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updated: 8/30/2012 12:58 PM

Clean energy group criticizes costs of new Illinois power plant

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Customers of the new Prairie State coal-fired electricity plant -- including the electrical agencies to which Batavia, Geneva, St. Charles, Naperville and Winnetka belong -- will pay much more for the electricity than they expected when they signed up to invest in the plant, clean energy advocates say in a report released Wednesday.

Instead of buying power for about $41 per megawatt hour, customers are paying closer to $60, the report says. The cost could be even higher, according to the report, since that figure is based on the $4.9 billion plant's two units running at 85 percent capacity in their first year, which the report says is overly optimistic. The first unit fired up in June, several months behind schedule.

"None of those promises is being kept by Prairie State to date," said Tom Santillo, a co-author of the report. " ... Prairie State is an unnecessary financial burden on local governments and taxpayers."

But Richard Heinemann, general counsel for the Northern Illinois Municipal Power Agency, disputes the report's findings.

"A lot of the assertions are not really based in fact," he said.

The report was done by Massachusetts-based Institute for Energy Economics and Financial Analysis.

The group's mission is, according to its website, to "accelerate the United States' transition to a diverse, sustainable and profitable energy economy and to reduce the nation's dependence on coal and other nonrenewable energy resources." The report's sources include bond documents; information from American Municipal Power, which owns a 23 percent share; a marketing presentation made to the Illinois Municipal Electric Agency; and the Mine Safety and Health Administration.

A May bill obtained from Batavia by the Sierra Club under the Freedom of Information Act shows NIMPA charging Batavia and Geneva $57.68 per megawatt hour this year. According to the federal Energy Information Agency, wholesale on-peak electricity averaged $38.17 in northern Illinois the first six months of the year. Natural gas prices at a 10-year low and lower consumption due to extraordinarily warm weather were credited with a 25 percent price decline compared to 2011.

The report also states that owners have been paying this year for electricity the plant has not produced, since the plant did not start up until June.

But Heinemann and NIMPA President Michael Buffington said that's not the case.

NIMPA found another supplier for that time period, they said, just as it will if the plant shuts down.

"We do not pay for energy we do not receive," Heinemann said.

St. Charles, Winnetka and Naperville also belong to the Illinois Municipal Electrical Agency.

Batavia and Geneva bought into the plant as a way to diversify their electrical supplies in a deregulated market. Until now, the cities have either bought via contracts with ComEd and Wisconsin Power, and the wholesale spot market via regional transmission operators.

Geneva also has a supplemental gas generation facility it fires up during peak times if it can get cheaper electricity from it than the spot market. Geneva also receives electricity from a methane gas plant at the Settler's Hill landfill in Batavia.

Municipalities and power agencies bought percentages of the plant; NIMPA owns 7.6 percent, and the IMEA owns 15 percent. Members of those agencies then split the agencies' bills.

For NIMPA, that means Batavia picks up nearly 46 percent of the tab, Geneva 29 percent and Rochelle 25 percent. NIMPA borrowed $533 million to buy in; bond repayments began in January and last until 2041. The plant is expected to generate 1,600 megawatts of electricity, and NIMPA is obligated to take or pay for 120 megawatts -- whether it needs them or not.

The power agencies are also part-owners of the coal mine that will supply the plant and of the ashfill that will store coal waste. The mine has a 30-year permit, but the report says that due to environmental regulations, the owners might only get coal out of it for 23 years.

Geneva raised its electrical rates last year to accommodate the increased costs, said Buffington, who is also Geneva's electrical superintendent.

The report also states the plant's original sole owner -- Peabody Electric -- should have known costs of electrical plant construction were rising, based on the experience of other plants across the country.

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