Several Chicago area communities are paying well above the market price for electricity, and will continue to do so for several years, due to the construction of an enormous coal-fired power plant.
Five municipalities, Batavia, Geneva, Naperville, St. Charles and Winnetka, made decisions over six years ago to finance the Prairie State Energy Campus, a $5 billion coal plant and mine outside Marissa, Illinois, and locked themselves into a 28-year contract with a company formed by Peabody Energy, according to the Chicago Tribune.
Peabody Energy, the world’s largest coal company, has since sold 95 percent of the project to public power agencies throughout the Midwest. It is also being investigated by the Securities and Exchange Commission in order to find out more information related to the electricity agreements.
The costly plant is a major contributor to climate change — spewing an estimated 13 million tons of carbon pollution into the atmosphere per year, equivalent to adding 2 million cars to the nation’s highways.
Not only is the plant a major source of carbon pollution that threatens the health of nearby communities, but its costing residents more money. The Prairie State mine produces seven million tons of coal per year and the coal-fired power plant provides electricity to more than 200 other towns, or 2.5 million families, in Illinois, Indiana, Kentucky, Michigan, Missouri, Ohio, Virginia, and West Virginia. These towns belong to municipal power agencies that invested in Prairie State and many are now struggling with higher electricity bills as a result.
As Michael Hawthorne reported in the Chicago Tribune,
“According to monthly invoices obtained under the Freedom of Information Act, Naperville has been paying a monthly average of $75.04 a megawatt hour this year, for example. By contrast, Chicago pays about $56 a megawatt hour through a deal city officials negotiated after voters approved a proposal for bulk purchasing of electricity, or municipal aggregation. Many other communities have secured even cheaper rates.”
Naperville’s city manager, Doug Krieger, told the Tribune, “We still feel comfortable with our decision to take a long-term approach with Prairie State. We can weather what we see as a short-term hiccup.”
Marceline, Missouri, a city with only 2,200 residents, was on track to lose $1.4 million this year and was on the verge of bankruptcy. But just a few weeks ago, the city was able to exit its 4MW contract with Prairie State and enter into a new deal where the Missouri Public Energy Pool will purchase Marceline’s 4MW — saving the city an estimated $6 million over five years.
Batavia, Illinois signed up for more electricity than it ended up needing and will now have to sell the excess electricity from the Prairie State plant at a loss.
“In retrospect, we should have focused on a little more diversity in our portfolio,” Gary Holm, Batavia’s director of public works explained.
Peabody planned and developed the coal campus beginning in 2001. Construction began on the power plant in 2007 with a budget of $2.9 billion, and it was scheduled to open in 2011. The coal plant finally started to serve its customers in June 2012. The project costs ballooned to over $5 billion, and the cost electricity customers were obligated to pay ultimately increased. Record low natural gas prices have also played a role in lowering electricity costs for other communities buying on the wholesale market.
Furthermore, cost-competitive renewable energy, in conjunction with energy efficiency practices, have also helped customers in other communities in the Midwest save money. Consumers Energy in Michigan proposed last month that it will eliminate the surcharge on customers’ bills that was designed to cover the cost of Michigan’s renewable electricity standard citing improved economics. And in July, Commonwealth Edison Company, or ComEd, announced its energy efficiency programs saved customers $400 million on electric bills over the past five years.
Matt Kasper is the Special Assistant for Energy Policy at the Center for American Progress.