by Chris Andrews
July 16, 2008

ITC CEO Joseph Welch. Photo by Monica Morgan

ITC Holdings CEO Joseph Welch is sure he knows the end point for Michigan’s — indeed America’s — energy future. But he says, only half-jokingly, that he may be on the pro shuffleboard tour or “on the other side of the grass” by the time policymakers see it, too.

State lawmakers are debating energy legislation that in all likelihood will clear the way for one or more baseload power plants to be built in Michigan. Consumers Energy has a plan on the table for a new clean-coal unit near Bay City. Private power producers are eager to construct plants here if the legislative package retains their ability to compete for customers.

Welch says Michigan doesn’t need more plants constructed within its borders. Rather, he says, the state needs a stronger commitment to high-voltage transmission, which, not surprisingly, is what ITC does. But transmission, for the most part, is on the backburner as lawmakers try to wrap up an agreement on an energy package before the end of the summer. But the outspoken energy CEO continues to say what many lawmakers apparently don’t want — or aren’t yet ready — to hear.

Welch believes fervently in a national energy strategy that generates the power at the source and sends power over transmission lines, rather than lugging coal to power plants in distant states. That means more power plants in coal fields in West Virginia or Ohio or in the windiest areas in Iowa or the Dakotas.

It certainly does not mean Bay City.

“When you talk about this legislation, it’s ensuring us that we are going to build another power plant inside the state, it’s ensuring us that we are not going to reduce our carbon footprint, it assures us that we are going to stay dependent on foreign oil,” Welch said in an interview at his company’s new 186,000-square-foot, state-of-the-art facility in Novi.

ITC Holdings is the nation’s first and only publicly traded standalone transmission company. Initially a spinoff from DTE in 2003, the company acquired the transmission assets of Consumers Energy in 2006 — and thus controls the overwhelming majority of the electricity grid in Michigan’s Lower Peninsula. Its workforce has grown from 38 to more than 300.

And it is aggressively expanding its national footprint. Last year it acquired transmission assets in Iowa, Minnesota, Illinois and Missouri, and Kansas and Oklahoma are on the horizon. Welch says he has no doubt ITC will expand into other states as well.

The company moved into its new high-tech, highly secure headquarters in April, a project that was completed in just a year. Visitors are issued pictured ID cards that must be scanned to get past the reception desk; employees have their thumbprints scanned to enter some areas of the facility. Welch is especially proud of the company’s world-class control center, which would fit in nicely at NASA or the Pentagon. A massive computer screen adorns the wall monitoring Michigan’s electricity grid. A second one will soon monitor Iowa.

“How do you launch the missiles,” I asked.

“I could tell you,” he said. “But I’d have to shoot you.”

A native of Kansas, Welch ended up in Michigan and in its electricity business almost by chance.

He was an electrical engineering student at the University of Kansas planning a career in aerospace. But the 1967 Apollo 1 fire that killed three astronauts proved to be devastating to the industry, and Welch had to look for other options.

He received job offers from General Electric and DTE. The DTE offer paid $5 more a week. Welch went for the big bucks.

He rose through the ranks at DTE and was director of transmission in 1999 when DTE, like many utilities, was under pressure to upgrade its transmission system. Welch put together the proposal for DTE to sell the assets. The DTE Board agreed, and Welch left to head the new company when it was formed in 2003.

Obsolete Model
At the core, Welch believes the United States is providing electricity in a grossly inefficient way that imperils us economically and environmentally.

While consumers buy furnaces for their homes that are 95-percent energy efficient, he says, the electricity system is only operating at 20-percent efficiency.

“In the case of DTE Energy, they mine coal in Montana and put it on a rail car. We ship the coal across the country. We unload it in Superior, Wisconsin, put it on barges. We bring it down the Great Lakes. We unload it off the barge and put it into a boiler and burn it. And we inventory it and have the cost of inventorying it.

“How do we get the fuel for the locomotive? We go to Saudi Arabia, drill a well, bring the fuel up, put it on a barge, ship it across the ocean, bring it to a refinery, distill it, transport it to the locomotive and move it.

“Sound pretty efficient to you?” he asks. “Not really. But that’s the process of vertical integration. Because we plan everything with little worlds and little kingdoms.”

To Welch, there is a clear-cut superior solution. One that he and his company are already major players in. Rather than a state-by-state approach, he envisions a national strategy, with high-voltage transmission lines designed and operating much like the interstate highway system.

Wind zones in Iowa and the Dakotas could help meet the power needs of other states with greater electricity needs. Nuclear power plants could be clustered in areas with abundant cooling water. Coal plants would be built in states such as West Virginia and Montana. “We increase our efficiency and reduce our carbon footprint without doing a darn thing other than rethinking the process,” Welch said.

No Consensus
Others don’t share Welch’s view. They say it’s in Michigan’s best interest to operate plants within the state.

Consumers Energy spokesman Dan Bishop points to the 21st Century Energy Plan laid out by Peter Lark in 2007 when he chaired the Michigan Public Service Commission. It concludes there is a need for a new baseload power plant, as well as for commitments to renewable energy and energy efficiency. Customers would be vulnerable to the volatility of the electricity energy markets if Michigan relies increasingly on energy produced in other states.

“We would have to import it (electricity) at the prices charged by the owners of those facilities,” Bishop said. “In addition to that, Consumers Energy plants are the second oldest generating fleet in the country. Building new facilities here makes a lot of sense in terms of jobs created, tax benefits, economic benefits.”

A study prepared for Consumers Energy last year said the direct and indirect economic impact of the project would be $1.2 billion over seven years, with 1,800 construction jobs at the peak of construction.

State Rep. Frank Accavitti (D-Eastpointe) chairs the House Energy and Technology Committee. While acknowledging that generating electricity at the source — whether it’s a coalfield or a wind farm — can increase efficiency, he shares the concerns about prices that are set by the Midwest ISO, the regional transmission organization, and which can fluctuate much like the stock market.

Another concern of his is the loss of control by the Michigan Public Service Commission.

“We monitor the current utilities — how efficient they are, what units they had on line during peak periods, when they are down for maintenance, why they are down for maintenance. We can regulate them to that level because they are physically within our state,” he said.

“What Joe is talking about probably would be feasible if he could get the federal government to completely rewrite the way energy is transported and shared from state to state,” Accavitti said. “But he’s barking up the wrong tree if he thinks we can effectively do it with legislation in Michigan.”

State Sen. Patty Birkholz (R-Saugatuck Twp.) said she has been disappointed that the issue of transmission hasn’t gotten more attention as lawmakers work on the package. “It’s kind of mentioned almost as an afterthought, which bothers me. We know we need more transmission.”

Birkholz serves on the Senate Energy Policy Committee and works on the energy issue through her involvement with the Council of State Governments. She said scientists are “close to perfecting” ways to store energy from wind farms and send it over the wires.

“Now that gas is $4 a gallon, suddenly those technologies become a lot easier to invest in, to really refine them,” she said. “When a group of scientists get together and work on perfecting something or inventing something, it’s a lot faster than it used to be.”

Birkholz said she believes that Michigan’s economy will benefit from getting its power cheaply and efficiently, even if it is generated in other states.

“The cost of doing business is greatly influenced by the cost of the energy,” she said. “Energy is a huge cost for almost any kind of business facility, whether it is a high-tech business where they have a lot of computers and high-tech equipment or whether it’s what we think of as an old-fashioned manufacturing firm.”