Michigan utilities, Toshiba in $800M pumped hydro wrangle

Michigan utilities, Toshiba in $800M pumped hydro wrangle

Posted on August 29, 2025 by admin

By Kennedy Maize

A long-running $800 million dispute between Michigan’s Consumers Energy and DTE Electric, joint owners of the 2,300-MW Ludington pumped storage hydro project, and Toshiba Corp. is headed to federal court on Oct. 28. The case involves a dispute over Toshiba’s rehab work on the elderly Ludington pumped storage hydro project, dating back to 2010.

Earlier this month (Aug. 8), Judge F. Kay Behm of the U.S. District Court for the Eastern District of Michigan rejected Toshiba’s motion for summary judgment. She ruled, “Defendants [Toshiba] have not sustained their burden of demonstrating that they are entitled to summary judgment.”

Ludington, on the shore of Lake Michigan and consisting of six turbine-pumps, was commissioned in 1973 at a cost of $375 million (in 1973 dollars). At the time it was the largest pumped storage project in the U.S. (Bath County Pumped Storage in Virginia is now the largest and Ludington is in second place). The owners – Consumers (51%) and DTE (49%) – in 2010 hired Toshiba’s American operation (TAES) to overhaul the plant.

The contract between the owners and Toshiba specified that Toshiba would “return the Plant to as nearly an as new condition as possible” and allow the plant to operate with a “minimum thirty (30)-year service life” with “only minimal routine maintenance.”

It didn’t go well from the start, as reported by MLive, the Michigan owner of multiple state newspapers. “The complex overhaul work involved disassembling and replacing hundreds of tons of equipment, taking generating units offline. It dragged out longer than expected,” the news service reported. “In total, delays stretched over 1,361 days where one or more units was unavailable to deliver power, according to a report the utilities have filed in court informing their ask for damages.”

An analysis of the dispute by the Bradley Arant Boult Cummings LLP law firm said the owners “paid Toshiba American Energy Systems over $500M to overhaul and upgrade the plant’s six units, which reopened between 2015 and 2019.” With a couple of years, they found “degraded metal in two of the units during a periodic inspection” and asked Toshiba for repairs, to no avail. The owners sued in 2022, claiming $800 million in damages and interest.

Toshiba counter sued, denying all of the charges against them as “wildly inflated” and seeking $15.6 million for unpaid work they claim was done at Ludington, billed, and not paid. Toshiba claimed, “While plaintiffs opportunistically seek a huge cash windfall through this action, their claims cannot be squared with the specific terms of the contract.”

Last May, the utilities told MLive, “Toshiba failed to deliver on promises made in its contract to perform work at the plant, and Toshiba failed to provide a meaningful remedy despite these shortcomings. Consumers Energy and DTE were forced to take legal action to hold Toshiba accountable and protect our customers.”

How will the outcome of the complex case affect the customers of the two utilities?

At the same time it filed suit against Toshiba in federal court three years ago, the two companies told the Michigan Public Service they had each already paid some $30 million on replacements at the plant and asked permission to “sequester” the funds so they wouldn’t be charged to customers pending the outcome of the litigation. They added that the case might take years to resolve and they would not seek to recover its costs until the outcome was known. The MPSC agreed.

The MPSC ruled, “The Commission notes that by granting approval of the accounting authority in this case it is not reducing the evidentiary burden the companies must meet before they may recover these costs in a future rate case proceeding. In other words, the accounting approval provided in this case is no indication, or guarantee, of a favorable outcome as to a future cost recovery request of any amounts remaining in the regulatory asset following litigation.”

Consumers Energy’s total generating capacity as of December 2021 was 5,300 MW. DTE’s total generating capacity, according to its 2024 annual report, is 12,000 MW. DTE is Michigan’s largest utility.

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