Illinois power workers caught in legislative dilemma

By CARL GREEN

Illinois Correspondent

Complicated legislative negotiations in Springfield could help determine whether workers at downstate Illinois power plants will keep their jobs or be sent home because of plant closures.

The talks could also affect whether nuclear power has a future in Illinois, how soon Granite City Steel comes back on line, and just how much everyone has to pay for their electrical service.

At press time, it was not yet clear exactly what legislation would result from the talks, but negotiators knew one thing – the power industry is moving ahead with or without action in the Illinois Legislature, distracted as it is with unending budget negotiations.

Faced with conflicting demands from power companies, environmentalists and consumer groups, legislative leaders had asked all of the parties to sit down together and try to come up with a plan they could agree on.

For a while, it looked like they might. But as the proposed bill grew more complex, the environmental watchdogs and consumer protection people began to have qualms about what was being proposed – drastic rate increases, for one thing, and reliance on coal burning into the indefinite future for another.

Recently, bill backers were saying that “subsidies” for downstate coal burning were being removed in the rush to save upstate nuclear plants but details of the change were not clear.

MISO WOE

Downstate coal-burning plants, while a target of environmentalists, have had another major problem in recent years that has made them an endangered species – an unbalanced and unfair regulatory system that makes it almost impossible for them to turn a profit.

Downstate Illinois power prices are subject to regulation by Midcontinent Independent System Operator (MISO), which also covers several other surrounding states and holds a power auction every year to set prices.

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The downstate plants, which are subject to strict Illinois regulations, compete in this auction with producers from other states with different rules that ensure lower production costs.

The result is prices that do not cover the cost of production for the Illinois plants, which are owned by Dynegy out of Houston, TX.

As a result of this, Dynegy is in the process of reducing plant capacity in central and southern Illinois. Dynegy shuttered its aging Wood River plant in late May, putting about 90 employees out of work and reducing southern Illinois generating capacity by about 30 percent.

Now Dynegy is shutting down two of the three units at its Baldwin plant nearby in Randolph County, and one of two units at Newton, in Jasper County in east-central Illinois. Both closings are for the same stated reason – low prices for power coming from the MISO auction.

ONE SOLUTION

The northern part of Illinois operates under a different power regulatory system, known as PJM Interconnection, in which prices tend to run higher. Switching downstate to PJM and leaving MISO could keep the downstate plants in business and keep thousands of jobs alive by creating a level playing field. It could also increase power bills.

A proposal has been before the Legislature for months to make that switch, called the Electric Generation Reliability Act, sponsored by state Sen. James Clayborne, (D-Belleville), who is the Senate Majority Leader.

Michael Carrigan, president of the Illinois AFL-CIO, wrote an article favoring this plan in June. He wrote:

“Illinois has an energy problem that if left unresolved will threaten electric reliability and lead to the loss of thousands of high-quality jobs and hundreds of million of dollars in taxes and economic benefits. The problem is simple: Illinois is split between two wholesale electricity markets, PJM to the north and MISO to the South. While PJM has a vibrant, competitive market, the MISO market is dominated by out-of-state traditional utilities that rely on their home state regulatory process to recover their costs and provide a return on their investments. That puts the southern Illinois market at a tremendous competitive disadvantage.”

IBEW leaders from Locals 702 and 51, which represent many of the plant workers, also called for passage of the legislation.

Another strong voice is Stanford Levin, emeritus economics professor at Southern Illinois University Edwardsville and former member of the Illinois Commerce Commission, who recently wrote, “MISO’s rules permit states to take control over how they procure capacity, and virtually all of the MISO states do so to ensure the reliability of power supplies. Illinois does not. Illinois should assert the authority that is has under MISO’s rules to avoid the risk of base load generating plants closing in Illinois. By exercising its authority, Illinois can avoid reductions in jobs, economic output and tax revenue and can also improve the state’s ability to attract and retrain businesses in central and southern Illinois.”

The plan has powerful opponents, who describe it as a “subsidy” for the coal-burning plants and claim it would increase costs for residents. Their option is to just let downstate Illinois drop out of the power generating business and rely on neighboring states.

BIG DISTRACTION

As the current veto session approached, Clayborne’s bill was caught up in negotiations for a very different but related matter – an attempt by Exelon, owner of nuclear power plants in Clinton and the Quad-Cities, to keep those plants profitable and operating. The far-reaching legislation has sections that affect rates, billing and energy efficiency programs.

So when the push began for a comprehensive energy bill, the two utility companies were pulled together. Complaints about parts of either proposal – nuclear waste disposal or pollution from burning coal – became problems for the entire package. Opponents called it a “Christmas tree” bill that would cost consumers $24 billion over 23 years.

Noted energy writer Kari Lyderson reported in Midwestern Energy News that members of the Clean Jobs Coalition, who had worked for months to help negotiate the bill, began dropping their support soon after it was introduced on Nov. 15.

One addition is called the Fixed Resource Adequacy Plan (FRAP) and would use state payments to ensure power supplies, keeping downstate plants open or sending payments to Missouri or to the nuclear plants.

That idea, however, was also seen as a replacement for the MISO-PJM switch that Illinois Labor leaders support.

Also, the possibility of FRAP keeping the coal plants open caused environmentalists to drop their support for the full package. Lyderson wrote: “Some thought they had reached a reasonable compromise until the FRAP language was added to the energy bill.”

THE LEADERS

Meanwhile, most of the debate shifted to the ramifications of propping up the always controversial nuclear plants, even as the legislative session moved toward its end this week. It seemed unlikely that all of the intersecting demands and concerns could be resolved in time; as of last week, Gov. Bruce Rauner and House Speaker Mike Madigan, the two most powerful players in Springfield, had not declared sides, but Rauner’s administration weighed in with a memo that supports keeping the nuclear plants open but opposes higher rates.

Reports from Springfield said the bill’s backers were dropping some measures based on Rauner’s memo, including downstate coal subsidies, but it was not clear whether that referred to the FRAP wording or the MISO switch that Labor supports.

Attorney General Lisa Madigan was opposing the bill, saying it would harm consumers. Some business groups were opposed, saying a sharp increase in electrical costs would drive companies out of business, and AARP was strongly opposed because of the effects a rate increase would have on its members.

The Illinois Coal Association opposed the bill on grounds that the Illinois plants don’t burn Illinois coal anyway.

Attorney Eric Robertson, representing a group of Illinois industries, said they would be harmed by higher electricity prices, including Granite City Steel.

“Steel is a very competitive market,” he said, adding that the bill would “endanger the continuation” of jobs in Granite City.

Meanwhile, the shutting of the downstate power plants continues inexorably as Dynegy awaits MISO’s permission to close more of its production capacity in southern Illinois.