Two major utility companies in Michigan are entrenched in a legal battle with an American subsidiary of Japan's Toshiba Corp. after an overhaul of a hydroelectric plant went awry — and consumers could end up paying the price on their energy bills.
What's happening?
As detailed by MLive.com, DTE Energy and Consumers Energy hired Toshiba America Energy Systems Corp. to overhaul the 1970s-era Ludington Pumped Storage Plant — a "critical piece" of their plans to provide affordable and reliable energy to millions of Michiganders, including by increasing their capacity to store cheap wind and solar power.
The $800 million project launched nearly 15 years ago, but DTE and Consumers allege that the Toshiba subsidiary hasn't lived up to its end of the bargain, introducing defects to the plant and relying on "trial-and-error" repairs after the utility companies requested fixes.
The companies, which co-own Ludington, say delays also resulted in 1,361 days in which at least one unit couldn't deliver power. DTE and Consumers ended their contract with Toshiba last year and hired another engineering firm.
A regulatory filing cited by MLive.com shows they are seeking upward of $690 million in damages and an additional $130 million in prejudgment interest after spending $30 million to amend the issues.
"Toshiba failed to deliver on promises made in its contract to perform work at the plant, and Toshiba failed to provide a meaningful remedy despite these shortcomings," they said. "Consumers Energy and DTE were forced to take legal action to hold Toshiba accountable and protect our customers."
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For their part, Toshiba and Toshiba America Energy Systems have denied the allegations and filed a countersuit. They say DTE and Consumers owe them more than $15 million for their work and that they "wildly inflated" damage claims.
The legal battle is in its fourth year.
Why is this important?
In addition to lowering household utility bills in the long run, investments in clean energy are generally good for communities, leading to improved quality of life and a cleaner environment.
For one, when utility companies generate electricity from renewables, they don't spew asthma-linked, heat-trapping pollution into the atmosphere. Solar, wind, and hydropower are among the safest forms of energy, as Our World in Data details.
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The failed Ludington project, though, may impact customers' bottom lines, since DTE and Consumers depend on ratepayers to fund upgrades, as MLive.com reported.
What can be done about this?
The Michigan Public Service Commission granted DTE and Consumers a deferral, allowing the utility companies to delay the process of trying to recoup project costs through higher rates.
Even if DTE and Consumers lose the case, the commission hasn't given the green light for them to pass the costs onto consumers, according to MLive.com. However, Douglas Jester, managing partner of 5 Lakes Energy — an energy policy consulting firm — suggested the result could determine whether consumers ultimately pay.
"Whether there'll be any remaining amount to be rolled over to customers in the future just depends on the outcome," Jester said.
A hearing on a motion for summary judgment filed by Toshiba is slated for June 11.
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