Consumers Energy plans to sell its 13 aging and unprofitable Michigan hydropower dams to a subsidiary of a Maryland private equity firm for a dollar apiece, in a deal that would ensure their continued existence for the next three decades.
Company officials announced Tuesday that Delaware-based Confluence Hydro LLC, which formed in June and registered to do business in Michigan in August, plans to sell the dams’ electricity back to Consumers at an unspecified price.
Consumers has been publicly pondering a sale of its 13 hydroelectric dams in the Au Sable, Manistee, Muskegon, Grand and Kalamazoo rivers for the past three years, seeking a way out of a hydropower business that generates paltry power at a $152 million net annual loss.
The company also considered keeping or demolishing the dams, but the sale emerged as “the most cost effective for customers,” said Sri Maddipati, Consumers’ president of electric supply.
Maddipati declined to offer specifics, saying more financial details will emerge as Consumers seeks federal and state approval for the proposed sale.
That process, including reviews by both the Federal Energy Regulatory Commission and the Michigan Public Service Commission, could take up to 18 months. If both entities sign off, Consumers officials said a sale could close in late 2026 or early 2027.
Confluence is a subsidiary of Hull Street Energy, a Maryland-based private equity firm founded in 2014 that invests in natural gas plants, dams and other power generating infrastructure across the country.
Its stated mission is to “rebuild and modernize the North American hydroelectric fleet” to provide “safe, reliable power to the electric grid for generations to come.”
“We bring specialized expertise to modernizing hydro dams, many of which suffer from under investment and poor performance,” said Ed Quinn, the company’s chief executive officer, during a webinar announcing the deal.
After marketing the impoundments to potential buyers virtually for free, Consumers announced in June that it was in negotiations with an unnamed buyer.
Nearby residents and dam safety advocates have expressed concern about the possibility of a sale to a private owner, citing Michigan utilities’ long history of offloading old and unprofitable dams onto new owners who can’t afford to maintain them. Such arrangements have repeatedly shifted safety risks and financial costs onto the public.
Consumers officials sought to allay those concerns on Tuesday, calling safety “a top priority” in the sale.
“We have used this process to find a buyer who is similarly committed to safety,” said Jean Kang, Consumers’ vice president of generation operations.
After the privately-owned and poorly-maintained Midland dams failed in 2020, both federal and state officials considered reforms including stricter dam safety standards and more rigorous financial vetting of dam buyers. They have acted on almost none of them.
News of the plan to keep the dams intact drew cheers from nearby residents, who had feared that Consumers would demolish the dams and drain impoundments that have become valuable recreational lakes.
“We think this is good news,” said Coco Soodek, president of the association representing residents on Lake Allegan, a reservoir impounded by Consumers’ Calkins Bridge Dam in the Kalamazoo River.
But the plan drew suspicion from dam safety and fish advocates who see demolition as a better option.
“This can keeps getting kicked down the road,” said Bob Stuber, executive director of the Michigan Hydro Relicensing Coalition. “These dams are aging infrastructure, and sooner or later, they've got to be dealt with.”
While they agree on little else, both Soodek and Stuber said they worry about a private equity firm owning such important pieces of infrastructure.
While Soodek said she has heard good things about the prospective new owners, “I haven't seen evidence that care for the community and private equity profit motives coexist consistently.”
Why the sale?
Built about a century ago before the era of large power plants and solar farms, the dams now produce just 1% of Consumers’ electricity, at nine times the cost of the company’s next-most-expensive power source.
Against that bad financial math, Consumers has spent recent decades whittling down its dam inventory from more than 90 to just 13 today.
The remaining dams are Michigan’s largest, plugging up rivers to produce artificial lakes that have become prized fixtures on the landscape. People have built homes along the shore, and communities have built tourism economies around boating, swimming and fishing in the reservoirs.
Recreation at the impoundments creates 1,420 direct jobs and $140 million in gross domestic product, according to a survey from Public Sector Consultants, and the reservoirs raise nearby property values by a combined $130 million.
But the dams also superheat and fragment rivers while trapping sediment in the reservoirs, harming migratory and coldwater fish like sturgeon, trout and salmon. Advocates of free-flowing rivers argue that removing the dams would also support tourism and recreation.
Consumers officials have previously estimated that demolishing them would save $781 million compared to keeping them operational under Consumers’ ownership. While they said Tuesday that a sale would present an even better deal for customers, they declined to offer details.
This article first appeared on Bridge Michigan and is republished here under a Creative Commons Attribution-NoDerivatives 4.0 International License.
