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IEEFA report warns of higher electrical rates

Posted on Wednesday, September 12, 2012 at 8:53 am

An August 29 report by the not-for-profit Institute for Energy Economics and Financial Analysis (IEEFA) proposed Vandalia’s electrical ratepayers could expect a substantial increase in energy costs for decades.
Missouri officials don’t agree, citing the report is slanted and error-ridden.
The IEEFA reported ratepayers can expect an energy cost increase from anywhere between 40 to 100 percent, resulting from alleged less-than-honest business practices on behalf of Peabody Energy and increased development costs of the plant.
The report noted the possible electrical rate increase results from several multi-million dollar jumps in development costs of the Prairie State Energy Campus since the start of its construction.
In 2007, construction of the campus was estimated to cost $1.8 billion, jumping to $4.095 billion in 2007, and then reaching an estimated $4.933 by 2010, according to the IEEFA report.
As a result of increased construction costs, the report noted the “promised” rate for electrical municipalities and co–ops, originally stated at $41 per Megawatt hour (MWh) in 2007, remains substantially higher now with long-term increases on the horizon.
Substantially more as in an estimated $59.24 per Megawatt hour (MWh) in Missouri during 2012, according to the IEEFA, or what the report noted as nearly double what the state could be paying in the Missouri energy market — or $30 in 2012.
The Prairie State Energy Campus — a two-unit, 1,600 Megawatt (MW) coal-fired power plant in southern Illinois nearing commercial operation — is among the largest power plants to be built in the last five years amid recent federal air-quality regulations.
Developed by Peabody Energy, 95 percent of the plant has been sold via bonds to 217 municipalities, and 17 electrical co-ops from Missouri to West Virginia, of which have started bond payments to the plant in February.
The plant services about 2.5 million electrical ratepayers, annually mining some 7-million tons of coal from an adjacent coal mine that is said to hold 30-years worth of coal.
The plant was first conceived in 2001.
In 2007, the Missouri Joint Municipal Electric Utility Commission, an aggregation of Missouri municipal power demands, bought into the plant.
The Missouri Public Energy Pool (MoPEP) is a project of the commission serving 35 cities, including Vandalia.
Floyd Gilzow, director of member relations and public affairs for the commission, said the commission’s interest in Prairie-State power had lain in lower energy rates but more so in securing an avenue to control future cost expansion.
About 12 percent of Prairie State Energy Campus is bonded to the commission, of which represents less than 10 percent of its entire energy portfolio.
Gilzow said the $30 per MWh stated in the IEEFA report is lower than typical in the last decade, as the rate reflects the sale of energy alone, ignores other costs of the wholesale energy market, and is cited during a time of economic recession when power demands are lower than capacity.
“You could find a time when that was the price,” he said.
“It’s really hard to follow (IEEFA’s) figures,” Gilzow said. “This (report) was the strangest financial analysis that I have ever read.”

Read the rest of this story in the September 12 issue of The Vandalia Leader.