Statewide Energy Assessment – Final Report ______________________________________________________________________ Michigan Statewide Energy Assessment Final Report September 11, 2019 Sally A. Talberg, Chairman Daniel C. Scripps, Commissioner Tremaine L. Phillips, Commissioner Statewide Energy Assessment – Final Report ______________________________________________________________________ Statewide Energy Assessment – Final Report ______________________________________________________________________ Table of Contents Executive Summary .................................................................................................................. i 1. Introduction ............................................................................................................................. 1 1.1 Governor's Charge to MPSC ................................................................................................................. 1 1.2 Scope of the Statewide Energy Assessment ................................................................................... 2 1.3 Evaluation and Recommendation ....................................................................................................... 2 1.4 Organization ............................................................................................................................................... 3 2. Michigan’s Energy System: Facing Challenges of Today and Tomorrow .......................... 4 2.1 Overview of Michigan's Energy System............................................................................................ 4 2.1.1 Electric ................................................................................................................................................ 5 2.1.2 Natural Gas ....................................................................................................................................... 9 2.1.3 Propane........................................................................................................................................... 12 2.2 Michigan's Unique Advantages ........................................................................................................ 13 2.3 Changing Landscape of Risks ............................................................................................................ 15 2.3.1 Fuel Procurement and Gas Supply Availability ................................................................ 18 3. Electric .................................................................................................................................... 28 3.1 System Overview and Operational Practices ............................................................................... 28 3.1.1 Generation/Transmission (Bulk Power System) ............................................................... 28 3.1.2 Distribution .................................................................................................................................... 31 3.2 Regulatory Oversight of Planning and Infrastructure .............................................................. 35 3.2.1 Generation ..................................................................................................................................... 35 3.2.2 Transmission ................................................................................................................................. 44 3.2.3 Distribution .................................................................................................................................... 49 3.3 Risk Assessment ..................................................................................................................................... 52 3.3.1 Infrastructure ................................................................................................................................ 52 3.3.2 Investment Trends and Projections ...................................................................................... 58 3.3.3 Adequacy of MPSC Rules Related to Customer Safety, Reliability, and Resilience; Customer Notification .................................................................................................................. 64 3.4 Vulnerabilities .......................................................................................................................................... 65 3.4.1 Aging Distribution Infrastructure .......................................................................................... 65 3.4.2 Generation Shift in Supply and Operations Considerations Across Multiple Timeframes and Seasons............................................................................................................. 65 3.4.3 Natural Gas and Electric Coordination................................................................................ 67 3.4.4 Equipment Damage ................................................................................................................... 69 3.4.5 Ability to Import Capacity into the Lower Peninsula ..................................................... 69 3.5 Contingency Planning Methodologies and Assumptions ...................................................... 71 3.5.1 Electric Distribution Risk-Based Planning Models .......................................................... 71 3.5.2 Load Forecasting Methodologies and Risks ..................................................................... 71 3.5.3 Available Mutual Aid From Regional/National Utility Resources ............................. 76 3.6 Electric Recommendations for Mitigating Risks ......................................................................... 78 3.6.1 Commission's Electric Recommendations ......................................................................... 78 Statewide Energy Assessment – Final Report ______________________________________________________________________ 3.6.2 Commission's Electric Observations .................................................................................... 79 4. Natural Gas ............................................................................................................................ 81 4.1 System Overview and Operational Practices ............................................................................... 81 4.1.1 Natural Gas Technical and Safety Standards .................................................................... 82 4.1.2 Storage Facility Operations ..................................................................................................... 88 4.2 Regulatory Oversight of Energy Planning/Infrastructure ....................................................... 92 4.2.1 Natural Gas System Planning ................................................................................................. 92 4.2.2 Infrastructure and O&M Prudence Reviews Through Rate Proceedings ............... 97 4.2.3 Review of Supply Arrangements to Meet Customer Demand and Redundancy in Gas Cost Recovery Proceedings ............................................................................................... 98 4.3 Vulnerabilities ........................................................................................................................................ 100 4.3.1 System Limitations.................................................................................................................... 100 4.3.2 Infrastructure Failures .............................................................................................................. 102 4.3.3 Interconnections ........................................................................................................................ 102 4.3.4 System Redundancy ................................................................................................................. 103 4.3.5 Single Source Supplies ............................................................................................................ 103 4.4 Risk Assessment ................................................................................................................................... 104 4.4.1 Infrastructure .............................................................................................................................. 104 4.4.2 Investment Trends and Projections .................................................................................... 109 4.4.3 Adequacy of MPSC Rules and Best Practices Related to Customer Safety, Reliability, and Resilience; Customer Notification ........................................................... 112 4.5 Contingency Planning Methodologies and Assumptions .................................................... 114 4.5.1 Transmission ............................................................................................................................... 114 4.5.2 Distribution .................................................................................................................................. 117 4.5.3 Load Forecasting Methodologies and Risks ................................................................... 118 4.6 Natural Gas Recommendations for Mitigating Risks ............................................................. 119 4.6.1 Commission's Natural Gas Recommendations .............................................................. 119 4.6.2 Commission's Natural Gas Observations ........................................................................