lauren d. donofrio (313) 235-4017 lauren.donofrio@dteenergy

April 27, 2020

Ms. Lisa Felice Executive Secretary Michigan Public Service Commission 7109 West Saginaw Highway Lansing, Michigan 48917 Re: In the matter of the Application of DTE Electric Company for approval of

Certificates of Necessity pursuant to MCL 460.6s, as amended, in connection with the addition of a natural gas combined cycle generating facility to its generation fleet and for related accounting and ratemaking authorizations.

MPSC Case No. U-18419 Dear Ms. Felice: Attached for electronic filing in the above-captioned matter please find DTE Electric Company’s BWEC Interim Report. Very truly yours, Lauren D. Donofrio LDD/lah Encl.

Lauren D. Donofrio (313) 235-4017 [email protected]

DTE Energy Company One Energy Plaza, 1635 WCB Detroit, MI 48226-1279

Michigan Public Service Commission Case No.: U-18419 DTE Electric Company April 27, 2020 Blue Water Energy Center Interim Status Report

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Blue Water Energy Center

Interim Status Report

April 27, 2020


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Contents Blue Water Energy Center Status Report to the Commission ...................................................................... 3

1.0 - Progress Summary ............................................................................................................................ 3

2.0 - Safety ................................................................................................................................................ 6

Table 2.1 Summary of Safety Performance to Date. ............................................................................ 6

3.0 - Schedule ............................................................................................................................................ 6

Figure 3.1 – Summary Schedule ............................................................................................................ 7

Figure 3.2 – Project Progress ................................................................................................................ 7

Table 3.1 Major Project Milestones ...................................................................................................... 8

4.0 - Cost ................................................................................................................................................... 8

Figure 4.1 – Project Financials .............................................................................................................. 8

5.0 - Quality ............................................................................................................................................... 9

6.0 - Risk .................................................................................................................................................. 10

7.0 – Commercial Operation ................................................................................................................... 10

Table 7.1 BWEC GIA Conditional Network Upgrades ......................................................................... 11

8.0 – Workforce Planning........................................................................................................................ 12

9.0 – Summary ........................................................................................................................................ 12

Appendix A – Permit Status ........................................................................................................................ 14

Appendix B – Risk Register .......................................................................................................................... 17

Appendix C – Progress Photos .................................................................................................................... 19


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Blue Water Energy Center Status Report to the Commission

DTE Electric is suppling this report in compliance with the following provision.

MCL 460.6s (7)

The utility shall annually file, or more frequent if required by the commission, reports to the commission regarding the status of any project for which a certificate of necessity has been granted under subsection (4), including an update concerning the cost and schedule of that project.

1.0 - Progress Summary Certificates of necessity were approved by the Michigan Public Service Commission on April 27, 2018 for DTE Electric’s proposed Blue Water Energy Center (BWEC) granting that:

• The power to be supplied by the new facility is needed. • The new facility represents the most reasonable and prudent means of meeting

the power need. • The estimated capital and financing costs, and the estimated cost of power from

the facility will be recoverable in rates from the company’s customers.

The Commission approved recovery of up to $951.8 million for the construction of the new generating facility.

DTE Electric (the Company) authorized Kiewit Engineering (MI) Co. (its Engineering, Procurement, Construction (EPC) contractor) limited notice to proceed with the project on April 30, 2018 and full notice to proceed with the project on July 30, 2018. With the notices, Kiewit has commenced engineering of the facility, procurement of equipment and materials, and site construction. As of April 1, 2020, the overall project (including engineering, procurement, and construction) is approximately 52% complete.

On March 23, 2020, Executive Order 2020-21 was issued by Governor Whitmer requiring a temporary suspension of activities that are not necessary to sustain or protect life in response to the COVID-19 pandemic. The order was in effect from March 24, 2020 to April 13, 2020 and was subsequently extended to April 30, 2020 by Executive order 2020-42. Non-critical work was suspended on the BWEC construction site in response to the Governor’s order. Critical activities including site security, care and maintenance, and irrevocable deliveries were maintained. On April 24th, DTE Electric and Kiewit implemented a phased four week plan to restart construction in a safe and orderly manner. Week one focused on finalizing new safety protocols and


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notifying parties of the restart including local governments and trade unions. The second week involves preparing the site for work to resume and initiating craft rehiring and orientation to new safety protocol. Construction resumes on the third week (beginning May 4th) with day shift only. Second shift work resumes on week four. As of April 27th, the project remains on schedule and on budget. However, the Company is still analyzing impacts of the pandemic and work suspension including extended staff, equipment rental, care and maintenance costs; subcontractor and supplier impacts; remobilization costs; and new government executive order compliance. The EPC is entitled by contract to a change order to recover expenses incurred as a result of the suspension. Any change order would require the use of project contingency. Permitting activities are ongoing. Critical permits, including the air permit, have been obtained. All other remaining permits are being obtained as needed and in a timely manner. The current status of all permits is included in Appendix A.

DTE Electric submitted a Generator Interconnection Agreement (GIA) application to MISO on June 5, 2017 for BWEC. The GIA process consists of three Definitive Planning Phases (DPPs) and execution of a GIA. The Company’s application is included in MISO’s August 2017 interconnection queue. All three of the DPPs are now completed for the August 2017 queue.

DTE Electric is working closely with MISO and the ITC to ensure the transmission interconnection is in place on time. A provisional GIA with MISO and ITC is in place to support the contractual date for DTE Electric to provide back feed power to the project. A permanent GIA and associated facilities construction agreement are expected to be finalized in the second quarter of 2020, as discussed below in section 7.0 – Commercial Operation.

Natural gas transportation, storage, and lateral pipeline/interconnection contracts have been executed. Construction of the natural gas lateral to BWEC is expected to be complete in the first quarter of 2021. Gas supply agreements will be negotiated and in place to supply the facility during startup and commissioning in 2021 and commercial operations in 2022.

Engineering of the BWEC is progressing as planned and is currently 88% complete. To date over 6,200 engineering drawings have been generated for review.

The most significant procurement component for the project is the power island, which includes the Combustion Turbines (CTs), Combustion Turbine Generators (CTGs), Heat Recovery Steam Generators (HRSGs), Steam Turbine (ST), Steam Turbine Generator (STG), and Distributed Control System (DCS). General Electric is under contract with Kiewit to provide the power island. The power island is on plan and is currently 96% engineered. Most of the major components of the power island have been delivered to


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site with a final shipment expected in the first week of May 2020. The DCS is in final configuration and is expected to be provided to the site in the third quarter of 2020.

An incident occurred during the delivery of one of the HRSG modules in October of 2019, resulting in damage to the module. Repair of the module is progressing with no schedule impact to the project identified at this time. DTE is not responsible for the cost of the repairs.

In addition to the power island, the following major procurements have been awarded since our last report in April of 2019:

• Transmission lead line poles, conductors, and insulators • Low energy fabricated pipe • Warehouse structures and installation • Drilled piers for switchyard and lead line poles • Fire protection • Site security

Site construction activities have progressed. Since our last report in April of 2019 the following progress has been made:

• Raw water intake line placement has been completed • Deep foundations (H-pile) have been completed • Cooling tower basin has been placed and the structure has been erected • Foundations and pedestals for both CT trains and the ST have been placed • HRSG modules, CTs, CTGs have been set • HRSGs have been enclosed • Warehouse installation completed

In addition, the following construction activities are in progress:

• Underground piping, electrical duct bank installation, and electric cable pulls • Main and finger racks and above ground piping • Switchyard foundations placement • Air inlet structure erection • Administration building erection and internal finishing • Field fabricated tank assembly • Water treatment building foundations placement, equipment set, and building

erection • Auxiliary boiler installation • Steam turbine condenser assembly and steam turbine building erection • Cooling tower baffle and mechanical equipment installation

Progress photos of the project are included in Appendix C.


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2.0 - Safety Safety is the number one priority for the Blue Water Energy Center. To date there have been two recordable injuries for the project. The Recordable Injury Rate (RIR) is currently 0.41 with more than 970,000 earned hours to date. In addition, there have been fourteen first aids and seven near misses for the project. Table 2.1 provides a summary of project safety metrics.

Two recordable injuries have occurred since our last report in April of 2019:

• During the setup of a tool used to perform a pipe fusion operation, the tool became locked in an incorrect position. While attempting to correct the position of the tool, a pipefitter’s finger was caught in a pinch point resulting in an injury to the finger.

• A boilermaker on a ladder experienced a lanyard release that struck them on the finger. The impact to the finger was initially categorized as a First Aid, it was later diagnosed as a fracture and reclassified as a recordable injury.

Kiewit has completed an investigation and has taken corrective action for all incidents that have occurred on the project.

Table 2.1 Summary of Safety Performance to Date. Table 2.1 – BWEC Safety Metrics

Recordable Injury Rate

Lost Time Incidents

First Aids

Near Misses

0.41 0 14 7

Both DTE Electric and Kiewit are dedicated to ensuring the construction project is managed in a safe manner in accordance with all applicable laws. Kiewit is solely responsible for initiating, maintaining, and supervising all safety precautions and programs in the performance of the work. Kiewit protocol requires that all individuals who enter the construction site must first complete safety orientation, including those who will be escorted. Proper personal protective equipment is also required at all times while on site.

In addition, BWEC and MIOSHA entered into a partnership agreement for the construction project in October of 2019.

3.0 - Schedule The new Blue Water Energy Center is expected to be commercially available and be included as a resource available to meet the Company’s capacity requirement for the MISO planning year beginning in June of 2022. The Company continues to analyze


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impacts of the COVID-19 pandemic that may potentially impact the commercial operation date (COD). Figure 3.1 provides a summary schedule.

Figure 3.1 – Summary Schedule

A detailed integrated schedule is maintained for the project that comprehensively describes the activities and associated milestones required to complete the project. The schedule is managed by Kiewit. The schedule is reviewed in detail each month by the Company. The schedule has been baselined, so going forward any changes will require approval from the project’s Change Review Board.

Figure 3.2 compares actual construction progress earned (completed) to the baseline plan (approved schedule).

Figure 3.2 – Project Progress

The Schedule Performance Index (SPI) is a measure of schedule efficiency, or how well the project team is using time. An SPI greater than 1.0 indicates the project has earned (or completed) more work than planned. An SPI less than 1.0 indicates that less work has been earned versus the baseline plan or schedule. Currently, SPI for the project is slightly lower than plan due to the COVID-19 suspension but is not projected to impact project completion. Progress is being monitored by both the Company and Kiewit. Schedule impacts due to the COVID-19 pandemic are still being analyzed.

Milestones have been established for the project baseline schedule to track progress toward completion. Table 3.1 summarizes the major contractual milestones for the project.

Electrical Interconnection

Gas Lateral

Engineer, Procure, Construct

Performance Testing

Figure 3.1 - Summary Schedule2018 2019 2020 2021 2022

DPP-1 DPP-2 DPP-3 GIA Complete

CompleteUnder Contract

LNTP FNTP Mobilize Major Deliveries Complete

SubstantialCompletion

Demobilize

First Fire

Demonstrate Capacity

COD

April2020


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Table 3.1 Major Project Milestones Table 3.1 Major Contract Milestones

Milestone Date Status Limited Notice to Proceed 04/27/18 Complete Full Notice to Proceed 07/30/18 Complete EPC Initial Mobilization 08/15/18 Complete EPC Full Mobilization 03/04/19 Complete Gas Lateral Complete 03/31/21 Site Back Feed Power Available 05/26/21 Fuel Gas Available 06/18/21 CCGT 1 First Fire 09/09/21 CCGT 2 First Fire 09/20/21 MISO Demonstration Test 03/01/22 Substantial Completion 03/31/22 Commercial Operation 06/01/22

4.0 - Cost On April 27, 2018, the Commission granted certificates of necessity assuring recovery of up to $951.8 million to construct the Blue Water Energy Center.

Figure 4.1 – Project Financials

A baseline financial forecast has been established for the project as shown in Figure 4.1 as the planned line. To date, the project is on plan indicated by the green bars in the figure. Spend to date on the project, including costs incurred prior to receiving the CON, is $601 million.

The project is managing several risks that are discussed below in section 6.0 - Risk. The project estimate at completion (EAC) remains at the Commission authorized spend. However, the impacts of the COVID-19 pandemic are still being analyzed and may impact the EAC.

Both DTE Electric and Kiewit are committed to ensure opportunities for Michigan and diversity enterprises. The Company and Kiewit continue to reach out to qualified Michigan and diversity businesses.

To that end, Kiewit has implemented a comprehensive plan to ensure that Michigan enterprises have opportunity to competitively bid on the supply of materials, equipment


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and subcontracted work. Kiewit has agreed to a Michigan spend target of $200 million and is currently on track to meet the target. To date, Kiewit has achieved $145 million in Michigan spend.

DTE Electric and Kiewit are committed to the Michigan work force and the utilization of Michigan craft labor in the construction of the Blue Water Energy Center. The Company’s target is that 90% of the craft labor for the project will be comprised of Michigan residents. To date, Michigan craft labor has accounted for 95% of total craft labor for the project.

At the time of the CON filing, the Company believed that adequate craft labor from Michigan would be available for the project. Since the CON filing, a significant number of new large construction projects have been announced within the state. This is creating a strain on the availability of Michigan craft labor. This is a risk for the project that is being carefully monitored and managed by both the Company and Kiewit.

DTE meets regularly with Michigan labor union leadership to discuss current and future projects at DTE and across the state and the skilled trades needed for the work. These tripartite meetings help both the Company and unions understand and plan for the supply and demand for skilled resources. Kiewit is now participating in the tripartite meetings. In addition, Kiewit has established a monthly meeting cadence with the Michigan union locals.

5.0 - Quality The Company has worked closely with Kiewit to implement a quality program for the construction of the Blue Water Energy Center to ensure the facility meets all defined requirements. Kiewit’s Quality Management System (QMS) will be deployed throughout all phases of the project including engineering, procurement, construction, acceptance testing, and turnover to operations. QMS is consistent with ISO 9001-2008 standards.

The quality program includes observations and inspections at predetermined points during the manufacturing of the major equipment and during construction. Quality inspection specialists will document any non-conformances. Any reported non-conformances will be fully analyzed and resolved before closure. To date, there have been 255 equipment supplier inspections completed with 223 quality non-conformances reported of which 179 have been resolved. There have been 89 non-conformances in field construction of which 74 have been resolved. Additionally, Kiewit is inspecting all piping welds. To date, 8 welds have failed final inspection requiring remediation.

The Company continues to work very closely with Kiewit and GE on the performance and reliability of the HA-class combustion turbines since the turbine blade failure in 2018. There have been no significant failures on the combustion turbine components since the last report to the Commission. The BWEC project team also maintains our engagement in a user group forum where GE discusses learnings on a regular basis.


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6.0 - Risk Risk identification, qualitative and quantitative analysis, management and control is an iterative process that will continue throughout the life of the project. As mentioned in the Cost section of this report, significant risk remains for the project. The COVID-19 pandemic is a significant risk to the project that has occurred for which the full impact is still being analyzed.

Two risk events have occurred resulting in the use of MPSC authorized contingency, including the effects of tariffs imposed after the contract was signed for $5.0M and additional costs for remediating differing soil conditions for $0.4M. Both events were included in the project risk register and have been formally reviewed and approved by the project change review board. The remaining MPSC authorized contingency for the project is $12.4M.

The current risk register for the project includes 23 potential risks that are being actively managed. This is a reduction of two from the last report filed on April 26, 2019. Since the April 2019 report, the risk associated with hydrostatic test water requiring offsite disposal has been resolved and closed. The risk associated with potential dock improvements required to accommodate heavy loads delivered by barge did not occur and has been closed. As the project team continues to actively manage project risk, the overall Expected Monetary Value (EMV) of the risk register has been adjusted accordingly.

The Company along with Kiewit will continue to manage all project risks. The current project risk register is included in Appendix B.

7.0 – Commercial Operation The new Blue Water Energy Center currently remains on target to be commercially available for the MISO planning year beginning in June of 2022.  However, impacts to the schedule resulting from the COVID-19 pandemic are still being analyzed.  To be included as a new generation resource for the planning year, BWEC will require a Generator Interconnection Agreement (GIA) to be in place and the facility must be registered in the MISO June Commercial Model for the planning year.  The GIA for BWEC is expected to be in place in June of 2020, per the current MISO schedule, and BWEC will be registered for the June 2022 planning year.  The Commission staff was informed by the Company in September of 2019 that MISO DPP3 study results indicate that several large-scale network upgrades will be included as conditional projects for the BWEC GIA. The conditions could limit BWEC from injecting and delivering its full output onto the transmission grid until the conditional projects are completed. Some of these conditional projects are related to ITC rating reductions on its transmission facilities in DTE’s service territory that occurred in 2018 (after BWEC entered the August 2017 generator interconnection planning cycle). Others


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are related to past MISO reliability projects that were approved, but not constructed due to implementation issues. Completion of ITC’s Blue Water Reinforcement project (a.k.a. Crimson or Romeo) which involves rebuilding of the north area grid is one significant condition imposed on BWEC’s GIA. Other conditions include the rebuild of portions of the Lincoln-North East/North West transmission line, rebuild of the MTEP17 Whiting-Custer transmission line project, and construction of the 345kV Meyer substation. As it relates to the Whiting-Custer project, ITC has encountered some challenges implementing the originally proposed solution and proposed a design change on March 24, 2020. MISO is currently evaluating the design change and will notify DTE of the impact on BWEC. As noted in Table 7.1 below, the currently published in-service date for one conditional project exceeds the planned commercial operation date of BWEC. Recently, ITC completed its review of the capital project schedule with DTE and is targeting completion of all conditional projects before BWEC commercial operation. The Company is continuing to work with MISO and ITC regarding in-service dates of all conditional projects and will keep the Commission staff informed of progress.

Table 7.1 BWEC GIA Conditional Network Upgrades

Table 7.1 BWEC GIA Conditional Network Upgrades Network Upgrade In-Service Date Status

MTEP19 Project #15878 Sag Remediation 12/31/21 MTEP Approved

MTEP18 Project #13814 Monroe 345 kV – Lallendorf 345 kV Station Equipment Upgrades

05/01/20 Long Lead Materials Ordered

MTEP19 Project #16028 Caniff – Saturn 120 kV Sag Remediation

12/31/21 MTEP Approved

MTEP19 Project #17164 Blue Water Reinforcement


MTEP project #16023 Lincoln-Northeast-Northwest 120 kV Rebuild (overhead portion only Facility ID: 25271)


Pontiac - Placid NRIS required sag remediation

12/31/21 Facility Study Complete

Pontiac – Wixom NRIS required sag remediation

12/31/21 Facility Study Complete

MTEP Project #8144 - Construct new 345 kV, double circuit structures, and loop the Kenowa - Argenta 345 kV line into Meyer


MTEP Project #9864 - Rebuild 9.98 from the Whiting – Custer 120 kV circuit

TBD Awaiting Design Finalization


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Table 7.1 BWEC GIA Conditional Network Upgrades Network Upgrade In-Service Date Status

MTEP Project #9887 Pontiac – Wixom 345 kV line sag limit increase


MTEP Project #13814 Upgrade Monroe 345 kV station equipment


BWEC will also have to demonstrate that the plant capacity is available by March 1, 2022.  Demonstration of capacity is achieved by meeting MISO Generation Verification Tested Capacity (GVTC) testing requirements.  Both DTE and Kiewit have mitigation plans in place for potential risks that could impact achieving capacity demonstration. Capacity demonstrations will occur prior to MISO commercial operation during a testing period. The output of the generating unit will not be limited due to required conditional network upgrades during this test period as MISO will manage all issues in real-time operation. In the event that BWEC has not demonstrated capacity by March 1, 2022, a deferral can be obtained.  The deferral will require DTE to post credit with MISO for an amount equal to 90 days of the daily Cost of New Entry (CONE) for MISO Zone 7.  Should the deferral occur, the GVTC requirements would need to be met by May 31, 2022.  At this time, DTE does not anticipate requesting a deferral.

8.0 – Workforce Planning To prepare for BWEC commercial operations, a comprehensive staffing plan has been developed to ensure that roles and responsibilities are well defined and that new positions are filled in a timely manner. In addition to the staffing plan, the BWEC project team is developing necessary training, job instructions, and procedures for the new facility. Some of the employees needed at BWEC have been hired, with all employees expected to be in place by the end of 2020. BWEC personnel will undergo 18-24 months of training. The employees will be trained so that they can be deployed to perform startup activities for the plant beginning in 2021, to prepare for full commercial operations in 2022.

DTE Electric has announced the retirement of four power plants by 2022. The employees displaced by the closures will be reassigned to other work within DTE Energy. The Company is committed to its employees and has no intention of layoffs as a result of the future plant closings.

9.0 – Summary The Company is pleased with the progress to date on the new Blue Water Energy Center project. At this time the project remains on schedule and on budget, but the Company continues to analyze the impacts of the COVID-19 pandemic. The project


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team is working well with Kiewit and GE to resolve challenges as they occur and to safely maintain schedule. Over the next six months, the team will be working diligently to set and assemble major components, pull electrical wiring, install piping, and erect buildings.

The Company is available to the MPSC for further discussion and to answer questions about this report.


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Appendix A – Permit Status Current permit status is show in Table A-1 below.

Table A-1 Project Permit Matrix Permit Applicant Agencies Status

Air Quality Federal Not Required Air Quality State (Permit to Construct) DTE MDEQ Recvd. 07/18 Boiler Permit (Non-HVAC) DTE/EPC E China Recvd. 06/19 Building Permits – Electrical DTE/EPC E China Recvd. 07/19 Building Permits – Elevator DTE/EPC State Need Q2/20 Building Permits – Fire Protection DTE/EPC E China Recvd. 03/20 Building Permits – Mechanical DTE/EPC E China Recvd. 07/19 Building Permits – Mechanical (HVAC) DTE/EPC E China Recvd. 07/19 Building Permits – Sewer Tap DTE St Clair Co Recvd. 03/19 Building Permits – Structural DTE E China Recvd. 05/19 Building Permits – Water Tap DTE E China Recvd. 03/20 Coastal Zone Management Not Required Cultural Resources (SHPO) Not Required Dam Safety Permits Not Required Demolition – General DTE/EPC E China Not Required Demolition – Asbestos (MIOSHA/NESHAPS) DTE MDEQ Not Required Demolition – Explosives (Transport/Storage) Not Required Demolition – Fuel Storage Tanks Not Required Demolition – Lead Abatement Not Required Drains (County) DTE St Clair Co Recvd. 02/19 Drains (Municipal) Not Required Endangered Species Federal Not Required Endangered Species State DTE State Recvd 08/18 Erosion Control Sedimentation County DTE St Clair Co Recvd 07/18 Erosion Control Sedimentation State Not Required Fence Permits DTE/EPC E China Not Required Flood Plain Management DTE/EPC JPA Not Required Ground Water Discharge DTE JPA Recvd 5/19 Hazardous Materials (HAZMAT) Not Required International Waterways Not Required Local Woodlands Not Required Marking & Lighting of Tall Structures (FAA) DTE/EPC FAA Not Required Marking & Lighting of Waterways Not Required Mineral Management Not Required NPDS – Major/Minor DTE MDEQ Recvd 08/18 Nuclear Equipment DTE NRC Need Q2/20 Paving Permit (Local Ordinance) DTE E China Not Required Planning/Zoning (Local Ordinance) DTE E China Recvd 03/19 Public Lighting (Interruption/Modification) DTE E China Need Q1/21


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Table A-1 Project Permit Matrix Permit Applicant Agencies Status

Railroad Crossings Not Required Right of Way Easements DTE Recvd. 06/19 Road Crossings / Curb Cut – Local Not Required Road Crossings / Curb Cut – County Not Required Road Crossings / Curb Cut – State DTE/EPC MDOT Recvd. 11/18 Signage Permits (Local Ordinance) DTE/EPC E China Recvd. 11/19 Sanitary Discharge / Removal (Pump/Haul) Not Required Stream / Drain Crossing County Not Required Stream Crossing Federal Not Required Stream Crossing State DTE JPA Not Required Storm Water Discharge (Run-off) DTE JPA See SESC Wild & Scenic Rivers Not Required Wetlands – Local Not Required Wetlands – State DTE/EPC JPA Recvd. 08/18 Certificate of Occupancy DTE E China Need Q3/21


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Appendix B – Risk Register


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Page | 19

Appendix C – Progress Photos

April 2019

May 2019

June 2019


Page | 20

July 2019

August 2019

September 2019


Page | 21

October 2019

November 2019

December 2019


Page | 22

January 2020

February 2020


Page | 23

March 2020

lauren d. donofrio (313) 235-4017 lauren.donofrio@dteenergy

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