The Cease Generation Order – Why it Happened, What it Means

By now most of the public in the area of the Wixom Reservoir know that the Federal Energy Regulatory Commission (FERC) has issued an order to Boyce Hydro Power, LLC, the licensee of the hydro power project located on the Edenville Dam, to cease electric generation as of 11/27/2017.  The licensee has complied with this order.  Operators will continue to manage the reservoir levels and shoreline property owners will not be adversely affected as might be feared.

The FERC order was issued in part because the licensee has not met certain progress submittal deadlines for the design of an auxiliary spillway proposed for the Tobacco River side of the Edenville Dam, which federal regulators have determined is necessary to safeguard against the magnitude of a theoretical flood that may occur every 500,000 to 1 million years.

As determined by the licensee’s engineering consultants and reported to FERC in April 2015, the probability of the “Probable Maximum Flood” (PMF) event occurring in the next five to ten years ranges between five in one million to ten in one million.

In order to mitigate this PMF risk, the Edenville dam must be modified to effect a total discharge flow of 64,000 cubic feet per second (cfs).  The current constructed capacity is calculated to be approximately 30,000 cfs.  Detailed construction plans for modifications to the six concrete spillways were proposed in 2012 to accommodate additional discharge for the PMF.  However, when the construction costs for that design were estimated, the total cost of implementation was over $8 million.  Given the revenue produced at current contract rates, the licensee could not absorb that expense with operating revenues.  Moreover, long term financing would not be available due to the fact that current rates paid by Consumers Energy for Electrical Generation are insufficient to debt service the required financing.

In 2013, as an interim measure, the licensee agreed with FERC that two auxiliary spillways in the earthen dam structure itself (one on the Tobacco side of the dam and one on the Tittabawasse side) could be constructed to partially mitigate the PMF.  The licensee had been working on developing construction plans for this interim solution for two years with its former Dam Safety Engineer who retired in May of this year.  The licensee was consequently required to engage a new engineering firm in July to complete this initial spillway design.  Starting in July, the new engineers had to review all of the previous work.  As a result, the scope of the project expanded significantly as the engineers determined the need for additional design and structural changes to ensure that the project would meet all safety, engineering and FERC requirements.  Consequently, the project has taken longer than anticipated to complete.  Nevertheless, FERC is aware that this work is continuing as the consulting engineers recently submitted a progress report to FERC detailing approximately 800 hours of engineering time expended on the project since July.

Design and construction of the Tobacco Auxiliary Spillway alone is projected to cost more than $1.25 million.  What has not been acknowledged by FERC is the fact that in excess of $340,000 in engineering and consultant expenses have been spent by the licensee over the last seven years in the effort to satisfy FERC’s requirement for a design that would pass this remote (if not improbable) PMF event at the Edenville dam.

As stated, long-term financing for these modifications is not available to the licensee for two reasons: banks will not finance capital improvements that do not increase income; and the indications from Consumers Energy are that it does not intend to renew its long-term contract to buy power from the licensee, which is due to expire in 2022.  Moreover, recent rate-setting orders by the Michigan Public Service Commission will unfairly cut the rates to be paid to small independent power generators like Boyce.  These rate cuts will likely affect the licensee as early as 2018.

FERC’s stop generation order will have the following effects:

  • Cut Boyce Hydro Power, LLC’s income from all of its four hydro power projects by 50-55%.
  • Make flood management more difficult and more expensive because the operators will have to manage water levels using only the mechanical spill gates.  Without the normal turbine discharge, approximately 1,600 cubic feet per second of flow that would normally be passed through the turbines will have to be accounted for by spill gate openings.
  • Reduce Boyce Hydro Power, LLC’s ability to successfully comply with FERC orders for PMF mitigation and other dam safety issues by depleting the very resources needed to do so.

Despite a 50% reduction in revenue, BHP is committed to making sure its dams are safe and properly operated, and will work with its attorneys and FERC to resolve this issue for the benefit of all concerned.

Leave a Reply