Are We a Target in the Crosshairs?

By that I mean hang on to your wallet.

The Obama Administration is pushing to reduce our nation’s dependence on fossil fuels and promote renewable energy. The Clean Power Plan requires the nation’s existing power plants to reduce carbon pollution by an average of 32% by 2030. This week’s announcement, issued through the Environmental Protection Agency (EPA), requires states to submit implementation plan drafts by 2016 with final versions due in 2018.

All this sounds good. Limiting carbon that pollutes the air (and arguably drives climate change) is a worthy cause. The approach is more than just a temporary fix. There is even opportunity for Northwest Missouri to embrace opportunities for renewable energy – just look at the wind turbines on the ridges near Rock Port and King City.

So far, so good.

Now think upon this: A good portion of the electricity we use here in Gallatin becomes available to us through coal. Thus, the national debate on placing new limits on greenhouse gases from power plants has a direct impact locally. Ultimately, the crosshairs used to target environmental polluters are aligning on us.

Let’s see if we can connect the dots.

Gallatin has a contract to purchase electricity through the MoPEP energy pool of the Missouri Joint Municipal Electric Utility (MJMEUC)

MJMEUC is part owner and thus a developer of the Prairie State Energy Campus, a coal-powered plant in Marissa, IL, initially developed and owned by Peabody Energy (MJMEUC has a contract for 195 MW from Prairie State, 86 MW of which go to the MoPEP pool)

On May 11 the president of Prairie State Generating Company asked the Environmental Protection Agency to exempt the coal-fired Prairie State Energy Campus in southern Illinois from new pollution-control rules. The letter, in part, states the plant cannot survive if — under new regulations aimed at curbing carbon-dioxide emissions — if it is relegated to a back-up role in favor of cleaner sources of energy

A number of red flags have already been raised about this particular coal plant.

In July, 2014, community leaders of towns in contract with MJMEUC (like Gallatin) took notice when the City of Hermann, MO, filed lawsuit to be released from its membership due to “excessive” electric rates. At that time, Hermann was paying paying $50,000 per month for this electricity, and electricity rates there tripled over the course of two years. A court decision on Hermann’s request is still pending.

At this point, it is unclear whether Hermann’s success would be good or bad for other MJMEUC members like Gallatin. On the one hand, Hermann might clear the way for other members to bolt from a business venture that is apparently gone bad. On the other hand, any member leaving the group only multiplies the expense on the others that still remain.

Prairie State’s request for an EPA exemption can be viewed as a verification of a business deal gone bad. It gives validity to charges leveled by such lobby groups as the Institute for Energy Economics and Analysis (see IEEFA.org online), which specifically works to reduce dependence on coal and other non-renewable energy resources. Much of what’s written here is using IEEFA as the source.

The big picture that the IEEFA paints is not encouraging. On July 9 an article written by Sandy Buchanan vividly states how Prairie State was originally sold as a clean coal plant to investors and how the buck is being passed to victimize end users. That article, in part, reads as follows:

“The 1600-megawatt plant was developed by Peabody Energy 10 years ago next to its Lively Grove coal mine. As construction costs rose, Peabody shifted 95% of the ownership — and the risk — to eight municipal power agencies, which collectively issued $5 billion in bonds backed by the electric revenues of 200 municipalities in the Midwest and Virginia, many of them induced into signing 50-year contracts.”

So, what happens when the revenue bonds fail to match expectations? Rates go up.

Years ago when Prairie State was being pitched, municipalities were told that an EPA crackdown on carbon-dioxide emissions would not affect Prairie State. Pitchmen suggested that the plant could meet standards by monitoring and remediation.

Investment models presented to bondholders and municipalities were based on the plant achieving an 80% capacity factor performance. The IEEFA says the plant has failed repeatedly to do so, noting that in 2013 the plant operated at 59% which improved to 70% in 2014 but has regressed to 65% this year (January-May).

“Today the power generated by Prairie State is at least twice as expensive as electricity that could be purchased on the wholesale market. That’s thanks to the plant’s many operational problems, which are likely caused by the poor quality of the Lively Grove coal.”

Gallatin is one of those 200 municipalities, using electricity from a coal plant that doesn’t meet standards of the past while our government is raising standards for the future.

I write and include this reprint in hopes of helping you understand how big picture things impact what you and I see on our monthly electricity billing. It is important to note that not all our electricity comes from this one source, so there is no one-to-one direct correlation between what happens at Prairie State and what you see on your monthly bill. But it is a factor, and you should be paying attention. The discussion is much, much more complex than what I’ve attempted to merely outline here.

In theory and in practice, America must pursue energy independence. Our founding fathers would embrace such efforts, and such goals that also lower pollution should be pursued. That’s the big picture. But understand there is a cost to everything. In the current national debate, it is coal users like us who could be most financially affected – even if only partially and in a “trickle down” fashion.

The days of Gallatin maintaining its own power plant to any advantage are gone. There is no discount given anymore for the power we use during normal usage in exchange for the capacity to generate electricity back into the grid during periods of high peak demand. Our aldermen are wise to consider selling off the diesel generators still housed in the power plant. And that is being discussed. But even bigger decisions loom ahead.

The time when national debate could hit us right in the pocketbook is upon us. If I understand what I’m reading, I think we’re definitely the target in the crosshairs with more than one putting a finger on the trigger. I wish I could say it ain’t so.

Oh, yeah …have a nice day.