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Group accuses Prairie State of charging more for power

Published: Thursday, Aug. 30, 2012 5:30 a.m. CDT

A group that analyzes energy economics is accusing the Prairie State Energy Campus, in which Batavia, Geneva and St. Charles invested, with charging more for power than promised.

A report released Wednesday by the Institute for Energy Economics and Financial Analysis criticizes the downstate Prairie State project as misleading, a charge Northern Illinois Municipal Power Agency officials say is not true.

NIMPA, to which Batavia and Geneva belong, is an energy consortium that is part owner of the Prairie State project. St. Charles also is invested through another consortium, the Illinois Municipal Electric Agency. Peabody Energy owns 5 percent of Prairie State; the rest is owned by the member municipal utility agencies.

The cities invested in the project in 2005 to ensure long-term, below-market power rates for their municipal electric utilities. Prairie State started charging the cities this year. City officials were either unavailable for comment or did not see the report. Geneva’s electric superintendent referred questions to Richard Heinemann, general counsel for NIMPA.

“Our study estimates that actual electricity costs for many municipalities will exceed $80 a megawatt hour in the first year, and therefore be over 100 percent of the costs promised by Peabody and Prairie State,” said Tom Sanzillo, finance director for the institute that did the analysis.

Heinemann questioned Sanzillo’s $80 figure.

“I do not know what basis he has for that,” Heinemann said.

Although Prairie State promised a rate of $41 per megawatt hour, it charged $57.682 per megawatt hour, according to a bill from NIMPA obtained by the Sierra Club through the Freedom of Information Act.

“The first year cost of electricity is far above the cost of electricity that was promised to participants,” Sanzillo said. “And the cost of electricity in the first year is far above the current market price of electricity ... . The study looks at the impact of cost increases. It is considerably more than what they [municipalities] were promised and signed on for.”

Heinemann said part of the reason the price for electricity is higher is because Sierra Club anti-coal activists caused delays in permitting. The price of commodities used in the construction project also increased, he said.

Sanzillo said the price to build Prairie State’s coal-burning plant went from $1.8 billion to $4.9 billion.

“That is the single biggest factor in driving these cost increases,” Sanzillo said. “Prairie State is an unnecessary financial burden on ratepayers and local governments, rather than the much needed financial relief that was promised.”

For the next decade, Sanzillo said the market outlook for the cost of electricity from Prairie State will exceed the cost of power from the private market.

The study shows communities will lose money from Prairie State.

“Our analysis shows that the project loses money for each participating community we reviewed through at least 2025,” Sanzillo said.

Kady McFadden, organizing representative for Sierra Club’s Beyond Coal Campaign and a 2006 St. Charles North High School graduate, also was critical of the Prairie State project.

“They promised cheap, long-term power, but what [municipalities] are getting is very expensive and very dirty power,” McFadden said. “They are selling it as clean, but that is not the case, and the prices are through the roof.”

McFadden called on the cities’ officials to hold Peabody accountable.

“Peabody Energy took advantage of my hometown by misleading St. Charles ratepayers into bankrolling an expensive, dirty and dangerous coal plant no matter what the price,” McFadden said in a statement. “Tri-Cities ratepayers need to demand that Peabody be held accountable for the promises they made.”

Heinemann said the Prairie State project is state of the art in terms of environmental protection.

“I understand many people in the NIMPA community don’t like coal,” Heinemann said. “It is not a dirty coal plant … . It goes far and above EPA standards. That is an extremely important part of this investment. We wanted to build a plant that would be clean based on EPA standards ... . It is a lot cleaner than any other coal plant in Illinois or the region. Many are being retired because they can’t meet the clean air requirements. It is an investment I think we are going to be feeling good about.”

Sanzillo said the project uses the same coal boilers of a bygone era instead of embracing newer technologies. He said the report is a starting point for people and public officials to ask questions.

Heinemann disputed McFadden and Sanzillo.

“This is a good project,” Heinemann said. “It’s a 30-year fixed price for coal source based on 2008 pricing to allow us to continue to receive economic energy for the life of the plant. From our standpoint, we believe it is a good investment and continues to be, even though the price is higher than we thought it would be.”

Geneva Mayor Kevin Burns said the city entered into the agreement to provide a 30-year horizon of “stable, reliable, affordable energy needs.”

“The fact that the now-quoted cost for kilowatt hour is higher than expected is ... a direct result of the avalanche of litigation posited by environmental groups and others who don’t want to face reality that cheap clean coal is still a viable energy product,” Burns said.

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