Thursday, July 05, 2012

Opponents say Leucadia power plant would cost too much for customers

By Jamey Dunn

Illinois business and environmental groups today panned a coal gasification project slated for construction in Chicago. They argue that the plant, which would turn coal and other carbon fuels into natural gas and trap emissions underground, would result in rate increases for customer statewide.

In July 2011, Gov. Pat Quinn approved a plan to build the plant on a polluted brownfield site on the southeast side of Chicago. Construction on the plant, which would be owned by Leucadia National Corp., is scheduled to begin in 2015. But after Peoples Gas and North Shore Gas bowed out of the project, the two remaining utilities, Ameren and Nicor Gas, argued that they were being stuck with too large of a share of the cost of construction. Both utilities would be required to buy gas from the plant, but they do not want to cover the construction expenses that the two utilities that left the project would have paid.

Business groups say that if they project is completed, customers of both utilities would pay the price. “If this project goes forward, the residents of Illinois, particularly in the Nicor and Ameren territories, are going to have to pay for natural gas at considerably higher prices,” said Mark Biel, executive director of the Chemical Industry Council of Illinois.

The Illinois Commerce Commission sided with Ameren and Nicor and rejected contracts that would have locked the utilities into a 30-year deal with the Leucadia plant. However, the commission agreed to reconsider the issue and is expected to give another ruling by July 11. “We have to make sure that everyone pays their fair share. And what happened is, this plant is now being put on suburban and downstate customers. That’s who’s paying for the plant, and we have a real problem with that,” said Brian McDaniel — senior policy analyst and government liaison for the Citizens Utility Board, a consumer advocacy group founded by Quinn. “There’s fundamental questions about equity and fairness that are on the table here and need to be answered,” he said.

But supporters of the project say that the commission has overstepped its regulatory authority. “They’re trying to rewrite legislation,” said Sen. Donne Trotter, sponsor of the legislation that created the project. Trotter also sponsored Senate Bill 3766, which would force the ICC to approve the contracts.

Opponents to SB 3766 today called on Quinn to veto the bill. “What Leucadia is seeking to do is go around Gov. Quinn’s hand-appointed Commerce Commission and change the law to tie their hands so that they cannot protect rate payers like they’re envisioned to do,” said Mark Denzler, vice president and chief operating officer of the Illinois Manufacturers Association. They say the bill would set a dangerous precedent that could take the teeth out of the regulatory commission. “You would have other utility companies trying to circumvent the Commerce Commission [by] going to the General Assembly when they think the Commerce Commission is going to make a ruling that’s detrimental to their cause.”

A spokesperson for Quinn said he is reviewing SB 3766.

Trotter said his bill is not an “end run around” the Commerce Commission but is instead meant “to clarify for them what their role is.”

While proponents of the plant say it would bring jobs to an economically depressed area, Biel said that it could hurt the economic outlook of the state overall. “Why would you want to locate a facility in Illinois if you know you’re going to have to pay an additional cost for your natural gas that you’re not going to have to pay in Iowa or Indiana or some of our competing states?” They argue that the recent boom in natural gas production aided by hydraulic fracturing, known as fracking, has led to plentiful cheap gas, and there is no need to create gas synthetically. “The dynamics have changed dramatically in the last two years with regards to natural gas availability.” (For more on fracking, see Illinois Issues May 2012.)

Trotter said that gas may be cheap now, but prices will likely change in the future. He and other backers argue that source of gas in the state could protect Illinois consumers from future changes in price. “Prices always fluctuate,” he said. Trotter said the law includes customer protections against drastic rate increases. Leucadia is required to put millions into a consumer protection reserve fund. “If prices rise over 2 percent, it will be capped there and all the other costs will be picked up through this fund,” Trotter said.

 He said environmental groups are trying to block the project because they are fundamentally opposed to any energy plant that uses coal. He said that the technology has been proven in other states. “Leucadia certainly doesn’t say that it is a perfect source of energy, but it certainly is something that has been proven to be a safe source of energy.” He said the project would be beneficial to the community, which has historically suffered high levels of pollution. To build the plant, the company would first clean up the contaminated site. The plant must also capture 85 percent of its carbon emissions or face fines. “The clean up alone is a great feather in the cap of the community,” said Hoyt Hudson, project manager for the Leucadia plant.

 However, some environmental groups, both local to the southeast side of Chicago and statewide, argue that the development of cleaner energy technologies, such as wind power, could bring the same benefits to the community without environmental risks. “We need smart, common-sense energy policy in Illinois that puts all of us in a position to succeed while being mindful of out environmental footprint. Leucadia does neither, and in fact moves us backward down the path of progress,” Jack Darin, director of the Illinois chapter of the Sierra Club, said in a written statement. (For more on the environmental history of the southeast side and current environmental battles going on in the area, see the current edition of Illinois Issues.)

Trotter said he understands why residents in the area are wary of the project. “Part of the problem is that in the past, there have been so many promises and none of them kept.” But he said once they see the investments that will be made in the area as part of the project, he thinks minds will be changed.

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