The Illinois Commerce Commission in a Jan. 9 order opened the second phase of a two-phase proceeding where the Illinois Power Agency is seeking approvals related to the sale of power from the FutureGen 2.0 coal project.
On Dec. 19, 2012, the commission approved the first phase. Phase 1 consisted of commission consideration of approval of power sourcing agreement as to form and the rate formula. As part of Phase 2, the sponsoring FutureGen Alliance has indicated that it would submit a set of proposed “Preapproved Total Capital Costs” and a proposed rate of return and capital structure (including a debt/equity ratio). The commission agreesd with and adopted this approach, but noted that since the commission has already approved FutureGen’s return on equity and capital structure, these need not be included as Phase 2 issues.
The issues to be covered in Phase 2 include, but are not be limited to: the provisions within Section 1-75(d)(3) of the IPA Act that are mandatory for sourcing agreements that are not associated with the initial clean coal facility; the preapproved total capital costs; and commission staff’s recommendations for annual audits, reconciliations, and periodic benchmark tests. The commission directed the parties at the outset of this proceeding to submit issue lists and appropriate docket timeframes to the Administrative Law Judge for resolution. The commission noted that issues resolved in Phase 1 can’t be relitigated in Phase 2 of the process.
The commission, over the objections of affiliates of Ameren (NYSE: AEE) and Exelon (NYSE: EXC), on Dec. 19 approved a plan from the Illinois Power Agency that in part supports power sales from the in-development FutureGen 2.0 project. The Illinois Public Utilities Act (PUA) requires the Illinois Power Agency (IPA) to prepare a power procurement plan that is designed to secure electricity commodity and associated transmission services to meet the needs of eligible retail customers in the service areas of Exelon’s Commonwealth Edison (ComEd) and Ameren Illinois (AIC). On Sept. 28, 2012, the IPA filed with the commission its fifth annual power procurement plan, initiating this proceeding.
The IPA Act contains a goal that cost-effective clean coal resources account for 25% of the electricity used in Illinois by Jan. 1, 2025. The act describes two special cases: the “initial clean coal facility” and “electricity generated by power plants that were previously owned by Illinois utilities and that have been or will be converted into clean coal facilities (‘retrofit clean coal facility’).” Currently, there is no facility meeting the definition of an “initial clean coal facility” that the IPA is aware of that has announced plans to begin operations within the next five years. However, the IPA said it is aware of a retrofit clean coal facility that intends to begin operations within the next five years, FutureGen 2.0.
FutureGen 2.0 consists of the proposed repowering of one unit at the shut Meredosia power plant of Ameren Energy Resources, which is located in Morgan County. FutureGen 2.0 is to be developed as 166 MWe (gross) of near-zero emissions coal-fueled generation, with a targeted commercial operation date in 2017, and a 30-year life. It is anticipated to operate as a baseload plant to be dispatched by the Midwest ISO in the coal stack of the dispatch order.
FutureGen 2.0, supported by the U.S. Department of Energy, is designed to validate the cost and performance of commercial-scale, near zero emissions oxy-combustion coal-fueled power generation with carbon capture and sequestration. The plant would receive $1bn in federal stimulus funds and additional state-level grant funding.
FutureGen 2.0 proposed a sourcing agreement with Ameren, ComEd and Alternate Retail Electric Suppliers (ARES). Given the size of the FutureGen 2.0 plant and the allocation of its output to Ameren, ComEd and the ARES in proportion to their market share, the Ameren and ComEd combined market share of the output could be on the order of a 50 MW block of energy, with the remainder shared among the ARES. Given the large unhedged positions of Ameren and ComEd in 2017 and beyond, this purchase does not appear to introduce an appreciable amount of portfolio risk, while maintaining competitive neutrality with ARES, the plan said.