Dynegy Inc. (NYSE: DYN) on Nov. 4 announced plans to retire its 465-MW Wood River Power Station in Alton, Illinois, in mid 2016.
Wood River includes two coal-fueled units that entered commercial operation in 1954 and 1964. The decision to retire the Wood River facility is due to its uneconomic operation stemming from a poorly designed wholesale capacity market in Central and Southern Illinois that does not allow competitive generators to recover costs, said Dynegy. The current market design of the Midcontinent Independent System Operator, Inc. (MISO) capacity auction is flawed because it allows regulated utilities from surrounding states to bid their capacity into the auction at little to no cost as these regulated utilities receive higher guaranteed compensation from their respective state-regulated markets, Dynegy added.
Central and Southern Illinois market participants, on the other hand, operate in a state with a deregulated competitive framework and must rely on the MISO capacity auction for fair compensation, unlike their regulated counterparts. Mixing these two regulatory regimes together in the same capacity auction puts all generating units in Central and Southern Illinois at financial risk, regardless of fuel type, shifting jobs and the economic benefits of hosting power plants from Central and Southern Illinois to neighboring states.
Said Robert C. Flexon, president and CEO of Dynegy: “Dynegy is committed to working with MISO, the state of Illinois, Union leadership and all stakeholders to redesign the MISO capacity market to one that properly functions and fairly compensates competitive generators or alternatively, to transition Illinois fully into PJM. Otherwise, all generating plants in the MISO portion of Illinois will face a future of financial challenge. If Wood River was located in the PJM market, like Dynegy’s Northern Illinois generating units, it is unlikely this retirement would be occurring.”
Dynegy expects to formally file a retirement notice with MISO by Dec. 1, 2015. This retirement notice will trigger a grid reliability review by MISO, which the company expects to be completed in the first quarter of 2016. If MISO determines the plant is not needed for reliability, Dynegy expects the retirement to occur in mid 2016.
U.S. Energy Information Administration data shows Wood River getting coal earlier this year from the Black Thunder mine in Wyoming of Arch Coal (NYSE: ACI), with that contract to expire at the end of this year.