Report: Springfield Coal Rate Hikes Could Total $21.3 Billion

On the Eve of Tenaska Vote, Former CUB Director Details Costs of Springfield’s Sweetheart Deals with Coal

CHICAGO (May 14, 2012) – As the Illinois House Public Utilities Committee prepares to vote Wednesday on legislation that would raise electric rates on Illinois consumers to pay for a coal plant proposed by Tenaska, Inc, a new study by a longtime consumer advocate shows the true cost of the rate hikes proposed for Tenaska and already approved for two other proposed coal plants.

The report by Martin R. Cohen, former executive director of the Citizens Utility Board and Chairman of the Illinois Commerce Commission, estimates the total cost to Illinois ratepayers of $21.3 billion over thirty years for the Tenaska, Leucadia, and Power Holdings projects.

“These sweetheart coal contracts will have consumers paying higher rates for decades,” said Cohen. “In the first decade alone, Illinois consumers will pay an average of nearly $1500 extra to subsidize these plants.”

The report “On the Hook: Potential Costs to Illinois Consumers of New Coal Power Mandates” examines the real costs that would be exacted on the Illinois economy if electric customers across the state are forced to underwrite pricey coal gasification plants for Tenaska, Leucadia and Power Holdings. 

In 2011, the General Assembly approved rate hikes to pay for two separate projects that seek to turn coal into synthetic natural gas. Now Tenaska is seeking what would be the largest of the three rate hikes.

In all three cases, the legislature would force utility customers statewide, home and business, to purchase electricity or synthetic natural gas from the plants for decades at rates far beyond current market costs. The report, released today, puts the drain on the state economy at well over $20 billion over the life of the agreements, a massive total that could help explain Tenaska’s change of course due to its inability to get enough votes for their plant.

“As the report shows, there is no real economic or jobs case to be made for these plants,” says report author Martin Cohen.

 “On the Hook,” uses futures market data to project the real costs of the three long-term contracts. If all three plants move forward, residential customers can expect to see a first year rate increase totaling $458 million. Over that first decade, the rate hikes will hit up each household in the state for an extra $1,413.

“These bailouts for big coal are clearly boondoggles that hit Illinois ratepayers hard, at the worst possible time,” said Jack Darin, director of Sierra Club Illinois. “These costs are unacceptable, especially when there are no plans in place to deal with the billions of pounds of pollution Tenaska will generate each year.”

Beyond the mandated costs to ratepayers, the report also digs into two major selling points used by backers to promote the coal projects: jobs and demand. In some ways, these numbers are even more galling, with each of the long-term jobs created by Tenaska’s Taylorville Energy Center costing ratepayers almost $1 million annually.

“This is an epic giveaway to build power plants that are not needed,” said Becky Stanfield, senior clean energy analyst for the Natural Resources Defense Council. “Illinois is part of an enormous regional power grid that has significant over capacity even if a number of older coal plants close. There is no danger of power outages and building Tenaska will not lower regional prices, it will simply raise our bills.”

The report was written by Martin Cohen, a longtime Illinois consumer advocate, with experience in the creation of the Illinois Power Agency while acting as Director of Consumer Affairs for the state, as well as directing the Citizen’s Utility Board.

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