I’m thrilled to sit down with Christopher Hailstone, a seasoned expert in energy management and renewable energy, with a particular focus on electricity delivery and grid reliability. As our go-to utilities specialist, Christopher brings a wealth of knowledge on hydroelectric infrastructure and the intricacies of utility regulations in the United States. Today, we’re diving into the recent announcement by Consumers Energy to sell its 13 hydroelectric dams in Michigan to Confluence Hydro, a subsidiary of Hull Street Energy. Our conversation will explore the motivations behind this sale, the financial and operational implications, the impact on local communities, and the safety considerations tied to transferring such critical infrastructure to a private equity firm. Let’s get started.
Can you walk us through the reasons Consumers Energy opted to sell its 13 hydroelectric dams rather than maintaining or demolishing them?
Certainly. Consumers Energy has been grappling with the reality that these dams, built nearly a century ago, are no longer economically viable. They generate just 1% of the company’s electricity but at a staggering cost—nine times more expensive than their next priciest power source. This translates to a net annual loss of about $152 million. Selling the dams emerged as the most cost-effective option for their customers compared to the hefty price tag of demolition, estimated at $781 million in savings if they kept operating them themselves. Beyond the financials, maintaining aging infrastructure poses operational challenges, and selling allows them to offload those burdens to an entity focused on hydro modernization.
What can you tell us about the financial dynamics of this deal, especially the symbolic $1 price tag per dam?
The $1 per dam price is more symbolic than reflective of value—it’s essentially a way to transfer ownership with minimal upfront cost while tying the deal to other financial arrangements. The real meat of the transaction lies in the electricity sales agreement, where Confluence Hydro will sell power back to Consumers Energy at a yet-to-be-disclosed rate. This setup likely helps offset the operational losses Consumers was facing. Specific financial details are still under wraps, but we can expect more clarity as the approval process unfolds with federal and state regulators over the next 18 months or so, potentially wrapping up by late 2026 or early 2027.
How does the background of Confluence Hydro and its parent company, Hull Street Energy, play into their ability to take on these dams?
Hull Street Energy, based in Maryland, was founded in 2014 with a focus on investing in power generation infrastructure, including natural gas plants and hydroelectric facilities. Their mission is to rebuild and modernize North America’s hydroelectric fleet, which aligns well with the needs of these aging Michigan dams. Confluence Hydro, their subsidiary, was recently formed to handle specific projects like this. They’ve publicly committed to bringing specialized expertise to upgrade under-invested and underperforming dams, aiming to ensure safe, reliable power for the grid. While their exact modernization plans for these 13 dams aren’t fully detailed yet, their track record suggests a focus on operational efficiency and infrastructure improvement.
What are the potential impacts of this sale on the local communities surrounding these dams?
These dams are more than just power sources; they’re integral to the local landscape. The reservoirs they create support 1,420 direct jobs and contribute $140 million to the gross domestic product through recreation and tourism like boating and fishing. Property values near these impoundments are also boosted by about $130 million collectively. Many residents are relieved the dams won’t be demolished, preserving these lakes and the economies tied to them. However, there’s skepticism about a private equity firm owning such critical infrastructure. Concerns linger about whether profit motives will align with community needs, and there’s uncertainty about how this ownership change might affect long-term access or maintenance of these recreational spaces.
How is dam safety being prioritized in this transition to new ownership?
Safety is a huge concern, especially given past incidents like the Midland dam failures in 2020, which highlighted the risks of poorly maintained infrastructure. Consumers Energy has emphasized that finding a buyer committed to safety was a top priority in this process. They’ve vetted Confluence Hydro to ensure they share this focus, though specifics on new safety standards or oversight measures tied to the sale haven’t been fully disclosed. The memory of past failures has certainly heightened scrutiny, and while federal and state reforms on dam safety have been slow to materialize, the approval process with the Federal Energy Regulatory Commission and the Michigan Public Service Commission will likely include rigorous evaluation of safety commitments.
Can you explain the approval process for a sale like this and what challenges might arise?
The approval process is quite extensive, involving both the Federal Energy Regulatory Commission and the Michigan Public Service Commission. They’ll review everything from the financial terms to the operational and safety plans of the new owner. This could take up to 18 months, with a potential closure in late 2026 or early 2027 if all goes smoothly. Challenges might include public pushback, especially from dam safety advocates and environmental groups who argue for demolition over continued operation due to ecological impacts on rivers. There’s also the question of whether Confluence Hydro’s plans will meet the stringent requirements of regulators, particularly around safety and grid reliability.
What is your forecast for the future of hydroelectric infrastructure in the United States, given trends like this sale?
I think we’re at a crossroads with hydroelectric infrastructure in the U.S. On one hand, aging dams like these in Michigan are increasingly seen as financial liabilities for traditional utilities, pushing more sales to private entities or specialized firms like Confluence Hydro who are willing to invest in modernization. On the other hand, there’s growing tension between maintaining these structures for power and recreation versus removing them to restore natural river ecosystems. I foresee a mixed future—some dams will be revitalized with private capital and new technology to support renewable energy goals, while others may face decommissioning as environmental priorities gain traction. The balance will depend heavily on regulatory frameworks and public sentiment in the coming decades.
