Chainkeen Exchange-As Illinois Strains to Pass a Major Clean Energy Law, a Big Coal Plant Stands in the Way

This article is Chainkeen Exchangethe result of a partnership between Inside Climate News and the Chicago Sun-Times.

After more than a decade of controversy, a move to force the closing of a Southern Illinois coal plant owned by municipal utilities across eight states is one of the final sticking points in the Illinois Legislature over a major energy bill.

If the Prairie State plant is forced to shut down by 2035, as legislators have proposed, it would begin the final chapter of a saga that led to the construction of one of the country’s last new coal plants, one that became a major source of air pollution.

“Prairie State, by itself, makes up a significant portion of the power-sector emissions in our state,” said J.C. Kibbey, a clean energy advocate for the Natural Resources Defense Council in Illinois. 

Beside being dirty, the plant left the operators of some locally owned electric utilities in the area furious over unfulfilled promises of competitive prices. In exchange for the guarantee of reliable power with predictable pricing, the utilities took ownership in the massive plant, signing up for decades of debt.

If the plant is forced to close, they, as owners, will have to continue repaying the debt even as they have to find and pay for replacement sources of electricity that could lead to much higher electricity bills, a scenario that is fueling reluctance by some to pass the bill.

Over the past week, the plant emerged as an obstacle to passage of key energy legislation in Springfield—a bill that would include an expansion of subsidies for nuclear plants, more funding for renewable energy projects and a ramping-up of climate targets that would include a phaseout of coal power.

Going beyond a May 31 deadline to finish their work, lawmakers are trying to find a way to respond to concerns about the financial ramifications of closing Prairie State.

Environmental advocates say the state can’t afford to let the plant continue to operate if Illinois is to meet its climate goals. Lawmakers backed by environmental groups also are considering a state bailout of more than $600 million of three Exelon nuclear plants.

Tensions are high because many participants see past clean energy legislation as having fallen short of promises.

A Costly Polluter 

Prairie State has been the single biggest source of carbon dioxide emissions in Illinois, releasing 12.7 million metric tons of carbon dioxide equivalent in 2019, the most recent year for which federal data are available. The plant ranks ninth in the country for carbon dioxide releases.

No other power plant in the state comes close to Prairie State’s emissions. And most of the other coal-fired plants already are scheduled to close, including all five plants owned by Vistra Corp, which has said it will shut them down by 2027.

“It’s not particularly a surprise that this plant wasn’t going to live out a typical lifespan,” said Emily Grubert, an energy systems researcher at Georgia Tech.

The plant’s combination of high emissions and high costs means it’s difficult to justify keeping it open, Grubert said.

It cost about $5 billion for construction, including about $1 billion in cost overruns.

Prairie State, which began operating in 2012, was one of the last large, coal-fired power plants built in the United States before market forces shifted against coal because other sources of electricity — like natural gas, wind and solar energy — were becoming less expensive, and because of the rising likelihood that the state or federal government would pass stricter emissions limits.

Among this last generation of coal-fired electric plants, Prairie State is in a category of its own because it initially was developed by a coal company, Peabody Energy. The idea was to buy coal from an adjacent mine, with Peabody selling the electricity through long-term contracts with municipalities and rural electric cooperatives that might have been less well equipped to assess the risks than large energy companies would be.

The plant’s customers and co-owners include about 200 communities in a footprint that stretches from Missouri to Virginia.

The Illinois Municipal Utilities Association, a trade group for utilities that signed up with Prairie State, says the state still needs coal “until technology can support fully renewable energy.”

Prairie State Generating Co. executives say they’re committed to providing “reliable and environmentally responsible electric power.”

“Prairie State and its owners have been engaged with lawmakers for years about how to ensure the best path forward,” company spokeswoman Alyssa Harre wrote in a statement.

Communities on the Hook

Environmental advocates warned early on that Prairie State was almost certain to be an environmental and financial disaster.

The plant’s customers have paid prices nearly double the equivalent prices they’d have paid in regional markets, according to an analysis last year by the Institute for Energy Economics and Financial Analysis, which does research to advocate for a transition to clean energy. Prairie State customers are paying down billions of dollars in principal and interest on the bonds used to buy their ownership shares.

“The power from the plant is way too expensive and is causing financial hardship for the communities,” said Sandy Buchanan, executive director of the institute.

Buchanan previously was executive director of Ohio Citizen Action, a role in which she warned local government officials in the 2000s of the risks of investing in the plant.

In 2007, Naperville, Illinois, signed a deal with Prairie State for electricity that ends in 2035, which is also the schedule for paying off the bonds. So closing the plant by that date would have less of an impact than it would on, say, Batavia, Illinois, which took one of the biggest stakes in the coal plant.

Batavia is on the hook until 2042 to keep paying off the debt it incurred through bond sales to buy in to Prairie State. Batavia officials are unhappy with the deal struck years ago. And they say any legislative mandate to close the plant should also include provisions to help the governments that would be affected. 

Even if the plant is closed, local utilities are on the hook for millions of dollars a year in bond debt, said Laura Newman, Batavia’s city administrator. 

“We tried to get out,” Newman said, referring to past legal attempts to be freed from the agreement. “We left no stone unturned to find out if we can undo this.”

For the city of Rochelle, about 80 miles west of Chicago, a benefit of having a contract with Prairie State has been that it kept electricity rates predictable, according to Jeff Fiegenschuh, the city manager there.

If the state forces the shutdown of Prairie State, Rochelle wants state compensation for its costs because it can’t spread its expenses over a large customer base the way larger utilities can, Fiegenschuh said.

“We are in favor of more renewables, no question about it,” he said of transitioning to renewable energy sources. “But we participated in this project for electricity reliability and long-term stability.”