Consumers seeks to delay millions in flood control upgrades as it pursues dam sales

Consumers Energy is looking to delay hundreds of millions of dollars in planned safety upgrades at the largest dam in Michigan while it seeks approval of a hotly-debated plan to sell the facility and 12 others.

In a filing March 16, the company asked the Federal Energy Regulatory Commission for permission to put off a long-planned $350 million replacement of the spillway at Hardy Dam on the Muskegon River. The utility contends it’s “neither feasible nor prudent” to begin the work on the Newaygo County dam while it awaits needed regulatory approvals and pursues a sale to a private equity firm that has agreed to take over maintenance responsibilities.

Consumers initially pitched the project in 2022, with construction slated to begin in 2023, then later moved to 2025. Now, it wants the start date pushed back to December 31, 2028.

“The requested two-year delay allows time for review and approval of the proposed sale and time for the new licensee to coordinate construction activities,” Consumers hydropower chief Adam Monroe wrote in the extension request.

Critics say they fear the delay will put communities downstream of the 120-foot dam’s 4,000-acre impoundment at risk.

The spillway upgrade is supposed to bring the 95-year-old dam into compliance with federal flood control standards, which require high-hazard hydropower dams to be capable of passing the so-called probable maximum flood, or the largest flood possible for the surrounding area.

After the Federal Energy Regulatory Commission recently upgraded its flood estimates, Hardy doesn’t meet the mark.

“I just don’t think it’s anything that Consumers should roll the dice on,” said Bob Stuber, executive director of the Michigan Hydro Relicensing Coalition, a river conservation group that opposes Consumers’ proposed dam sale.

Local public officials, who Consumers alerted to the proposed delay last year, told Bridge Michigan they don’t share those concerns.

It would take a “very, very big flood,” to overwhelm the dam, said Luke Trumble, dam safety chief with the Michigan Department of Environment, Great Lakes and Energy.

“It’s always a concern when a dam should be designed to pass (the maximum flood) and it can’t,” Trumble said, “but there are varying degrees of concern.”

A contentious plan

The possible project delay is the latest point of debate tied to the sale plan, which Consumers unveiled last fall after years of pondering whether to keep, sell or decommission its 13 dams in the Muskegon, Manistee, Au Sable, Grand and Kalamazoo rivers.

Averaging more than a century old, the dams generate $12.9 million-worth of power annually and face hundreds of millions of dollars in maintenance and repair costs. State utility regulators have hesitated to let Consumers charge those costs to ratepayers who derive little benefit.

But the dams are beloved by neighboring communities, where homes, campgrounds, restaurants, marinas and other businesses have cropped up along their reservoirs.

Without the dams, said Morgan Heinzman, supervisor of Croton Township, which is just downstream of the Hardy Dam and upstream of Croton Dam on the Muskegon River, “probably none of them would survive.”

Against that backdrop, Consumers emerged last fall with a plan to essentially give the facilities away to Confluence Hydro, a subsidiary of Maryland private equity firm Hull Street Energy, and then sign a 30-year contract to buy back the power at about twice the market rate, or $160 per megawatt-hour plus a 2.5% annual increase.

The plan will cost ratepayers billions of dollars, but is supposed to give Confluence enough money to upgrade and relicense the dams for another few decades-worth of operations. Hardy’s current power generation license expires in 2035.

While nearby communities have cheered the sale plan as a way to maintain the reservoirs, dam safety officials and environmental and ratepayer advocates have criticized the sale, with some questioning whether a more loosely-regulated private company can be trusted to safely maintain the impoundments.

A ‘critical need,’ but who pays?

In past filings with state and federal regulators, Consumers officials have referred to the Hardy Dam upgrades as a “critical need,” without which federal regulators would likely revoke Hardy’s license and a major flood could destroy the dam.

Tens of thousands of people live in the flood zone, some of whom could die in the event of a failure. Damage to homes, roads, bridges and the environment could climb into the billions of dollars.

The dam had a near miss in September 1986, when a Consumers supervisor told reporters that floodwaters from a massive storm had Hardy and Croton dams “teetering on the edge.”

Such a failure would have sent a 52-foot wall of water barreling downstream, imperiling lives and property all the way to Muskegon, more than 30 miles away.

Consumers spokesperson Brian Wheeler said subsequent enhancements to Hardy dam make it capable of passing a similar flood with no need to activate the auxiliary spillway.

The company has estimated a cost of $350 million for the spillway project, telling utility regulators that it “cannot reasonably — and will not — make the investments” unless it can charge ratepayers for them.

Confluence plans to take that work on instead, using money from the 30-year contract with Consumers. Spokesperson Natalie Joubert said it’s not known when the project would begin because it requires federal regulatory approval.

“Confluence Hydro is proud of our long and proven track record of successfully managing improvement projects at hydroelectric dams on schedule, on budget and in compliance with all regulations,” Joubert said.

The sale plan to Confluence envisions construction work at Hardy costing no more than $216.5 million, and allows Confluence to charge Consumers up to $5 extra per megawatt-hour in case of overruns.

Wheeler, the Consumers’ spokesperson, declined to say how much such an increase could affect the deal’s overall cost, saying it’s confidential information.

Attorney General Dana Nessel’s office has called upon the Michigan Public Service Commission to not to allow the increases. Her spokesperson, Danny Wimmer, said Nessel will request a commission order for the spillway project to be completed quickly, with transparency about who is paying for it.

“To allow Confluence to increase the price of power should this project experience cost overages would grant confluence a blank check from Consumers Energy customers,” Wimmer said.

While the project remains on hold, Consumers has implemented “a suite of remedial risk reduction measures to address the flood risk,” Wheeler said.

That includes lowering the water level behind the reservoir by 12 feet from November to late May, leaving more space for floodwaters to accumulate behind the dam. Water levels are raised back up before Memorial Day, the unofficial start of summer boating season.

Croton Township Supervisor Heinzman, whose community is located just downstream of the dam, told Bridge Michigan he’s comfortable with those measures.

“I’m not worried about that dam at all,” he said, adding that Hardy has “survived a lot of pretty tough rains over the years.”

But Stuber, of the Hydro Relicensing Coalition, said his group will ask federal regulators to order a year-round drawdown until Hardy’s spillway capacity issues are resolved.

He noted that many of the region’s biggest floods have happened outside Consumers’ current November-to-May drawdown window.

“The coalition acknowledges this is going to disrupt normal recreation at Hardy,” he said. “It’s going to be a pain in the butt for people with their docks, with their boat watches and things like that. But human safety is paramount here.”

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This story was originally published by Bridge Michigan and distributed through a partnership with The Associated Press.