Batavia aldermen discuss Prairie State Energy Campus project

Government_probe_into_power_plant_trigge_382920001_20130307232651_640_480Officials debate whether to ask for Attorney General investigation

BATAVIA – “Aldermen on Tuesday discussed whether the city should ask Attorney General Lisa Madigan to investigate Prairie State Energy Campus.

‘We should talk about whether we should do it or not,’ Batavia 5th Ward Alderman Lucy Thelin Atac said during Tuesday’s Joint Committee of the Whole meeting.

Earlier this year, state Rep. Tim Schmitz, R-Batavia, asked Madigan to investigate Prairie State Energy Campus. Schmitz had said the letter reflected his concern regarding cost overruns on the $5 billion project and the impact on participating communities that might have to pass the cost along to ratepayers.

In 2005, the Northern Illinois Municipal Power Agency, of which Batavia is a member, agreed to a long-term power contract to buy electricity from Prairie State. Geneva and Rochelle are other members….

‘We have no idea if there is fraud,’ Callahan said. The discussion ended without a recommendation from aldermen.

The discussion follows on the heels of Batavia businessman Joe Marconi recently filing a class-action lawsuit in Kane County Circuit Court over the city’s investment in the downstate Prairie State Energy Campus….”

By Eric Schelkopf, Kane County Chronicle

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Paducah Power System Board May Have “Unintentionally” Violated Open Meetings Law

“The Paducah Power Board of Directors may have violated the Kentucky Open Meetings Law as the energy provider seeks ways to increase revenue. The publicly owned company provides power to more than 22,000 customers and is subject to  open meetings law requirements.

However, on Tuesday four of the five board members participated in a conference call with a portfolio management company with whom the Kentucky Municipal Power Agency is considering a contract…

PPS gets the bulk of its power from Prairie State Energy Campus in Illinois, of which it is a part owner. However, the plant is failing to produce enough energy for all customers, requiring PPS to buy energy from the open market. That energy comes at a premium and is being passed on to customers in the form of a power cost adjustment (PCA).  Maximizing the output of the peaking plant may ease some of the high added costs to customers….

Underwood said if there was a violation, it was unintentional.

Here is what the Open Meetings Law states, in part:

  • The Open Meetings Act applies to meetings of a quorum of the members of a public agency at which public business is discussed or action is taken; a discussion of public business by a quorum of the agency’s members triggers the requirements of the Act even if no action is taken.

Underwood says the minutes for the next PPS board meeting will reflect that a conference call did occur.”

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Time to push back on power bills

logoA decade ago, Paducah was told it could look forward to many years of affordable power.

A Paducah Sun story on Jan. 26, 2005, reported the good news: ‘…becoming a partner in the construction of a new power plant in southern Illinois will mean lower costs over the next 25 to 30 years, according to PPS Chairman Ray McLennan.’

The story went on to quote McLennan, who still chairs the Paducah Power System Board, saying that investing in the new plant ‘will provide an immediate savings of at least 10 percent annually and even more in future years.’

A man with that kind of vision badly needs new glasses. He also needs to be replaced, along with his fellow board members.

Paducah’s 30-year investment in the under-performing Prairie State Energy Campus has cost Paducah dearly and stuck the town with what appear to be the highest electric rates in Kentucky.

And the rates here aren’t just a little higher, they are miles higher.

We published a chart last month showing that a monthly residential bill for 1,000 kilowatt hours from Paducah Power cost residents $147.78.

That’s 47 percent higher than what customers of Louisville Gas & Electric would pay ($100.16); 55 percent higher than Jackson Purchase ($95.58); 57 percent higher than Kentucky Utilities ($94.29); and 89 percent higher than Henderson ($78.12).

Imagine for a moment if Paducah’s City Commission made a decision that jacked up the city’s property tax rate that far above other towns. Think those commissioners would keep their seats?

The impact of the PPS board’s misplaced confidence in Prairie State has been jarring, not just in terms of the inflated bills consumers have to pay but also in terms of economic growth and the financial health of existing businesses.

One striking example:

An executive with Banks Grocery Co., which has stores on Lone Oak Road and Jackson Street spent some time putting together a comparison of what his Paducah Power bills have been for the past eight months vs. what neighboring Jackson Purchase Energy would have charged.

The Paducah Power bills total $186,134. Using Jackson Purchase rates, confirmed by the utility, the same bills would have totaled $82,051.

That’s a budget-busting difference of $104,083 so far this year.

What company with any significant need for power wants to locate or expand in a city with the state’s highest electric rates? Yes, prospective firms are offered a lower rate for five years, but wouldn’t they ask what happens then?

I’ve spoken with several people knowledgeable about the decision 10 years ago to leave TVA and invest in Prairie State, including two who served on the PPS board at the time. They say that given energy market conditions and other facts they had at that time, plus the glowing assurances from Peabody Energy about the Prairie State plant, it was a rational move.

Not everyone agrees, but even if it seemed to make sense then, it doesn’t now.

In addition to the board’s accountability for today’s expensive bills, there’s a second and more pragmatic reason its members need to go that relates to the Kentucky Attorney General’s Office.

Given the unrealized avowals that the Prairie State investment would lead to reliable power at lower rates, it’s reasonable to wonder whether Paducah was misinformed and misled by Peabody Energy, which built and marketed the plant.

The best way to find out would be to ask the AG’s Office to get involved. It could issue what’s called a civil investigative demand for relevant documents. Depending on what turns up, a fraud suit or other civil litigation could follow.

Attorney General Jack Conway was in town last week, and I asked if he was inclined to step into the matter. While he wouldn’t talk about a possible investigation, he made it clear that he’s up to speed on the issues, including possible misrepresentation.

When I handed him a copy of our recent editorial (‘BILKED? Legitimate question exists on whether PPS was misled’) he said he had already read it.

Conway seems plenty interested, but he can’t act unless he is asked by the PPS board. That should have happened months ago, but no request has been made, which is another reason to clean house. If the members won’t resign, the mayor has authority to remove them and should use it.

The City Commission plans to hear from both defenders and critics of Paducah Power at its Sept. 23 meeting. It figures to be a lively session that should be catalyst for action.

This town has acquiesced long enough. It’s time to explore any potential avenue of relief.”

By Steve Wilson, Paducah Sun

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Lawyer says power in numbers will help the cause

“Lawyers for the people who filed a lawsuit over the cost of electricity in Batavia urged a crowd of about 90 people Thursday to join in the class action to strengthen their case.

‘We believe there is power in numbers,’ said Michael Childress, a partner in the Childress Duffy law firm of Aurora.

 

Attendees picked up all the 225 signup packets his firm had brought to the meeting at the Batavia Public Library. Some said they would hand them out to neighbors. At least 25 people turned their applications in that night.

Nine Batavia utility customers filed the suit Tuesday against consultants who had advised Batavia when city officials were considering whether to have Northern Illinois Municipal Power Agency, to which Batavia belongs, buy a stake in the Prairie State Energy Campus. PSEC, in Washington County, is a coal mine and electricity plant….

He said there is no cost to join the class, and no liability or bills to class members if it loses.

The first object of the suit, he said, is to get information about the deal that has been kept secret due to confidentiality agreements. That, he said, may reveal what Batavia officials were told, and whether things were kept from those officials….”

By Susan Sarkauskas, Daily Herald

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BILKED? Legitimate question exists on whether PPS was misled

logoPADUCAH – “We’ll grant that some of those behind a class action lawsuit related to power rates from the Prairie State Energy Campus may have ulterior motives.

The lawsuit was filed on behalf of ratepayers in the city of Batavia, Illinois, which like Paducah invested in the power generating project and contracted to buy power from it. The suit accuses consultants on the project of misleading Batavia officials about costs and likely power rates from the Prairie State project.

Paducah Power System General Manager Dave Clark takes umbrage at the lawsuit’s claims, saying the law firm leading the suit is affiliated with the Institute for Energy Economics and Financial Analysis, an anti-coal group. He says it is the latest effort by environmental groups who opposed Prairie State every step of the way to shutter the plant. Clark also says that Paducah used different consultants than the ones named as defendants in the lawsuit.

While we’re generally not in sympathy with efforts by environmental groups to shut down the coal industry, we do think there is a legitimate question as to whether cities that invested in Prairie State were misled and have been harmed as a result. A trip through the archives of our news stories on Prairie State over the years certainly gives that impression as far as Paducah is concerned.

In a March 21, 2010 Paducah Sun article, Paducah Power System board chairman Ray McLennan said power rates in Paducah would decline slightly when Prairie State became fully operational. PPS at the time was buying power on the open market, having just ended its supply contract with the Tennessee Valley Authority three months earlier.

But by January 8, 2012, that narrative began to change. Clark said in a Paducah Sun article on that date that, ‘Starting out of the gates, our rates won’t be cheaper. The good part of it is, the rates will be very stable going forward.’ He continued, ‘We’re looking at the long haul. We’re not expecting Prairie State power to go up but maybe a percent a year.’

That story changed markedly over the next 18 months. Part of the reason was that PPS increased its power purchase commitment to more than 100 percent of its needs from Prairie State, believing it could sell the excess power on the open market for a profit. That proved incorrect.

In December of 2012 PPS announced an ‘interim’ rate hike of 8.2 percent. Then in March of 2013 PPS announced two further rate hikes – one in April of 2013 and another for April of 2014 – totaling 12.5 percent. The increases were due to unexpected costs related to the financing and operation of Prairie State.

Then came the ruinous 3.59 cents per kilowatt hour Power Cost Adjustment in early 2014 – a surcharge of more than 20 percent on the base city electric rate. That charge stemmed largely from the PPS’ bizarre contract arrangement requiring it to pay for its allotment of Prairie State power whether that power is generated or not. In this case, due to an accident at the plant, a significant portion of the power was not generated. PPS had to pay for it anyway, plus pay for replacement power on the open market. That cost was passed on to ratepayers by way of the PCA.

While PPS’ purchase of the excess power capacity muddles the picture, it still strikes us from a review of this history that PPS officials were misled with regard to the financial risks and eventual cost of power from Prairie State. They obviously genuinely believed they would pay lower-than-market costs to buy power from Prairie State and even after the project ran into problems, they were publicly predicting stable rates, based we presume on what consultants were telling them.

What they got instead were some of the highest, if not the highest, power rates in the state, to the great detriment and harm of their ratepayers. PPS officials were advised all along the way by consultants who apparently persuaded them this was a good deal and a reasonable risk. That turned out to be far from the truth. While we don’t believe the answer to every problem is to sue somebody, we have to ask ourselves whether there’s not professional liability here against which ratepayers have some recourse.

It looks to us like Paducah Power was sold a bad bill of goods.

We think it would be appropriate for the Kentucky Attorney General’s office to take a look to see if there’s not legal relief to be had for local power consumers.”

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Energy lawsuit seeks 400 ratepayers to create a class action

Duffy said the 137-page lawsuit is aimed at consultants that Batavia officials relied on to tell them what power would cost.

‘Promises that were not kept. Promises that were not delivered,’ Duffy said. ‘Not only in terms of development but also in the way things were constructed and the way power was delivered.’

‘We are not seeking money damages [from Batavia] but what we are seeking is the truth,’ Duffy said. ‘We intend to ask for agreements, contracts, correspondence, emails. … We understand that there are a lot of confidential agreements between and among a lot of entities as this was developed and came to pass. We’d like to see what all that’s about.’

With 400 or so people signing on, a local judge would be inclined to certify it as a class, Childress said. Signing on to a class action does not put anyone at risk and the attorneys only get paid if there is a judgment in their favor.

By BRENDA SCHORY, Kane County Chronicle

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Meeting on electric rate lawsuit draws more than 80 people in Batavia

photo links to video

photo links to video

“Attorneys seeking monetary damages from consultants they allege provided misinformation about a downstate coal plant that ultimately has cost Batavia consumers higher electric rates encouraged residents and business owners to join their class-action suit at a public meeting Thursday night.

The more people who sign up, the attorneys said, the better chance the suit has in court.

‘If you participate in the lawsuit (and it is successful) what you would receive at the end of the day is a check,’ said attorney Michael Childress, of Chicago-based law firm Childress Duffy, which is representing nine Batavia residents and business owners listed as plaintiffs in the suit filed Tuesday. ‘The more voices and the more avenues pursued the better.’

The more than 80 people in attendance at the Batavia Public Library seemed to get the message, some signing up right there and others leaving with extra envelopes containing information about the suit to give to their friends and neighbors. Within minutes of the meeting’s close, all 225 envelopes were taken.

‘Today, I decided that I was going to join this class,’ Betsy Zinser, a Batavia resident who has spent years researching Prairie State, said during the meeting. ‘Whether the city asks for it or not, they need our support and this is my way to help do something about a problem that they cannot seem to be able to solve on their own.’…”

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Letter: We deserve to know the truth

Screen Shot 2014-02-11 at 6.20.25 PMBy Deborah McGrath, Kane County Chronicle – “As a longtime resident of Batavia and a member of Sierra Club, I am more than concerned about the city’s contract involving Peabody Energy that binds the rate-payers to buy electrical power with steadily rising costs for the next 30 years from a coal plant that is far from clean.

It may well be true that when negotiations were being made between the city, Prairie State and Peabody Energy that it looked like a good deal for Batavia residents, but what was promised – low cost, clean electricity – never materialized. Now we are stuck in this very expensive contract and are left wondering how this could have happened.

The rate-payers of Batavia need to know if Peabody knowingly misrepresented the facts. I urge the Batavia City Council to request an investigation from the attorney general regarding this contract.

We all deserve to know the truth and to find out if there was any wrongdoing on anyone’s part, and the only way to find out is to launch a thorough investigation.”

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Peabody refutes cost claims in Prairie State lawsuit

Government_probe_into_power_plant_trigge_382920001_20130307232651_640_480Louisville, Kentucky—”Peabody Energy on Wednesday refuted claims by Illinois plaintiffs in a lawsuit who accuse promoters of the 1,600-MW Prairie State Energy Campus of misrepresenting the costs and benefits of the controversial baseload coal-fired power plant in southwestern Illinois…

The suit alleges negligent misrepresntation by five consultants to Batavia and names 19 other entities as respondents in discovery, including Peabody, which originated the nearly $5 billion project more than a decade ago…. Over the years, the project was delayed and costs nearly tripled. The plant’s two 800-MW units went into commercial operation in 2012.

Prairie State extremely competitive: Peabody

According to the suit, Batavia was not informed that a ‘capped’ price for electricity from Prairie State had been removed from the city’s contract. As a result, Batavia’s power costs climbed to more than $100/MWh and reached a delivered high of $179.82/MWh in November 2013, far exceeding the $46/MWh it had been promised, the suit said….

Vic Svec, Peabody senior vice president of global investor and corporate relations, said the suit’s allegations that Prairie State is not good for consumers are baseless. ‘Sound long-term forecasts show electricity costs from Prairie State will be extremely competitive with other fuels over the long term,’ he said.…”

— Bob Matyi, Platts

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More on Lawsuit

MISTAKE City should seek an out on PPS power plant deal

Mapa-de-la-Ciudad-de-Paducah-Kentucky-Estados-Unidos-1919-10662PADUCAH – “The predicament Paducah Power System now finds itself in with its investment in the Prairie State Energy Campus is a lesson in why municipally owned utilities should not try to be venture capitalists.

Private companies have shareholders, and if they make a bad investment it is the shareholders who pay the price. Further, shareholders have options. They can fire management and directors for bad decisions. And they can always dump the stock.

But when a municipal utility makes a bad investment, it’s the ratepayers who are stuck. In the case of Paducah Power’s investment in Prairie State, they are stuck for 30 years. The only way out of the investment for them is to move. And in a city that already is struggling with population loss, that’s a serious concern.

As a story in Sunday’s Paducah Sun notes, the power rates now charged by Paducah Power are among the highest if not the highest in the state. They are the highest regionally by a lot.
The all-in rate for 1,000 kilowatt hours in Paducah is $147.78. In most of McCracken County, where service is provided by Jackson Purchase Energy Corp., the rate for the same amount of power is $95.58, more than one-third less. If you happen to live in the small sliver of the county served by Kentucky Utilities it is lower still at $94.29. The rate for 1,000 kilowatt hours is (rounded) $28 cheaper in Mayfield, $35 cheaper in Owensboro and Murray, $66 cheaper in Metropolis and $70 cheaper in Henderson…

But the devil was in the details. Several months ago it was learned that Paducah Power bought more power capacity than it needed at Prairie State, ostensibly to provide for future growth. The plan apparently was to sell surplus power on the open market, theoretically for a profit, thus further stabilizing rates. That gambit was turned on its ear when the shale gas boom and competition from gas-fired power plants caused wholesale power rates to fall below levels coal-fired plants could profitably match on the open market.

The kicker, though, and this is what is currently hammering Paducah ratepayers, is that Paducah Power contracted to buy a set amount of power from Prairie State whether that power is generated or not. Put another way, if Prairie State operates at below capacity or if as recently happened, an accident forces one of its two generators to shut down, Paducah Power must pay for power that wasn’t even generated, plus go out on the open market to buy replacement power.

Editorial, Paducah Sun

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