Media advisory: Prairie State coal plant continues to fail; Public backlash in Kentucky and Illinois

High Electricity Rates and Long-Term Debt Associated With Peabody Energy Project Are Seen as Crippling to Local Economies

PADUCAH, Ky., Sept. 26, 2014 — A report by the Institute for Energy Economics and Financial Analysis (IEEFA) shows the Prairie State Energy Campus continuing to fall short of the pitch made by Peabody Energy when it marketed the plant to municipal power agencies in 2005.

The report, “No Evidence of Turnaround at Prairie State,” presents recent data from American Municipal Power (AMP) and Northern Illinois Municipal Power Agency, two of the eight public agencies that now own Prairie State.

It coincides with a growing public backlash against Prairie State, which was sold as a reliable, affordable energy provider by Peabody Energy to municipal power providers in 2012.

“We are seeing a groundswell of skepticism among residents and businesses in the communities affected by this exceptionally questionable deal,” said Sandy Buchanan, IEEFA executive director.

Residents of the Chicago suburb of Batavia last month filed a class-action lawsuit against Indiana Municipal Power Agency, one of the public-utility owners of Prairie State, and several consultants. The suit alleges that Batavia “is bound, for at least decades, to an unaffordable an unreliable source of power that is draining the city’s resources.”

A City Commission hearing this week in In Paducah, Ky., included testimony on how a doubling in residential and business electricity rates has dealt a harsh blow to the economy of the city, which relies solely on Prairie State for electricity.

In a PowerPoint presentation to the commission, Prairie State officials conceded that the plant has not lived up to expectations and that the electricity it produces is significantly more expensive than originally projected.

The plant has had a series of accidents and malfunctions since it opened in 2012, Interim Prairie State CEO Marc Gerken, who is also President of AMP, told the commission that it will take at least three more years to stabilize operations at the plant.

“This is nothing that we’re proud of,” Gerken said.

Gerken also cited a series of problems caused by the characteristics of the coal that Peabody Energy sold Prairie State for use at the plant: “it’s abrasive, high sulfur, and high ash.”

Council members and residents were not placated by assurances from the Prairie State representatives that the plant—which is built on a “mine-mouth” model that relies on coal from an adjacent Peabody mine—would eventually produce as promised.

“I’m not hearing an answer for what kind of relief we’re going to have for our citizens and business in Paducah and the other cities that are impacted by this,” said City Commissioner Sandra Wilson.

In other developments:

• A Paducah Sun editorial has called for the attorney general of Kentucky to investigate the deal that transferred liabilities from Peabody to municipal utility companies, citing “a legitimate question whether cities that invested in Prairie State were misled and have been harmed as a result.”

• Ray McLennan, the chairman of the Paducah Power Board resigned and said in an email to city officials that the Peabody coal supplying the power plant “seems to contain more rocks than we believed it would” and that “this has contributed to several breakdowns.”

• The Paducah City Commission passed a resolution urging the Paducah Power Board to hire an independent expert to investigate the information on which the decision to invest in the Prairie State campus was made and to hire an expert in utility matters to investigate current financial obligations.

___________________________________

The Institute for Energy Economics and Financial Analysis (IEEFA), based in Cleveland, Ohio, conducts research and analyses on financial and economic issues related to energy and the environment. The Institute’s mission is to accelerate the transition to a diverse, sustainable and profitable energy economy and to reduce dependence on coal and other non-renewable energy resources.

For additional information contact Karl Cates [email protected], by phone at 917-439-8225, or viaTwitter @ieefa_institute