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Dynegy looking for two separate subsidies for its coal-fired plants

Monday, Oct 16, 2017

* Steve Daniels

One year after Exelon convinced state lawmakers and Gov. Bruce Rauner to bail out nuclear power plants, the second-largest power generator in Illinois has decided it’s its turn. Houston-based Dynegy will push for the General Assembly to consider legislation in next month’s veto session that would likely hike electric bills in downstate Illinois to preserve at least some of the company’s financially ailing fleet of coal-fired power plants. Dynegy’s plants are by far the largest source of electricity downstate.

The move follows recent news that Dynegy and the Rauner administration are working to soften state environmental standards on pollutants emitted by coal burners. The proposal, which was submitted Oct. 2 to the Illinois Pollution Control Board for approval, angered environmentalists who negotiated the standards with the coal industry more than a decade ago. […]

Dynegy’s Illinois proposal, which will surface by month’s end in the form of legislative language, would have the state take over the pricing of “capacity”—ratepayer payments to generators for the promise to deliver during peak demand periods. Currently, that’s handled by Midcontinent Independent System Operator, or MISO, the power-grid operator for southern Illinois and much of the Midwest. As energy prices have plummeted, these capacity payments—embedded in the overall electricity prices consumers and businesses pay regardless of whether they buy from utilities or alternative suppliers—have become a far more important part of plant operators’ revenue streams.

But MISO’s most recent capacity auction resulted in a paltry $1.50 per megawatt-day for the southern half of the state. By contrast, plants in the northern half, operating under a different capacity system, are being paid $153.61 per megawatt-day right now. For the average household, the difference between the two is about $115 a year. […]

Ellis stops short of saying Dynegy will close its entire downstate Illinois fleet, or even specific plants, if it doesn’t get relief. But there’s little financial risk to the company in doing so. It essentially paid nothing to acquire the downstate Illinois plants of St. Louis-based Ameren in 2013.

Asking Springfield to endorse a rate increase for all of downstate Illinois heading into a campaign year will be a challenge. Dynegy’s reticence to state the specific consequences of inaction likely will make delay until after November 2018 attractive for lawmakers and Rauner.

* Another reason to wait

State subsidies to keep open two nuclear power plants took effect in June, hiking electric bills for all homes and businesses. But the ripple effects from last year’s Future Energy Jobs Act may well lead to future increases on top of the new surcharges.

The organization that sets the rules for the wholesale power markets from northern Illinois east to Washington, D.C. , is contemplating changes that would compensate the owners of unsubsidized power plants for the potential harm the subsidies pose to the competitive market. […]

The initiative is in direct response to Illinois’ nuclear subsidies. PJM is charged first with ensuring there’s enough power to keep the lights on during peak demand and secondly with keeping the power markets competitive. […]

Effectively, Chicago-area ratepayers could be paying twice to keep the same plants open. That’s because the subsidies for Exelon are nearly certain to remain at the state-imposed annual limit of $235 million for the decade they’ll be in effect despite provisions in the law calling for the subsidies to decline when market revenues rise. At Exelon’s insistence, the Future Energy Jobs Act was written in such a way to keep the subsidies flowing in most foreseeable market conditions.

“With most of the proposals on the table, Illinois likely will get penalized for the state approving the subsidies to produce cleaner air,” says Greg Poulos, executive director of Columbus, Ohio-based Consumer Advocates of PJM States. […]

Demanding action from PJM are Exelon competitors NRG Energy, based in Princeton, N.J., and Houston-based Dynegy. NRG operates coal- and gas-fired plants serving the Chicago market, and Dynegy is the second-largest generator in Illinois, running a mainly coal-fired fleet downstate.

* And

More than 60 percent of Americans think climate change is a problem that the government should address, including 80 percent of Democrats and 43 percent of Republicans, according to a new survey from the University of Chicago’s Energy Policy Institute and The Associated Press-NORC Center for Public Affairs Research.

Those numbers were even higher when limited to those who say they believe in climate change. Seven in 10 Republicans and nearly all Democrats who believe climate change is happening agree that the government needs to take action, the poll found.

“Public opinion around many energy issues tends to be fluid, with people often defaulting to partisan starting points,” said Trevor Tompson, director of The AP-NORC Center, in a statement. “Majorities of both Democrats and Republicans agree that climate change is happening, and there are signs that consensus could happen on other issues, too.”

…Adding… Press release…

The Illinois Clean Jobs Coalition issued the following statement today in the wake of a report published by Crain’s Chicago Business detailing a possible legislative bailout for Dynegy, Inc:

“On Friday, Crain’s Chicago Business broke a story suggesting that backroom discussions could lead to possible bailout legislation for Dynegy in the upcoming veto session, forcing downstate Illinois residential customers and businesses to subsidize this giant out-of-state corporation. This latest backroom deal comes on the heels of news that Governor Rauner’s office and Dynegy worked behind-the-scenes for several months on a new rule that would undermine pollution controls just to pad Dynegy’s profits at the expense of the public. This corporate bailout would represent an unfair rate hike on customers and small businesses in Central and Southern Illinois and would contain no benefits whatsoever to any party besides Dynegy. With new power coming on line under the Future Energy Jobs Act (FEJA), the majority of it expected to be located in Central and Southern Illinois, we urge lawmakers to reject Dynegy’s bailout that would impose new costs on downstate consumers and small businesses and pose new risks to the public’s health in order to shore-up the profits of an out-of-state energy giant. At a time when President Trump and his coal cronies are already moving to bail out companies like Texas-based Dynegy, Illinois needs to do exactly the opposite and prepare for a clean energy future.”

- Posted by Rich Miller   14 Comments      


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