CLEVELAND — “Ohio’s Attorney General has been asked to investigate ‘potential fraud’ involving a multi-billion dollar coal plant supplying power to Cleveland and scores of cities across Ohio and the Midwest.
The calls for a state probe come on the heels of an exclusive 5 On Your Side investigation in July 2012 that raised serious questions about the plant’s performance and impact to ratepayers.
In a letter to Ohio Attorney General Mike Dewine , Cleveland Councilman Brian J. Cummins, along with three other councilman from Gallion, Painesville and Martinsville, W.Va, are ‘urging’ an investigation into “any potential fraud or misrepresentations” that led municipalities to enter into long-term contracts to invest in the Prairie State Energy Campus in Marissa, Illiniois.
The letter argues that ‘the financial impact of the project is already placing small communities under severe financial distress.’”
The Prairie State Energy Power Plant, near Marissa, Illinois. Photo by Robert Srenco at bob@screncoaerialph
MARCELINE, MO — ”From its railroad heritage to its connection to entertainment icon Walt Disney — who spent his early childhood here — tiny Marceline practically oozes nostalgia.
But there is one aspect of the city’s past that some people here would just as soon forget — a big bet on the Prairie State Energy Campus, a controversial coal-fired power plant in southwestern Illinois.
Marceline and its electric utility, with only three employees, agreed in 2004 to buy almost all of its electricity from Prairie State. But the plant’s price ballooned, and along with it the cost that the city is obligated to pay. Now, Marceline is on track to lose almost $1.4 million this year, City Manager Luke Lewis said.
Even for a larger city, a loss of that size would be tough to digest. But for a rural community that’s bleeding population, it’s a full-blown financial crisis. The loss equals more than $600 for each of the city’s 2,200 residents, and more red ink is forecast for years to come.”
CLEVELAND, OH — “A government probe into a $5 billion electric generating plant supplying power to Cleveland and cities across the Midwest is triggering concerns over future rate hikes.
The U.S. Securities and Exchange Commission has subpoenaed records related to the development of the Prairie State Energy Campus in southwestern Illinois.
The plant came under scrutiny following an exclusive 5 On Your Side investigation in July 2012 that revealed the $5 billion facility had failed to generate electricity for four full months while municipalities across the Midwest were paying millions on bond payments.
Our investigation also found a mechanical problem was blamed for shutting down the just opened plant.”
COLUMBUS, OH — “Prairie State, located in southern Illinois, is partially owned by American Municipal Power of Columbus. The 1,600-megawatt, coal-fired plant has been hurt by cost overruns and mechanical problems. The result is electricity that is more expensive than the market price.
Although Missouri-based Peabody initiated the project, it had sold almost all its interest to a series of buyers by the time the plant began operating at full capacity last year. AMP owns 23 percent, which is more than any other owner.
AMP could not be reached for comment about the SEC investigation. The company helps city-owned utilities manage their electricity systems. It has about 130 members in six states; 68 member cities chose to invest in Prairie State, of which 60 are in Ohio. Among Ohio AMP members, Galion bought shares in the plant, while Columbus and Westerville did not.”
Illinois' Prairie State plant begins producing power at a time when economic factors are making power companies look to natural gas instead of coal for most new plants. (Tim Vizer/Belleville News-Democrat/MCT)
ST LOUIS, MO — “Peabody Energy Corp. said the Securities and Exchange Commission is probing the company’s role in the development of the $5 billion Prairie State power plant in southwestern Illinois.
St. Louis-based Peabody was served in January with a subpoena seeking information and documents related to the sprawling power plant and an adjacent mine about an hour southeast of St. Louis. The company disclosed it in its annual report filed with securities regulators on Tuesday.
…The Peabody subpoena represents the latest twist in the development of the 1,600-megawatt Prairie State plant — the largest new coal-fired power plant built in the United states in 30 years.”
NEW YORK, NY — “Peabody Energy Corp. (BTU), the largest U.S. coal producer, said the Securities and Exchange Commission served it with a subpoena seeking information and documents relating to the development of the Prairie State power station.
Peabody is cooperating with the investigation and believes “pending or threatened proceedings” will be resolved without material impact on the company’s financial condition, it said in its annual report filed with the SEC today.
The Prairie State Energy Campus became operational last year. Peabody, based in St. Louis, owns 5.06 percent of the 1,600-megawatt, coal-fueled power plant in southern Illinois, the balance being owned by public power agencies.”
HOMER CITY, PA — “A July 2010 contract that the developers signed with Bechtel Corp. fixed the costs of the Prairie State project at $4.93 billion. According to the study, original developer and still co-owner Peabody Energy Corp. in 2004 made an initial estimate that the plant would cost $1.8 billion.
While Sanzillo, who co-authored that report and is a former deputy comptroller for New York, has been analyzing the economics of power plants for years, the double whammy of low natural gas prices and the slowdown in the economy recently changed his conclusions about coal-fired generation. As reflected in his work on Homer City and Prairie State, it can no longer be assumed that any new spending on coal plants will pay off, given the competition from other energy sources, he said.
‘The whole theory of large capital plant investments is really thrown into a tailspin. You have more of a need for incremental investments like natural gas, wind and solar,’ Sanzillo said in an interview. ‘What that really is, is a switch from a generalized acceptance that the coal fleet is here to stay.’”
The Prairie State Energy Campus under construction in 2010.
NEW YORK, NY — “But at least for the near term, the owners will be paying extra for electricity, according to a report produced at the behest of anti-coal groups. When the construction cost rose from the $4 billion estimate to what the opponents put at $4.9 billion, the price of electricity from the project, which includes the capital cost, went above the cost of electricity bought on the open market in the Midwest, according to the report, produced by the Institute for Energy Economics and Financial Analysis, a nonprofit group in Belmont, Mass.
‘The Prairie State coal plant is turning out to be the financial and environmental nightmare that many of us feared when the plant was proposed,’ said Sandy Buchanan, executive director of Ohio Citizen Action. Mostly because of the low price of natural gas, a megawatt-hour of electricity in Ohio now wholesales for about $40, but power from the first unit of the plant, which went into service in June, costs about $60, the groups pointed out, and the customers face some additional charges because of a slight delay in getting the generators into service. The second half is due on line late this year.”
Report: Through 2025, those with a stake in coal-fired plant will pay above-market prices
COLUMBUS, OH — “Environmentalists have been critical of Prairie State because it uses coal at a time when the electric-power industry is moving toward more use of natural gas and renewable energy. The Energy Information Administration reports that Prairie State is the only new coal plant in the country to come online this year.
The plant was started by Peabody Energy, a coal company, which then sold nearly all of its interest to municipal-power companies in several Midwestern states. AMP, which provides power to city-owned utilities, owns the largest share.
In Ohio, the 12 communities with the largest investments in Prairie State will pay a premium of $135 million, the report says.”
Prairie State plant at 12:51 p.m., August 29, 2012. photo: Kathy Andria
ST LOUIS, MO — “The report cites cost overruns and delays that have plagued the Prairie State project and driven its ultimate price tag to $5 billion, double what was estimated when the plant was conceived by St. Louis-based Peabody Energy Corp. a decade ago.
The first of two 800-megawatt operating units at Prairie State went online in early June, about 6 months behind schedule. The second unit, which is supposed to be operational by August, is now estimated to be running by the end of the year.
The Missouri Joint Municipal Electric Utility Commission, a state-chartered entity that buys bulk power for dozens of municipal utilities, owns 12 percent of the Prairie State plant. Kirkwood, Columbia and Hannibal are a few of the 40-plus cities and towns across Missouri that have contracts to buy some of the plant’s output.”