Analysis: Prairie State Power cost skyrockets between January and May 2013

As shown in the following figure, the monthly cost of power that AMP is charging for power from the Prairie State coal plant has risen dramatically in recent months climbing from $58.53 per megawatt hour in January, with the Rate Levelization adjustment, to $85.14 per megawatt hour in May.  This represented a 46 percent increase in just four months.

However, even these costs understate the actual cost of power from Prairie State because they reflect what AMP calls Rate Levelization in which part of the cost of the power from the plant is being deferred from 2013 into future years.  For example, as shown in the figure, above, the actual average cost of power from Prairie State was $83.76 per megawatt hour in January – however, AMP only charged Galion $58.53 per megawatt hour that month, deferring the remaining $25.23 for future collection.  Similarly, although the actual cost of a megawatt hour of power from Prairie State in May was an incredible $121.87, AMP only charged Galion $85.14 per megawatt hour, deferring the remaining $36.73 per megawatt hour (or 30 percent) for collection in some future date.

Although AMP has not provided any public explanation for the rapid increase in the cost of power from Prairie State, we believe it is due, at least in large part, to the plant’s poor operating performance. AMP promised in 2007 that Prairie State would operate at an 85 percent capacity factor. (Note that a plant’s capacity factor measures how much power the plant actually generates compared to how much it would generate if it operated at 100 percent power for 100 percent of the hours in the month or year being considered)  According to AMP’s June 17 Report, since beginning operations, Prairie State Units 1 and 2 have achieved capacity factors of 59.2 percent and 67.2 percent, respectively, with a total plant capacity factor of 62.1 percent. This is much lower than the 85 percent capacity factor that AMP promised in 2007 and the 81.4 percent capacity factor that AMP has assumed in its recent budgets.

It also is important to recognize that the cost of power from Prairie State will continue to be extraordinarily high during the coming year as Unit 1 will be shut down for “an extended outage in the fall of 2013 for maintenance and upgrades to correct additional design and construction deficiencies,” according to a June 17, 2013 AMP Report to Prairie State Participants (PDF).  According to the same AMP Report, Prairie State Unit 2 will be shut down for a similar extended outage in the spring of 2014 for maintenance and upgrades to correct additional design and construction deficiencies.

Deferring part of the actual cost of power from Prairie State may be a good idea for AMP as a way to mitigate or deflect the municipalities’ legitimate anger and concerns about the project. However, there is “no free lunch” and these costs will have to be paid at some point, probably not in the too-distant future.

-David Schlissel, Director of Resource Planning Analysis, Institute for Energy Economics and Financial Analysis