We Energies, Domtar mull biomass project conditions

By Anna Austin | May 11, 2011

We Energies and Domtar’s plan to build a 50-megawatt biomass cogeneration plant in Rothschild, Wis., has been approved by the state Public Service Commission. To move forward, however, the companies must come up with $10 million in additional concessions to lower the cost to We Energies ratepayers.

If built, the plant would be fueled with recycled mill waste from Domtar’s papermaking process, along with waste wood from area forest operations and sawmills.

This isn’t the first time the companies were told the project was too expensive. At an earlier hearing, the PSC pointed out that a generic wind project alternative would cost $25 per megawatt hour (MWh) less than the proposed biomass project. The companies were then ordered to restructure their financial plan to lower the cost of the $255 million project, mainly to lessen the burden on eastern Wisconsin electric customers.

As a response, the companies indicated that Domtar would increase its capital cost allocation of $22 million to $47 million, increasing the steam payment from Domtar by 20 percent. That would lower the estimated cost to about $115 per MWh from $123 per MWh, saving ratepayers about $2 million in annual capital recovery costs.

That adjustment would also bring the project within 10 to 20 percent of the cost of a generic wind project, We Energies pointed out, but more than likely even closer than that as the current cost estimate for a generic wind project is based on a $19 per MWh tax credit that expires at the end of 2012.

We Energies spokesman Brian Manthey said the company and Domtar have been reviewing the new project conditions as discussed by the commissioners on May 6, but couldn’t yet say whether plans for the plant would move forward. “Once we've seen the final written order, which is being drafted currently by the PSC, and we've reviewed the impact of the conditions, we'll be able to make a more definitive statement about the future of the project,” he said.