DTE Power Supply Cost Reconciliation Docket for 2022
Synapse provided expert witness testimony on behalf of the Michigan Environmental Council (MEC) in DTE’s Power Supply Cost Reconciliation Docket for the calendar year 2022. Our testimony focused on evaluating the causes and drivers of DTE’s substantial under-recovery of fuel and power cost expenses for that year. We primarily examined the costs incurred by DTE to operate its newest combined-cycle gas turbine (CCGT) plant, the Blue Water Energy Center (BWEC).
We reviewed the Company’s natural gas supply purchasing strategies, its transportation contracts—specifically with NEXUS, among others—its storage contracts, and its management of excess NEXUS capacity. Additionally, we evaluated the reasonableness of DTE’s operational practices at its coal- and gas-fired power plants, as well as the reliability of the Company’s baseload and peaking generation assets.
We found that natural gas costs made up $155 million of DTE’s total $426 million shortfall in Power Supply Cost Recovery (PSCR) for 2022. This shortfall was mainly due to DTE’s choice to start and operate the new BWEC plant. Our analysis showed that DTE opted for an index-based purchasing strategy for natural gas instead of switching to a forward-based strategy after the new plant started up. This exposed ratepayers to market price fluctuations, especially as demand increased significantly. Additionally, DTE’s NEXUS transportation costs and its decision to stop using an asset manager for the pipeline led to avoidable extra costs for ratepayers. DTE also faced an unusually high number of outages in 2022, resulting in over $77 million in costs for replacement power.
We recommend that the Commission disallow the excess natural gas costs incurred as a result of the Company’s decision not to switch to a forward-based purchasing strategy and also the extra costs from its NEXUS contract. We also suggest that DTE start using an asset manager again to better manage NEXUS capacity. Lastly, we recommend that the replacement power costs resulting from the high outage rate at DTE’s baseload plants in 2022 be disallowed.