Environment
5:45 pm
Wed August 29, 2012

Report Says Nation's Newest Coal Plant Isn't as Cheap as Promised

A large coal-burning power plant in Illinois that provides electricity to some areas of Western Kentucky and Indiana is under fire. A non-profit analyzed the costs of the plant and the numbers suggest ratepayers in eight states are paying more than they should.

Prairie State is a 1600 megawatt coal plant just outside of St. Louis. It’s owned in part by nine municipal energy agencies and co-ops. One of those is the Kentucky Municipal Power Agency (KMPA) which owns nearly eight percent of the plant and provides power to the Paducah area. KMPA issued nearly $500 million in bonds to buy its share of the generation, and is now selling electricity to power companies in Paducah and Princeton.

But according to a report, ratepayers getting their power from Prairie State are paying a premium. The data compiled by the non-profit Institute for Energy Economics and Financial Analysis says the project’s cost was higher than expected, and costs for Prairie State’s power will only go up.

Report co-author Tom Sanzillo says the Prairie State project made a promise to members, which was that:

“The Prairie State plant would provide affordable low-cost electricity to participating communities from day one of commercial operation,” he said.

He says that’s not happening.

But in Paducah, KMPA General Manager Dave Clark says the company is so far happy with the project and thinks the costs are under control.

“We know what our price for coal is going to be for the next thirty years, and it’s going to be about a fourth of what it’s going to be in the marketplace,” he said. “And it’s not going to rise very much.”

Unlike most utilities in Kentucky, KMPA is not regulated by the Public Service Commission because it’s a municipal utility. And because of all the costs and surcharges added into utility bills, it’s hard to compare rates among utilities.

KMPA sells the electricity to Paducah Power and Princeton Electric for between 5 and 5.5 cents per kilowatt hour—this covers all of KMPA’s bonds and associated costs with investing in Prairie State, and Clark says this rate is in line with what the company expected. But residential customers in the area end up paying between 8.2 and 9.8 cents per kilowatt hour.

To put that in perspective, at the two other utilities doing business in the area—Kentucky Utilities and Jackson Purchase Electric Co-op—customers pay between 7 and 7.6 cents per kilowatt hour.