Environmental, citizen groups battle Illinois coal projects

With the Illinois House Public Utilities Committee reviewing legislation backing a coal gasification power plant proposed by Tenaska, the Natural Resources Defense Council said May 14 that a new study by a longtime consumer advocate shows the true cost of the rate hikes proposed for Tenaska and two other coal plants.

The report by Martin Cohen, former executive director of the Illinois Citizens Utility Board and Chairman of the Illinois Commerce Commission, estimates the total cost to Illinois ratepayers of $21.3bn over 30 years for the Tenaska, Leucadia National and Power Holdings of Illinois coal gasification projects, all of which have been long-proposed in the state and are at varying stages of development.

“These sweetheart coal contracts will have consumers paying higher rates for decades,” said Cohen. “In the first decade alone, Illinois consumers will pay an average of nearly $1,500 extra to subsidize these plants.”

The report “On the Hook: Potential Costs to Illinois Consumers of New Coal Power Mandates,” examines the costs to the Illinois economy if customers are forced to take energy from these plants. 

In 2011, the Illinois General Assembly approved rate hikes to pay for two separate projects, Leucadia and Power Holdings, which seek to turn coal into synthetic natural gas. Now Tenaska is seeking what would be the largest of the three rate hikes, NRDC said. In all three cases, the legislature would force utility customers statewide, home and business, to purchase electricity or synthetic natural gas from the plants for decades at rates far beyond current market costs.

“On the Hook” uses futures market data to project the real costs of the three long-term contracts. If all three plants move forward, residential customers can expect to see a first year rate increase totaling $458m, the report said.

“These bailouts for big coal are clearly boondoggles that hit Illinois ratepayers hard, at the worst possible time,” said Jack Darin, director of Sierra Club Illinois. “These costs are unacceptable, especially when there are no plans in place to deal with the billions of pounds of pollution Tenaska will generate each year.”

Beyond the mandated costs to ratepayers, the report also looks into two major selling points used by backers to promote the coal projects: jobs and demand. Each of the long-term jobs created by Tenaska’s Taylorville Energy Center would cost ratepayers almost $1m annually, the report said.

The House Public Utilities Committee is due to hold a hearing the morning of May 16 on SB 678, which cleared the Senate last November and has been stalled lately in the House. The bill, among other things, would amend the Illinois Power Agency Act and the Public Utilities Act to provide for the procurement of renewable energy resources from a clean coal facility.

Tenaska has its own figures on project costs

Independent power producer Tenaska, the managing partner of the Taylorville Energy Center (TEC) project, on April 17 released a rate impact analysis by Pace Global, an international energy consultancy, which shows the project is of benefit to Illinois ratepayers.

Tenaska has been battling critics for years, including Illinois-based, nuclear-energy-dependent power provider Exelon (NYSE: EXC), as it tries to get the TEC project built. The Pace Global analysis found that significantly lower interest rates have more than offset the additional rate impact caused by changes in the energy market, Tenaska said.

In March, the STOP Coalition released an Exelon-funded study claiming that the rate impact for the project had gone up by over $100m annually (40%) because of lower power and natural gas prices. Tenaska said that study was deeply flawed and took neither accelerating coal plant closures nor lower interest rates into account. So Tenaska asked Pace Global, author of the original rate impact study from the 2010 Facility Cost Report vetted by the Illinois Commerce Commission, to update its study, replacing the 2010 commodity price forecasts with the most recent U.S. Energy Information Administration data.

The Illinois EPA issued a new air permit for the TEC project on May 1. The final air permit for the Christian County Generation LLC (CCG) project shows that this facility would gasify coal to make substitute natural gas (SNG), with the SNG to either be directly sold as a product or used on-site to fuel combined cycle combustion turbines to generate electricity, which would be fed to the grid. The gasification block would have a nominal daily production capacity of 64 million standard cubic feet of SNG. The power block would have a nominal net electrical output of 602 MW. CCG is a project affiliate of Tenaska.

Two other coal projects also in the works

Power Holdings of Illinois plans the Southern Illinois Coal-to-Synthetic Natural Gas Facility in Jefferson County. The facility would produce up to 65 BCF of SNG annually, representing 5% of total consumption of residential, commercial, and industrial customers in Illinois. The facility, which would consume 5 million tons of coal per year, would sell a substantial portion of this production under long-term sales agreements to Illinois gas utilities.

Illinois Gov. Pat Quinn signed legislation in July 2011 aiding a coal gasification project being developed by Leucadia National through its subsidiary, Chicago Clean Energy. Chicago Clean Energy is a $3bn SNG project that will be located on a former LTV Steel plant site on Chicago’s southeast side. The plant would use at least 1 million tons of Illinois coal per year.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.