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The Consumers Energy headquarters in downtown Jackson.

(JULIE DAWES)

JACKSON, MI - A perfect storm is brewing in Michigan's Lower Peninsula, according to the two largest energy providers in the state.

Rolling blackouts and electricity shortages may become the new norm, as the state's two largest utilities will shutter coal plants under federal mandates and a partially deregulated market leaves them skittish of new energy investment, officials warned in a recent report.

The report, released in November and commissioned by DTE Energy and Consumers Energy, warns of a potential electricity generation capacity shortfall in Michigan as soon as 2016.

A capacity loss of as much as 1.3 gigawatts - enough to power Detroit, Grand Rapids and Lansing - is expected under the planned retirement of nine coal-fired power plants over the next two years. Utilities will have to stretch resources to provide adequate electricity to customers during peak demand, normally reserved for the hottest summer days.

Coal plant retirements include Consumers Energy's "classic seven" coal plants by April 2016, capable of generating 950 megawatts of electricity. A handful of these plants are being retired simply because they were built in the 1950s and reaching the end of their productive lives, Consumers Energy officials said, while others will retire due to state and federal law.

Consumers Energy officials said they're doing their best to stretch resources to provide electricity to Michigan residents, including the reopening of a Dearborn power plant and the $155 million purchase of the DPC Juniper power plant in Jackson, capable of generating 750 megawatts of electricity.

"You can't store electricity so it's important to try and have a surplus of it," said John Russell, President and CEO of Jackson-based Consumers Energy. "When customers hit the switch they're either going to have it or they're not."

The purchase of existing power plants is one thing, but building wholly new power plants is a tall order under a partially deregulated state, Russell said.

"We make billion dollar bets," he said. "We want to make sure our investments will pay off for us when we spend that kind of money to build a new plant, and the current climate is too volatile."

Under current laws, up to 10 percent of Michigan's electricity can be provided from out-of-state providers, providing a hybrid between a deregulated market driven solely by consumer choice and a regulated market driven by government-sanctioned, in-state utilities.

Consumers Energy officials said they're not willing to build new plants unless they have a fully regulated market and the secure customer base that comes with it.

"A problem arises if and when the 300 former Consumers customers - mostly larger businesses - that now buy from alternative providers suddenly decide to come back to us," Russell said. "Right now, we aren't planning on serving them."

Russell said the roughly 300 customers account for about 800 megawatts of energy.

"It's hard to plan for the future when we don't know what to expect," said Daniel Bishop, media relations director at Consumers Energy.

State Rep. Mike Shirkey, who introduced legislation in 2013 to deregulate the energy market in Michigan, said he's wary of Consumers Energy and DTE Energy warning of "a looming crisis."

(Related: Rep. Shirkey touting new report showing $37 billion in energy savings through Illinois' electric-choice system)

"There isn't any evidence of a crisis on the horizon," the representative from Clark Lake said. "If there were, both utilities would be working toward a solution. If it takes longer than 24 months to build to capacity then there should be shovels in the ground."

Shirkey said he believes both utilities are taking advantage of the situation at hand to push for a wholly regulated, "government-sanctioned monopoly."

"It's in their best interest," Shirkey said. "They're being opportunistic and saying they can't properly plan for the future."

Michigan residents will have to wait and see what energy policy will come out of Lansing in the coming year, with a wide variety of bills and proposals on the docket.

Shirkey said he plans to reintroduce legislation to move toward a deregulated market this year.

"We need to provide a sensible, stepped, demand-driven approach to increase the cap on alternative energy providers," he said. "As long as it doesn't harm utilities or shock the system, competition will keep Michigan ahead of the curve."

Governor Rick Snyder has said he wants to wean Michigan off of coal-powered electricity and toward natural gas, while retaining the cap on out-of-state energy providers.

Snyder proposed a plan earlier this month that would preserve the 10 percent customer choice cap while at the same time increasing the state's renewable energy goal to 19 percent by 2025, up from the current 9 percent.

Still, other state representatives are pushing for a wholly regulated market. State Rep. Aric Nesbitt, chairman of the House Committee on Energy Policy, introduced a packed of bills March 5 that included the elimination of customer choice.

Contact Will Forgrave at wforgrav@mlive.com or 517-262-7554. Follow him on Twitter at @WillForgrave.