Prairie State Backlash Grows: A Call for Bankruptcy; Trouble in Fulton and Hannibal, Mo.; Legal Review Sought in Batavia, Ill.

The Paducah Sun over the weekend published a scathing editorial on what it called the Paducah Power System’s “disastrous investment in Prairie State Energy Campus,’‘ the Peabody Energy “mine-mouth” coal-powered power facility marketed and sold to local utilities in 2007.

The editorial says that former Board Chairman Ray McLennan, who resigned last week, led the agency “largely under the radar” into $600 million in debt obligations tied to ownership of questionable power sources—mostly via Prairie State.

“We think it is a fair question given this mountain of debt and the losses PPS is taking on its power sales to ask if PPS is a candidate for Chapter 11 bankruptcy (or the municipal equivalent),” the paper says. “If it’s legally doable, PPS needs to do it, because with current rates, the very economic viability of the city is threatened. One can foresee a future in which, absent relief on rates, there is an exodus of business and an acceleration of the population loss already plaguing the city, creating a deadly downward spiral on the PPS customer base.’”

“Paducah was obviously led down the primrose path on Prairie State, and bankruptcy might be one way to force the players to the table on fairer terms.”

The paper also called for the immediate resignation of Prairie State Power Manager Dave Clark. It reported separately that Paducah Power’s new board is calling for a formal investigation into the deal Paducah signed with Prairie State, a move  that drew the attention of the Bond Buyer in a story (subscription required) that put it this way: “Saddled with high electric rates, the Paducah Power System in Kentucky will investigate its fiscal obligations to the beleaguered Prairie State Energy Campus.”

Last week’s City Commission meeting—in which Prairie State officials tried, awkwardly at times, to explain the plant’s failures—was recorded in full by the city and is posted here.

The Bond Buyer also noted a similar backlash in Batavia, Ill., under the headline “Chicago Suburb Will Seek Legal Review of Prairie State Deal,” in an article that reports “officials plan to ask the Illinois Attorney General Lisa Madigan’s office to examine the city’s 2007 decision to purchase power from the controversial bond-finance, coal-fired Prairie State Energy Campus.”

Meantime, the Fulton (Mo.) Sun reported last week that the city of Fulton is facing a $500,000 budget deficit in part because of failures at the Prairie State Power Campus: “The city’s 2014 budget assumed that Prairie State’s two units would each produce power at full load 80 percent of the time. Neither unit produced at full load 80 percent of the time, which caused the city to purchase power from the open market.”

And the Hannibal (Mo.) Courier-Post reports that the Hannibal Board of Public Works is raising rates because of failures at Prairie State. The paper quotes Bob Stevenson, general manager of the board: “Stevenson observed that the ‘honest reality is the electric rate increase is due to Prairie State, the coal-fired power plant in which the city owns a share. The Prairie State Energy Campus continues to underperform and we have lowered our revenue projections to what we believe will be closer to reality, he said.’”