2 sides stack up the costs of Tenaska plant

Apr 18 - Chicago Tribune

How much would a power plant that generates electricity from gasified coal cost consumers and businesses?

That's the question Illinois legislators are asking as they decide whether to commit electricity users to an agreement that would have them purchasing electricity from the plant -- to be built near Springfield by Omaha-based Tenaska Inc. -- for the next 30 years.

Opponents of the project, among them Chicago-based electricity generator Exelon Corp., say Tenaska's big idea keeps getting more expensive. As natural gas gets cheaper, Tenaska's electricity from synthetically produced natural gas costs more: About $100 million more per year since a cost report was last commissioned in 2010.

But Tenaska's supporters, who include Illinois Attorney General Lisa Madigan and consumer advocacy group Citizens Utility Board, point out that low interest rates will reduce the cost of the plant by $5.4 million a year from 2010 estimates even with natural gas prices at historic lows.

At the same time, Tenaska argues that its opponents have grossly exaggerated the additional costs, which it places at $24 million using U.S. Energy Information Administration power and natural gas price projections (before the savings from lower interests rates).

Tenaska argues that the STOP Coalition's figures are wildly inaccurate and based on less-than-transparent assumptions.

The state Senate has passed the bill and the House is expected to take up the proposal by the end of this session. If it passes, it would mean the project, which has been on the tables since 2008, might be built. If it fails, Tenaska has said the company will likely pull up stakes and quit trying.

Tenaska wouldn't be able to lock in interest rates for more than a year even if the bill in Springfield becomes law. But if natural gas prices rise, the 600-MW Tenaska plant's steady electricity rates could become more attractive.

The bill includes provisions for the purchase of renewable energy, energy efficiency and distributed electric generation to woo environmental groups. And the plant's developers say they will sequester greenhouse gas emissions underground and emit about on 40th the smog-producing and lung-damaging pollutants of conventional coal plants (which burn coal instead of gasifying it).

Yet Sierra Club has remained staunchly opposed to the plant, saying there is no guarantee Tenaska will sequester its emissions because the legislation allows the company to wiggle out of that for a $20 million per year fee.

And a massive business coalition against the project has formed over concerns that cost overruns could come out of their pockets. The legislation allows up to a 2 percent rate increase on residential electricity bills due to Tenaska, but a cap to protect business customers is less stringent and could include construction cost overruns.

Yet CUB and the state attorney general's office have lined up to support the project, saying that with cheap power from coal plants leaving the market, new sources of electricity are needed to prevent prices from spiking as more expensive forms of electricity take on the load.

An Illinois Commerce Commission study cited by the STOP Coalition, which opposes the project, said new coal plants would come online to replace old coal plants. Many of the projects cited by that study were coal plants that never materialized and Tenaska didn't include them in its assumptions.

"We need additional capacity," said Paul Gaynor, a spokesman for Madigan's office. "We're not just interested in having plants built that aren't needed."

The STOP Coalition, however, argues that a new natural gas plant would be a better choice than one that produces gas fabricated from coal.

"The interest rate gimmick (savings) could disappear just as quickly as they appeared," the STOP Coalition wrote in a statement. "What doesn't change is the still staggering price tag -- even if they could save $800 million in interest, the project costs Illinois consumers $11.2 billion."

Gov. Pat Quinn has not stated publicly whether he will sign the bill if it reaches his desk.

jwernau@tribune.com

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