Dynegy able to buy Illinois coal plants due to board okay

The Illinois Pollution Control Board on Nov. 21 granted an approval to Ameren (NYSE: AEE) and Dynegy (NYSE: DNR) that should allow Dynegy to close on its planned buy of several Illinois coal-fired plants from Ameren.

Earlier this year, the board refused to transfer a break on the state Multi-Pollutant Standard (MPS) that it had previously granted to Ameren because it gave that break to all of the Ameren plants in Illinois as a group. But Dynegy only would get the operating coal plants. The board on Nov. 21 approved a revision that basically divided the plants into operating and shut facilities.

Dynegy and Ameren have said that getting this board approval was the only remaining major obstacle to the closing of this deal. Dynegy officially announced right after the board decision that the deal will close in December. The Federal Energy Regulatory Commission approved the deal on Oct. 11.

Illinois Power Holdings LLC (IPH, which is a unit of Dynegy), AmerenEnergy Medina Valley Cogen LLC and Ameren Energy Resources LLC (AER) sought a variance from the SO2 emission rate in the multi-pollutant standard (MPS) rules applicable to the AER MPS Group of facilities in Illinois. The AER MPS Group includes the following seven coal-fired plants:

  • Coffeen Energy Center (Montgomery County, 895 MW);
  • Duck Creek Energy Center (Fulton County, 410 MW);
  • E.D. Edwards Energy Center (Peoria County, 650 MW);
  • Joppa Energy Center (Massac County, 1,167 MW);
  • Hutsonville Energy Center (Crawford County);
  • Meredosia Energy Center (Morgan County); and
  • Newton Energy Center (Jasper County, 1,197 MW).

Hutsonville and Meredosia have been mothballed, though the U.S. Department of Energy’s FutureGen 2.0 project would repower part of Meredosia with an advanced coal combustion technology and CO2 capture system.

On July 22, petitioners filed a petition for a variance from the overall SO2 annual emission rate in the MPS applicable to the seven coal-fired stations in the AER MPS Group. Petitioners sought relief from an MPS requirement for five years beginning January 2015 and ending December 2019, and relief from another requirement for three years, beginning January 2017 and ending December 2019.

“In summary, the Board finds that petitioners are eligible to apply for and obtain variance relief, and that this record contains adequate proof that timely compliance with the overall SO2 annual emission rates in Sections 225.233(e)(3)(c)(iii) and (iv) would impose an arbitrary or unreasonable hardship on IPH,” the board ruled. “Petitioners have committed to an overall SO2 annual emission rate of 0.35 lb/mmBtu from 2013 through 2019 in conjunction with the continued closure of the Meredosia and Hutsonville stations, increased efficiency of the FGD units at the Coffeen and Duck Creek stations, the use of low sulfur coal, and compliance with an overall mass SO2 emissions cap of 327,996 tons from fourth quarter 2013 through 2020. The Board finds this compliance plan satisfactory, as it results in an overall reduction of SO2 emissions from fourth quarter 2013 through 2020, and provides a net benefit to Illinois air quality.

Board places various conditions on Dynegy going forward

The approval is subject to various conditions, including:

  • Through Dec. 31, 2019, IPH must comply with an overall SO2 annual emission rate of 0.35 lb/mmBtu. Beginning Jan. 1, 2020, IPH must comply with an overall SO2 annual emission rate of 0.23 lb/mmBtu.
  • AmerenEnergy Medina Valley Cogen LLC must not operate the electrical generating units at Meredosia and Hutsonville, which Ameren is keeping, until after Dec. 31, 2020. The FutureGen 2.0 project at the Meredosia Energy Center is exempt from this restriction.
  • Through Dec. 31, 2019, IPH must continue to burn low sulfur coal at the E.D. Edwards, Joppa, and Newton Energy Centers. The combined annual average stack SO2 emissions of these three stations must not exceed 0.55 lb/mmBtu on a calendar year annual average basis. The plants mostly burn low-sulfur Powder River Basin coal.
  • Through Dec. 31, 2019, IPH must operate the existing Flue Gas Desulfurization systems at the Duck Creek and Coffeen Energy Centers to achieve a combined SO2 removal rate of at least 98% on a calendar year annual average basis.
  • IPH must permanently retire E.D. Edwards Unit 1 as soon as allowed by the Midcontinent Independent System Operator. MISO has lately fronted money allowing the aging, 90-MW unit to stay open for extra time so it can make needed grid improvements in the meantime to make up for that loss.
  • For the time period beginning Oct. 1, 2013 through Dec. 31, 2020, IPH must limit the MPS Group system-wide mass emissions of SO2 to no more than 327,996 tons. The specified time period and emissions limit apply without any adjustment based on the time period of IPH ownership of MPS Group facilities.
  • For the time period beginning Oct. 1, 2013 through Dec. 31, 2020, IPH must report annually to the Illinois Environmental Protection Agency the combined tons of mass SO2 emissions and the overall SO2 annual emission rate from the five operating stations in the MPS Group: Coffeen, Duck Creek, E.D. Edwards, Joppa, and Newton.

Dynegy would be allowed to continue with a key feature of the variance, which was a slow-walk of the FGD installation at Newton so money could be saved in the short-term in a down power market. Under the Newton part of the variance:

  • On or before July 1, 2015, IPH must complete engineering work on the Newton FGD project.
  • On or before Dec. 31, 2017, IPH must obtain a new or extended construction permit, if needed, for the installation of the FGD equipment.
  • On or before Dec. 31, 2018, IPH must complete construction of the absorber building on the Newton FGD project.
  • On or before July 1, 2019, IPH must complete steel fabrication of ductwork and insulation activities on the Newton FGD project.
  • On or before July 1, 2019, IPH must complete installation of electrical systems and piping on the Newton FGD project.
  • On or before Sept. 1, 2019, IPH must set major equipment components into final position on the Newton FGD project.
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.