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Thursday, Dec. 12, 2013 12:01 am

Power plant giveaway wins pollution pass

Opponents say deal was structured to skirt environmental regulations

Coffeen Power Station in Montgomery County, south of Springfield, is one of the five power plants obtained by Dynegy subsidiary Illinois Power Holdings earlier this month.
Photo courtesy of Dynegy


One of Illinois’ largest energy companies has given away five power plants, following a decision by state regulators to give the new owners a temporary pass on pollution standards. Environmentalists are livid, claiming the divestment is a ruse to dodge pollution laws.

Last week, St. Louis-based Ameren divested itself of its former subsidiary, Ameren Energy Resources, and five coal-burning “energy centers” in Illinois, essentially trading the plants to Houston, Texas-based energy company Dynegy Inc. in exchange for Dynegy also taking on Ameren’s $825 million debt. The deal was contingent upon state regulators granting Dynegy subsidiary Illinois Power Holdings a “variance” to delay compliance with pollution standards for the plants.

Environmental groups blasted the Illinois Pollution Control Board’s decision, saying the coal plants create too much pollution and should be cleaned up immediately or shut down.

“By allowing Dynegy to postpone complying with necessary air pollution standards, the board has chosen to place Dynegy’s profit margin over the health of the residents living near the plants,” said Carrie Otto, a grassroots organizer for Prairie Rivers Network. “This is unacceptable.”

On Nov. 21 the pollution control board granted Illinois Power Holdings, the Dynegy subsidiary, a variance from a 2006 law that regulates certain air pollutants. Under state law, the board can grant variances for as long as five years to organizations which prove that compliance would impose an “arbitrary or unreasonable hardship.”

IPH based its hardship claim on the notion that low energy prices made it difficult to turn a profit from coal plants. If IPH takes on Ameren’s coal plants, the company reasoned at the time, it won’t immediately be able to turn enough profit to install pollution controls.

David Johnson, a financial expert at ACM Partners in Chicago, warned that Dynegy intentionally underfunded IPH so that the subsidiary wouldn’t be able to install the pollution controls. Johnson, who was commissioned by the Sierra Club of Illinois to examine the deal between Ameren and Dynegy, said Dynegy was taking a gamble that energy prices would improve, but the risk was all on the public because of how the deal was structured.

“Not only does Dynegy thus seek to have local residents bear the costs of its gamble and profit-seeking immediately – in the form of years of increased pollution levels and the resultant public health consequences of same,” Johnson wrote in his scathing report, “as noted, IPH will be at significant risk of going into bankruptcy in the first several years of its existence, putting pensions and jobs at even greater risk and quite possibly leaving behind major environmental issues.”

The five power plants in the exchange are Duck Creek in Fulton County, E.D. Edwards in Peoria County, Coffeen in Montgomery County, Newton in Jasper County, and Joppa in Massac County. Another Dynegy subsidiary, CoalCo, already owns four other coal plants in Illinois: Baldwin Energy Complex, Havana Power Station, Hennepin Power Station and Wood River Power Station in Alton. Data from the U.S. Environmental Protection Agency show each of CoalCo’s four power plants have committed recent or current violations of pollution regulations.

The five plants acquired by IPH are what’s known as a multi-pollutant standard (MPS) group, which essentially allows the facilities to be bundled together and meet a collective standard instead of each facility meeting an individual standard. If one facility pollutes more than its share, the others must pollute less to compensate. The variance granted to IPH allows the company to not meet the emission limit for sulfur dioxide at the five plants until Dec. 31, 2019.

In exchange, IPH must meet several deadlines for installing equipment that reduces pollution at the five plants. The company must also burn low-sulfur coal from Wyoming at three of its plants.

One member of the four-person board voted against granting the variance. Chairwoman Deanna Glosser wrote in her dissenting opinion that IPH hadn’t established that any hardship exists. Glosser likened IPH’s request to a previous case in which a company purchased a foundry that was previously cited for violating pollution standards. The company wanted to continue operating in violation of the standards for seven months while it obtained pollution control equipment. The board denied that request because “a petitioner may not bootstrap himself into a preferred position by spending money first and then claiming he has been injured.”

Dynegy spokeswoman Katy Sullivan says IPH has already identified several ways to make the plants more efficient, in turn allowing the company to turn a profit where Ameren could not. Additionally, Sullivan points out that the variance will result in a smaller total volume of emissions than under the state standard, and the company also agreed to an emissions cap, which it plans to meet by using low-sulfur coal, using existing pollution control equipment and using the plants less if emissions are too high.

Contact Patrick Yeagle at pyeagle@illinoistimes.com.


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