. PLEASE DESCRIBE THE IRP SUBMITTED BY CONSUMERS. A. The IRP submitted by Consumers is the first IRP submitted by Consumers as required under Section t() of Act, MCL 0.t(). The IRP is intended to provide a projection of the utility s load obligations and its plan to meet those obligations in a manner that is reliable, economic, and compliant with legal and regulatory requirements. The MPSC laid out specific guidelines as to approach and assumptions. Consumers believes the IRP it submitted is consistent with MPSC requirements. Q. WHAT IS CONSUMERS PREFERRED COURSE OF ACTION (PCA) IN THE IRP? A. The PCA consists of the following: Incremental increases in Energy Waste Reduction (EWR), Demand Response (DR) and Conservation Voltage Reduction (CVR) with no capacity need for the first three years of the plan Early retirement of Karn & Utilization of EWR, DR, and CVR to replace the Karn & capacity in 0 and leveraging of available solar resource to increase resource diversity and decrease execution risk of the capacity replacement plan Utilization of EWR, DR, and CVR and solar to replace the end of the MCV PPA in 00 and the retirement of Campbell & in 0. Establishment of a regulatory asset for recovery of the unrecovered book balance of Karn & and decommissioning costs by 0. Utilization of a competitive bidding process to address the Company s future capacity needs and determine the Company s avoided cost rates pursuant to the Public Utility Regulatory Policies Act of (PURPA) Page of

12 0 0 Introduction of a financial compensation mechanism (FCM) which will be applied to all new PPAs that the Company enters through a competitive bidding mechanism. Q. WHAT HAS CONSUMERS REQUESTED FROM THE MPSC? A. Consumers wants the MSPC to find the Consumers IRP to be the most reasonable and prudent means of meeting the Company s energy and capacity needs and agree to all its requests. Q. ARE THERE ANY CONSEQUENCES IF MPSC DOES NOT FIND THE ENTIRE IRP ACCEPTABLE? A, Consumers says that all proposals made by the Company are integrally part of the PCA. As such, Consumers reserves the right to abandon or amend its PCA if the Commission rejects or modifies any of the Company s proposals presented in the IRP. Q. IS THIS YOUR EXPERIENCE WITH OTHER IRPS AND COMMISSIONS? A. It is not my experience. In Indiana, for example, IRPs are accepted, not approved. Any request for investment recovery is handled separately through a Certificate of Public Convenience and Necessity petition. As the requests for investment are part of the Consumers IRP, approvals are necessary for recovery. However, it is not at all clear how all the proposals are integrally part of the PCA. Therefore, it is not clear why the approval of all is required for the approval of some. In my experience, IRP s are a dynamic planning tool which often involves alteration of the utility's PCA over time. More relevant is that the Michigan process is clear. The statute states the IRP can either be accepted or denied by the MPSC. If denied, the utility can submit revisions to the IRP within 0 days from the final order denying the IRP to the MPSC for approval. The MPSC then has 0 days to approve or deny if the revisions are minor or 0 days if the revisions are material. If the MPSC denies the IRP, recovery of any financial This is not a legal review. The statute PA-0.htm speaks for itself. Page 0 of

13 0 0 0 commitments made by the utility pursuant to the IRP are not assured. Therefore, it is not Consumers place to challenge the procedure set up by the statute and Consumers would be the party at risk for failing to obtain approval for its IRP. In other words, while Consumers may be free to withdraw or reject Commission modifications, it does so at its own risk. Q. WHAT WERE THE BASELINE CAPACITY ASSUMPTIONS IN THE IRP? A. According to Company Witness Clark, the baseline capacity assumptions are as follows: The retirements of Campbell, Campbell, Karn, Karn, Karn, and Karn are assumed to align with MISO Planning Year 00/ The Jackson and Zeeland Generating Plants are assumed to continue operation through the end of the planning period The termination of the Palisades PPA occurs on April, 0 The Company executes its unilateral right to extend the PPA with Midland Cogeneration Venture Limited Partnership ( MCV ) from the current termination date of March, 0 to 00 The continued expansion of existing DR programs, and continued levels of the Rate GI Provision and the Energy Intensive Primary program; Achieving energy efficiency savings of.% in 0 MW of wind in 0 plus an additional MW of wind in 0 The T.E.S Filer City Station Limited Partnership (Filer City) PPA amendment which provides for the commercial operation of the converted Filer City Plant in Planning Year 0 The commercial operation of Cross Winds Energy Park II and III expansions Direct Testimony of Thomas P. Clark, Page, Lines -, Page 0, Lines - Page of

14 Company Witness Clark notes in his Direct Testimony during the preparation of the IRP, the following adjustments to the baseline capacity assumptions were made: 0 An additional 0 MW of PURPA capacity assumed to be supplied by solar generators A change in the commercial operation date of the converted Filer City Plant from Planning Year 0 to Planning Year 00 Campbell Unit is retired at end of year 0 Minor reductions in the level of DR in the short-term Q. CAN YOU SUMMARIZE THE RETIREMENTS AND ADDITIONS IN THE IRP? A. Yes. The Consumers IRP Executive Summary shows respectively the assumed retirements and the assumed additions. Over,000 MW of capacity or PPA s are not expected to be in the resource mix by 00. The primary source of replacements is expected to be solar. 0 Consumers IRP Executive Summary, Page. Page of

15 Q. HAVE THERE BEEN ANY ADDITIONAL CHANGES SINCE THE IRP WAS FILED IN JUNE 0? A. Yes. In August 0, the amendment to the Filer City Plant PPA was not approved by FERC. Given the current MW coal plant was assumed to be replaced by a MW gas plant, the net increase in assumed resources is about 0 MW less than assumed in the IRP. Based upon the decision, this increase in capacity is uncertain if not unlikely. IV. ROLE OF MCV IN CONSUMERS IRP 0 0 Q. PLEASE DESCRIBE HOW THE IRP ADDRESSES MCV? A. There is limited discussion of MCV in the IRP. The IRP describes the MCV arrangement including the revised PPA and that the PCA assumes Consumers expects to exercise its contractual option to extend the PPA. Q. PLEASE REVIEW THE STATEMENTS RELATED TO THE PPA. A. The IRP notes that the Amended and Restated PPA with MCV was approved by the Commission s June 0, 00 Order in Case No. U-0. Section of the Amended and Restated PPA, which is shown below, is included in the IRP. Beginning December, 0, and continuing through March, 0, Consumers shall have the option to: (i) purchase the MCV-Facility at the then fair market value as determined by an appraisal mutually acceptable to the Parties, or (ii) extend this Agreement for an additional five-year term at a Capacity Price of Page of

16 0 0 0 $ per megawatt hour. In the event that Consumers exercises the foregoing purchase option, the effective date of any such exercise shall be no earlier than March, 0, and the timing and means of payment will be contained in a purchase agreement negotiated between the Parties. In the event that Consumers exercises the foregoing extension option, the effective date of any such exercise shall be no earlier than March, 0. Q. DOES CONSUMERS STATE THAT IT INTENDS TO CONTINUE TO REVIEW THE DECISION TO EXTEND THE MCV OPTION UNTIL THE EXERCISE DATE IN THE PPA? A. Yes, but in reality Consumers cannot do this. MCV supplies a significant share of Consumers generation portfolio. If Consumers does not want to exercise its option to replace this capacity in 0 as part of the IRP, it would need to start that alternative process in the near future. The PCA does not include specific investments that would allow that capacity to be replaced by 0. Further, there is every indication that the capacity at $ per megawatt hour will be very economic. Q. WOULD IT BE A BENEFIT TO CONSUMERS IF THE OPTION WAS EXERCISED AS PART OF THE IRP APPROVAL? A. It could. If MCV had greater certainty as to the extension of the PPA, it would be more willing to make improvements in the facility that could among other things extend its life. These improvements provide benefits both to the owners of MCV and to Consumers, its rate-payers, and the economic well-being of the state of Michigan. Q. HOW IS MCV CONSIDERED AS A RESOURCE AFTER 00? A. It does not appear to be given any consideration. Q. WHAT IS YOUR EVIDENCE OF THIS? A. Company Witness Troyer in Exhibit A (KGT-) affirmatively states it is not considered. Direct Testimony of Company Witness Troyer, Page, Lines -. Page of

17 0 Q. WHY DO YOU THINK MCV SHOULD BE CONSIDERED POST 00? A. Because of the large drop off in capacity in 00/0, Consumers is over-building in the 00 s according to Company Witness Blumenstock to build its resource portfolio in preparation for (these) capacity losses. Witness Blumenstock states this over-building of capacity is a result of Consumers modular approach of adding smaller portions of supply on a yearly basis (which) allows the Company to be flexible in its resource planning providing the opportunity to evolve and adapt to changing conditions without making significant up-front investments in one large, centralized generating station. Figure of Company Witness Blumenstock s Direct Testimony as displayed below shows a. GW surplus of capacity in 0. Direct Testimony of Richard T. Blumenstock, Pages, lines - and Page lines - Page of

18 0 0 The problem with Consumer s approach is obvious. Adding capacity every year before the deficit exists creates an unnecessarily significant surplus. While surplus capacity is assumed to be sold at the market price for capacity, 0 it is not clear that the assumed market price reflects. GW of surplus Consumers capacity. Ironically, Consumers in its discussion of PURPA capacity recognizes that the surplus capacity would come at a cost. Company Witness Troyer states The Company believes that the (PURPA-related) updates proposed in (his) testimony will ensure that the avoided costs that customers will be obligated to pay accurately reflect the cost of adding new capacity while the capacity demonstration updates will ensure that customers are not burdened with paying for surplus capacity. If there was a more reasonable capacity retirement schedule, a significant share of this surplus could be avoided. The MCV is open to a further PPA extension or a new PPA agreement, the economics of which should at a minimum be evaluated. Q. DO YOU AGREE THAT BUILDING THE SURPLUS IS NECESSARY TO SERVE AS A PRUDENT HEDGE AGAINST POTENTIAL EXECUTION AND DELIVERY RISKS WITH ADDING SIGNIFICANT AMOUNTS OF DR AND SOLAR AS WITNESS BLUMENSTOCK STATES? A. No. In fact, if this is a concern of Consumers it speaks to a broader issue about the IRP and the assumed end of power purchases from MCV and the timing of the retirement of Campbell &. Given the dates associated with these events are self-imposed and Consumers concern, it would be reasonable to slow the transition. The PCA should reflect plans which do not require Consumers to build a. GW hedge. When Consumers updates its IRP in no later than five years, the timing issues can be revisited again. 0 Direct Testimony of Sara T. Walz, page in lines - Direct Testimony of Keith Troyer, Page, Lines -. Page of

19 Q. DO YOU BELIEVE THE COST AND CONSEQUENCE OF THE CAPACITY SURPLUS IS PROPERLY EVALUATED IN THE IRP? A, No. In fact, there is an apparent disconnect. Presumably as primarily renewables capacity is added into the generation mix, it will impact the dispatch of the Campbell units as well as MCV. As shown below, the forecast in the Direct Testimony of Company Witness Walz shows no impact until 00. Page of

20 0 0 Exhibit ESM-. Forecast Generation (GWH) Plant Type Campbell Coal,,,,,, Campbell Coal,,,,,0, Campbell Coal,,,,0,0, Midland Cogen Gas,,,,,0, TOTAL,,0,0,,00,0 Source: Direct Testimony of Sara Walz (Exhibit A-, STW-) Q. WHAT IS THE CONSEQUENCE OF THIS DISCONNECT? A. In addition to raising a concern about the modeling and/or Consumers confidence in bringing on these assets, the disconnect suggests an understatement of costs associated with PCA. Q. DOES CONSUMERS HAVE AN ALTERNATE PLAN IF THE PCA FOR WHICH IT IS SEEKING APPROVAL CANNOT BE IMPLEMENTED? A. Company Witness Clark states in his Direct Testimony which is confirmed by Company Witness Walz in her response to a data request that if its PCA runs into problems Consumers alternate plan is to build a natural-gas fueled combined cycle ( CC ) unit and a natural-gas fueled combustion turbine ( CT ) unit beginning in 0. It is unclear what type of approval for the alternate plan Consumers is seeking with the IRP approval. Q. CAN YOU SUMMARIZE YOUR CONCERNS ABOUT CONSUMERS ALTERNATE PLAN? A. Yes. An approval of any alternate plan must include a contemporaneous analysis at the time of the commitment. It would be highly inappropriate to provide ad hoc approval at this time as part of the IRP process as the circumstances are likely to be different in the future and require a fresh look. 0-ELPC-CE- Page of

21 0 0 Further, it is known that Consumers did not perform a comprehensive analysis of the alternate plan as Consumers did not consider extending its PPA with MCV (at a negotiated price) in the development of the alternate plan. An extension of the PPA would be a cost-effective approach to provide additional time to the transition to renewables being proposed by Consumers without building a new CC. Consumers should be required to evaluate this option. In addition, it is not at all clear than the alternative plan is consistent with Consumers goals to eliminate carbon emissions from future electricity generation. A commitment to a new CC is a commitment to carbon generation throughout the life of the new CC. With a likely life of 0 to 0 years and an on-line date of 0, a new CC would generate carbon emissions through 00 to 00. If additional time is needed to achieve the PCA, which could be possible, a much better environmental alternative in terms of total carbon emissions is the extension of existing plants which will have a considerably shorter life going forward than constructing new long-lived capacity. Further, the economics of such an approach would be superior for customers than building a new long-lived asset which could be stranded prematurely. Finally, a commitment to a large CC plant is contrary to Consumers stated strategy. According to Company Witness Walz, the Company is focused on small, modular resources instead of locking into a single technology. If the future changes, the Company can react to changing conditions and leverage lower cost resources, if they become available. What is obvious by its glaring omission is that a negotiated contract with MCV can be structured at a level of 00 MW up to over 00 MW and scalable over a period of years to fit the capacity needs. Q. WHAT IS YOUR RECOMMENDATION REGARDING THE ALTERNATIVE PLAN? Response to 0-AG-CE-. Page of

22 0 0 0 A. There is inadequate analysis of the alternative plan or its consequences to support approval at this time. The alternative plan assumes an approach which is contrary to the represented strategy of the Company. My recommendation would be that the MPSC should make clear that acceptance of the IRP is not an approval of the alternate plan. Should at some point in the future Consumers wish to pursue an alternate plan, a new IRP or petition would be required which fully justifies such an approach. V. THE MEDIUM ANALYSIS Q. PLEASE EXPLAIN THE BASIS FOR THE MEDIUM ANALYSIS? A. Case No. U- required that a retirement assessment of the Medium (coal) Units should be submitted as a standalone analysis in the Company s IRP. The analysis was required to address the following elements: i. Capacity replacement costs ii. Impact of recovery of undepreciated book value iii. Customer rate impact analysis iv. Non-economic variables such as portfolio balance, employment and community impact v. Effect on contractual fuel obligations vi. Near-term revenue requirements vii. Conditions of existing equipment viii. Execution risk Q. DID YOU REVIEW THE ENTIRE MEDIUM ANALYSIS? A. The Medium analysis presented in Mr. Clark s testimony appears incomplete. Mr. Clark s written analysis is limited in scope and there is not a back-up study as confirmed in discovery. Q. WHAT CONCLUSIONS DID THE MEDIUM ANALYSIS REACH? A. From the Medium analysis, Consumers is recommending early retirement of Karn & by May, 0 and the retirement of Campbell & by May, 0. Response to 0-MCV-CE-. Page 0 of

23 0 0 Q. WOULD YOU SAY CONSUMERS RECOMMENDATION IS WITHOUT HESITATION? A. Not at all. Consumers qualifies its recommendation in several respects: Consumers is clear that the economics of the retirement plan are marginal at best. Consumers states that if the backfill in capacity is not achieved at the costs forecast, the retirement plan will erode the customer savings upon which the Company s proposed retirement decision was based. A particular concern relates to whether the MPSC will require the PURPA QF capacity at the rates identified in Case No. U-00. If so, Consumers states unequivocally the Company would not propose to retire Karn Units and in 0. Consumers recommendation is contingent on receiving unrecovered costs for Karn &, which are expected to come at a cost to customers. Q. DID YOU FIND ANY PROBLEMS WITH THE MEDIUM ANALYSIS? A. Yes. There is a problem with the conclusions because as is stated on Page of the Application, the results of the retirement analysis do not clearly favor the early retirement or continued operation of any of the Medium Units from a net present value perspective. The retirement of a coal plant is an irreversible decision. Therefore, the decision should be founded on a strong basis. Q. DID YOU FIND ANY ASSUMPTIONS IN THE ANALYSIS WHICH FAVORED RETIREMENT OF THE MEDIUM COAL PLANTS? A. Yes. The following assumptions favored retirement of the coal plants: The delivered coal price assumptions were not adjusted to reflect the rail discounts that had been offered to Consumers. According to Company Witness Gallaway, Consumers has received unsolicited proposals from all of its rail carriers seeing ways to reduce the cost of coal transportation. If successful, the results will be lower delivered coal costs than included in this Direct Testimony of Company Witness Clark, Page. Page of

24 filing. In order words, the delivered coal prices used in the analysis exceeded Consumers reasonable expectations as to future delivered coal prices. The results could be materially different had the lower prices been incorporated. 0 The MPSC was clear in Commission Order in U- as to what natural gas price forecasts utilities should use in development of their IRPs. According to U-, the business as usual case should reflect natural gas prices (that) are consistent with business as usual projections as projected in the United States Energy Information Administration s (EIA) most recent Annual Energy Outlook. Despite this requirement, according to Company Witness Walz, Consumers decided that it would be better if it used its own natural gas price forecast for the Medium analysis. As the Medium analysis is an integral part of the IRP and the MPSC established which price forecast to use, this analysis cannot be deemed complete as presented. Use of the Consumers forecast as a sensitivity would have been appropriate. However, this was not done. The use of the AEO price forecast would most certainly have produced different conclusions. 0 Q. DO YOU BELIEVE IF THESE ASSUMPTIONS WERE CORRECTED, THE CONCLUSIONS OF THE MEDIUM ANALYSIS WOULD BE DIFFERENT? A. Yes. Q. DID YOU HAVE ANY OTHER ISSUES WITH THE MEDIUM ANALYSIS? A. Yes. I have several. It is not clear how the unrecovered book value associated with the Medium units is considered in the analysis. Consumers states it While the impact can be estimated based upon the discount times the assumed tonnage, this approach would most likely understate the benefit as the lower delivered price is likely to improve the dispatch of the coal units, thereby increasing tonnage levels and reducing total generation costs. Page Page of

25 currently has $. billion unrecovered in coal plants of which $ million is associated with Karn &. If these units were allowed to operate through 0, the unrecovered balance would drop to $. billion of which $ million be associated with Karn &. 0 Strategist, the primary model used in Consumers analysis, cannot according to PACE s Independent Review of 0 Integrated Resource Plan determine optimal retirement schedules for existing assets. 0 The retirement dates were inputs into the analysis, not solved by the analysis. The execution analysis focuses on the retirement of the coal units, not the replacement of the capacity. 0 The retirement date options were limited to 0, 0, and 0. There is no justification for limiting the Medium analysis to these dates when the objective is to optimize when such retirements occur. It is not clear that the modeling conducted for the Medium analysis was sufficiently accurate given the modeling limitations identified by Company Witness Walz in response to DR 0-MEC-CE-. Company Witness Walz notes the Strategist lacks the ability to accurately consider commitment of units having long lead times and minimum run times, based on startup and variable costs. Therefore, allowing Strategist to decommit the coal units may result in unrealistic projected operation. This is impractical for coal units. Q. DOES THIS CONCLUDE YOUR TESTIMONY? A. Yes but I reserve the right to update if additional information becomes available. While acknowledging the unrecovered amounts are significant, Company Witness Clark implies they are not considered I the economic analysis as he says they have no impact on the economic evaluation presented above. Page Direct Testimony of Company Witness Clark, Page 0 Independent Review of 0 Integrated Resource Plan, Exhibit A- (MH-) Appendix B, Technical Workshop, Question. Page of

26 Attachment ESM- EDUCATIONAL BACKGROUND M.P.A. B.A. PROFESSIONAL EXPERIENCE Current Position RESUME OF EMILY S. MEDINE Woodrow Wilson School of Public and International Affairs, Princeton University, Geography, Clark University, (magna cum laude, Phi Beta Kappa) Emily Medine, a Principal, has been with Energy Ventures Analysis since. Her experience includes forecasting, integrated resource plans, bankruptcy support, market strategy development, fuel procurement audits, fuel procurement, acquisition and investment analyses, and strategic studies. She has also provided expert testimony to regulatory commissions and in arbitration and litigation proceedings. The types of projects in which she is involved are described below: Integrated Resource Planning Ms. Medine works with utilities and/or stakeholders on the development and evaluation of Integrated Resource Plans (IRP). Ms. Medine focuses on validation of all assumptions including fuel, emission allowances, carbon, and renewable energy credits (RECs). Procurement Ms. Medine develops and implements fuel procurement strategies for U.S. and foreign coal consumers. Fuel procurement assistance has ranged from determining an appropriate strategy to soliciting bids and negotiating purchase agreements. In the last five years, Ms. Medine has advised several international coal consumers of their fuel procurement activities. Ms. Medine continues to advise numerous U.S. and international coal consumers on their coal and petroleum coke procurements. In recent years, Ms. Medine has worked on natural gas and REC procurement evaluations. Forecasting Ms. Medine develops forecasts of U.S. and global solid fuel demand and prices for alternative coal types, coke and market segments. These forecasts are provided to individual clients and are documented in various FUELCAST/COALCAST reports. Bankruptcy Support Ms. Medine was an advisor to the Horizon Natural Resource companies which operated as a debtor-inpossession in the development of a plan to accomplish reclamation on all permits not sold and transferred as part of the plan of reorganization. For a period of months, Ms. Medine served as Executive Vice President of Centennial Resources, Inc., a debtor-in-possession, as part of EVA s contract to manage this company post-petition. In this capacity, she managed the day-to-day operations of the company as well as serving as the liaison between the company, state and county regulatory agencies, the bankruptcy court, and the lenders. This assignment ended upon the filing of Centennial s plan of reorganization. Ms. Medine has also served as the advisor to secured lenders in another coal industry bankruptcy. In this capacity, she reviewed and developed independent financial forecasts and operating plans of the debtor-in-possession. Ms. Medine has also provided support to the Department of Justice on coal industry bankruptcies. Acquisition and Investment Page of

27 0 0 0 Ms. Medine was the agent for Lexington Coal Company in the sale of its assets in Indiana and Illinois. As part of this engagement, Ms. Medine was responsible for the sale of three mines to Peabody Energy. Ms. Medine also routinely evaluates the economics of potential projects or acquisitions for producers, developers, and industrials. For coal projects, this includes market and financial forecasts. In addition to the above, Ms. Medine has completed the sale of multiple mine assets. Ms. Medine was an advisor to and on the board of The Elk Horn Coal Company until its sale to Rhino Energy in June 0. Fuel and Power Purchase Procurement Audits Ms. Medine manages and performs fuel procurement audits on behalf of regulatory commissions, utility management, and third-party interveners. She has performed over audits of utilities regulated by the Public Utilities Commission of Ohio and testified in a number of proceedings. She also managed two major audits of the fuel procurement practices of PacifiCorp. Recent audits include Appalachian Power (00, 00, 0, 0, and 0) and Monongahela Power (00, 0, 0, and 0) on behalf of the Consumer Advocate of the State of West Virginia, Tucson Electric Power on behalf of the Arizona Corporation Commission in 00/00 and 0, AEP Ohio on behalf of the Ohio s Consumer Counsel, and AEP Ohio (00, 00, 0, 0, 0 and 0) and Dayton Power & Light (00, 0, 0, 0, 0, and 0) on behalf of the staff of the Public Utilities Commission of Ohio. Market Strategy Development Ms. Medine assists clients in the development of marketing strategies on behalf of fuel suppliers and transporters. She has helped to identify the high value markets and strategies for obtaining these accounts. Expert Testimony and Presentations Ms. Medine prepares analyses and testimony in support of clients involved in regulatory and legal proceedings. She provides testimony in commission hearings on a variety of issues. Ms. Medine regularly speaks at industry meetings. Prior Experience Prior to joining EVA, Ms. Medine held various positions at CONSOL including Assistant District Sales Manager Chicago Sales Office and Strategic Studies Coordinator. Prior to CONSOL, Ms. Medine was a Project Manager at Energy and Environmental Analysis, Inc. where she directed two large government studies. For the Environmental Protection Agency, Ms. Medine directed an evaluation of the energy, environmental and economic impacts of New Source Performance Standards on Industrial Boilers. For the Department of Energy, Ms. Medine directed an evaluation of the financial impacts of requiring utilities with coal capable boilers to reconvert to coal. Ms. Medine worked as a Research Assistant at Brookhaven National Laboratory while she attended graduate school. Page of

28 STATE OF MICHIGAN BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION In the matter of the application of ) CONSUMERS ENERGY COMPANY ) for approval of its integrated resource plan ) Case No. U-0 pursuant to MCL 0.t and for other relief. ) ) DYKEMA GOSSETT A PROFESSIONAL LIMITED LIABILITY COMPANY CAPITOL VIEW, 0 TOWNSEND STREET, SUITE 00 LANSING, MICHIGAN PROOF OF SERVICE Rebecca L. Grenawalt, an employee of Dykema Gossett PLLC, being first duly sworn, deposes and says that on the th day of October, 0, she served Midland Cogeneration Venture, LP s upon: Consumers Energy Company Anne M. Uitvlugt Robert W. Beach Bret Totoraitis Gary A. Gensch, Jr. Michael C. Rampe Theresa A.G. Staley Consumers Energy Company One Energy Plaza Jackson, MI 0 anne.uitvlugt@cmsenergy.com robert.beach@cmsenergy.com bret.totoraitis@cmsenergy.com gary.genschjr@cmsenergy.com michael.rampe@cmsenergy.com theresa.staley@cmsenergy.com mpsc.filings@cmsenergy.com Counsel for the Great Lakes Renewable Energy Association and Residential Customer Group Don L. Keskey, Esq. Brian W. Coyer, Esq. Public Law Resource Center PLLC Albert Avenue, Suite East Lansing, MI donkeskey@publiclawresourcecenter.com bwcoyer@publiclawresourcecenter.com Michigan Environmental Council, the Sierra Club, and the Natural Resources Defense Council Christopher M. Bzdok Lydia Barbash-Riley, Esq. Kimberly Flynn, Legal Assistant Karla Gerds, Legal Assistant 0 E. Front Street Traverse City, MI chris@envlaw.com Lydia@envlaw.com kimberly@envlaw.com karla@envlaw.com Energy Michigan, Inc. Laura A. Chappelle Timothy J. Lundrgen 0 N. Washington Square, Suite 0 Lansing, MI lachappelle@varnumlaw.com tjlundgren@varnumlaw.com Counsel for the Sierra Club Michael Soules, Esq. Massachusetts Avenue NW, Suite 0 Washington, DC 00 msoules@earthjustice.org

29 DYKEMA GOSSETT A PROFESSIONAL LIMITED LIABILITY COMPANY CAPITOL VIEW, 0 TOWNSEND STREET, SUITE 00 LANSING, MICHIGAN Counsel for the Association of Businesses Advocating Tariff Equity ( ABATE ) and Gerdau Macsteel, Inc. Bryan A. Brandenburg, Esq. Michael J. Pattwell, Esq. Clark Hill PLC East Grand River Avenue Lansing, MI 0 bbrandenburg@clarkhill.com mpattwell@clarkhill.com Consultant for ABATE Jeffry C. Pollock Billie S. LaConte Kitty A. Turner J. Pollock, Inc. Olive Boulevard, Suite St. Louis, MO jcp@jpollockinc.com bsl@jpollockinc.com KAT@jpollockinc.com Cadillac Renewable Energy, LLC; Genesee Power Station, LP; Grayling Generating Station, LP; Hillman Power Company, LLC; TES Filer City Station, LP; Viking Energy of Lincoln, Inc; Viding Energy of McBain, Inc. Thomas J. Waters Anita G. Fox Fraser Trebilcock Davis & Dunlap, P.Cl Allegan Street, Suite 000 Lansing, MI tjwaters@fraserlawfirm.com afox@fraserlawfirm.com MPSC Staff Daniel Sonneveldt Amit T. Singh Heather M.S. Durian Spencer A. Sattler Michigan Public Service Commission 0 W. Saginaw Hwy, rd Floor Lansing, MI sonneveldtd@michigan.gov singha@michigan.gov durianh@michigan.gov sattlers@michigan.gov Environmental Law & Policy Center Margrethe K. Kearney Environmental Law & Policy Center Wealthy St. SE, Suite Grand Rapids, MI 0 mkearney@elpc.org Bradley Klein, Esq. Environmental Law & Policy Center East Wacker Drive, Suite 00 Chicago, IL 00 bklein@elpc.org Cypress Creek Renewables, LLC Jennifer Utter Heston Fraser Trebilcock Davis & Dunlap, P.C. W. Allegan, Suite 000 Lansing, MI jheston@fraserlawfirm.com Administrative Law Judge Hon. Sharon L. Feldman 0 W Saginaw Hwy., rd Floor Lansing, MI feldmans@michigan.gov Attorney General Celeste R. Gill W Ottawa St Fl Lansing, MI -0 Gillc@michigan.gov Counsel for Independent Power Producers Coalition of Michigan Laura A. Chappelle, Esq. Varnum, LLP The Victor Center, Suite 0 0 North Washington Square Lansing, MI lachappelle@varnumlaw.com Counsel for Michigan Chemistry Council and Solar Energy Industries Association Timothy J. Lundgren, Esq. Justin Ooms, Esq. Varnum, LLP The Victor Center, Suite 0 0 North Washington Square Lansing, MI tjlundgren@varnumlaw.com jkooms@varnumlaw.com

30 Michigan Energy Innovation Business Council and Institute for Energy Innovation Laura A. Chappelle, Esq. Toni L. Newell, Esq. Varnum, LLP The Victor Center, Suite 0 0 North Washington Square Lansing, MI lachappelle@varnumlaw.com tlnewell@varnumlaw.com DYKEMA GOSSETT A PROFESSIONAL LIMITED LIABILITY COMPANY CAPITOL VIEW, 0 TOWNSEND STREET, SUITE 00 LANSING, MICHIGAN Via at the addresses above. Rebecca Grenawalt