Friday, December 14, 2018

Dynegy to Shutter 3 Ill. Coal Plants; Blames MISO Market Design

So. Illinois Could Lose 30% of Capacity

By Amanda Durish Cook

Dynegy said it will idle at least three coal-fired units in Central and Southern Illinois beginning in the fall, saying the merchant units can’t recover their costs from MISO’s energy and capacity markets.

dynegy, miso, coal plants

Baldwin Energy Complex

Dynegy said the three 40-year-old coal units totaling 1,835 MW — Units 1 and 3 at the Baldwin Power Station and Unit 2 at the Newton Power Station — are unable to recoup their operating costs because of current energy and capacity market prices. In MISO’s Planning Resource Auction in April, Zone 4 cleared at $72/MW-day, a 50% drop from a year earlier. (See MISO’s 4th Capacity Auction Results in Disparity.)

The company also said it’s considering closing another 500 MW of coal-fired capacity in Zone 4, though it didn’t name specific plants, with a final decision due later this year.

Including Dynegy’s 465-MW Wood River Power Station — which it previously announced would shut down in June — the planned suspensions would remove 2,800 MW of generation, about 30% of the capacity in Southern Illinois.

At a Thursday meeting of MISO’s Resource Adequacy Subcommittee, Dynegy Director of Regulatory Affairs Mark Volpe clarified the company’s stance on the closures. “I want to be clear that we plan to suspend, not retire. Those units could come out of suspension given the right compensation,” he said.

The company said competitive generators in Zone 4 cannot cover their operating costs under the existing MISO market design because out-of-state generators receiving regulated revenues from their home states are suppressing capacity and energy prices. “If Newton and Baldwin were located in PJM, as Northern Illinois plants are, or Zone 4 was regulated as the other MISO generators outside of Illinois are, no shutdowns would occur,” the company said in its announcement Tuesday.

“This is a losing model that exports Southern and Central Illinois jobs and economic base to the surrounding states, resulting in a catastrophic economic outcome for downstate Illinois,” Dynegy CEO Robert Flexon said. “Central and Southern Illinois competitive units in MISO Zone 4 are wrongly grouped with out-of-state utilities rather than the competitive power producers in Northern Illinois and PJM. This must change.”

Dynegy said it was seeking relief from state policymakers because it wasn’t convinced MISO — whose “membership is overwhelmingly represented by out-of-state utilities that reap the benefits of the existing market design” — would make needed design changes.

In March, the RTO proposed a three-year forward capacity auction similar to PJM’s for its deregulated markets. (See MISO Proposes Adding Forward Auction for Retail Choice Zones.) Dynegy and Exelon had floated a similar idea in February, but Exelon has said MISO’s proposal falls short. (See Stakeholders React to MISO Proposed Auction Design.)

Unless MISO determines the units are needed for reliability, Dynegy said, Newton Unit 2 will stop operations in September, with Baldwin Unit 1 following in October and Unit 3 in March 2017. The shutdowns will leave one unit apiece still functioning at the Newton and Baldwin locations. Dynegy purchased the Newton plant from Ameren three years ago along with four other coal plants, as Ameren departed the Illinois market.

“In the limited time left before closures occur, we are ready to work quickly with MISO, the state of Illinois, union leadership and all stakeholders to rectify the situation and preserve the jobs and economic base in downstate Illinois,” Flexon said.

Flexon lamented that Illinois officials’ only response so far has been to file a complaint against the Houston-based utility over its bidding in the 2015 capacity auction. (See FERC Launches Probe into MISO Capacity Auction.)

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