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Dynegy to shut more Illinois coal plants, calls for fixes in MISO market

DynegyInc. said May 3 that it will shut down three coal-fired units inIllinois over the next year, adding another 1,835 MW to the list of powerplants the company says it has to close due to alleged flaws in the wholesalemarket run by the MidcontinentIndependent System Operator Inc.

The planned shutdowns signal a situation that is so alarmingthat policymakers in Illinois must "act now" to fix the market,according to Dynegy. "Resolution of this issue in a way that servesIllinois as a whole can only be achieved with the immediate help and leadershipof the Illinois state government for which we believe we have solutions, and weurgently need an audience," Dynegy CEO Robert Flexon said in a .

The company will shut down units 1 and 3 at the Energy Complex,which date from the first half of the 1970s, and unit 2 at the plant, which beganoperating in 1982, because they did not get enough payments from the recentMISO auction to cover their "basic operating costs," according to thestatement. Including those units, a total of 2,800 MW of Dynegy capacity are atrisk of closure. Last year the company said it will halt operations at the 465-MW plant in themiddle of this year. Also, Dynegy is reviewing another 500 MW for potentialshutdown.

At this time the company is not announcing what units makeup that capacity, and also will not speculate on the future of the remainingunits at Baldwin and Newton, according to a spokesman. Baldwin has one otherunit with 634.5 MW in nameplate capacity, while Newton has another 617.4-MWunit. The 1,835 MW will come out of Dynegy's 12,720.3-MW coal plant fleet,according to S&P Global Market Intelligence data.

Dynegy's announcement triggers a reliability review by MISO.The company said if MISO finds the plants can be shut without affectingregional reliability, Newton 2 would be shut down in September, Baldwin 1 inOctober and Baldwin 3 in March 2017.

Following the latest MISO Planning Resource Auction, someanalysts had predicted that the prices in Zone 4 of MISO, where theDynegy plants are located, were low enough to put pressure on several merchantplants, including the entire Newton plant.

Dynegy argues that the auction unfairly pits plants inregulated markets, which receive revenue streams from their state regulatorycommissions, against Dynegy's deregulated generators.

But Dynegy's own conduct in the auctions has received somecriticism. Last year complaints were filed with FERC that Dynegy's acquisition ofAmeren Corp.'smerchant generation business might have caused prices to jump in Zone 4.

The company, however, disputed that. "Disappointingly,rather than resolve the market design deficiencies, which has the added benefitof retaining Illinois jobs and economic benefits, the only response fromIllinois officials to date occurred last year when the Attorney General'soffice filed a complaint claiming that the clearing capacity price received byDynegy for less than 10% of the company's megawatts in MISO Zone 4, that wascomparable to prices in northern Illinois and did not even cover Dynegy'scosts, was not just and reasonable," Flexon said. "Dynegy has spentmore than a year defending itself against this baseless claim."

In 2016 so far, Baldwin bought around 725,000 out of over918,000 tons of its coal from Peabody Energy Corp.'s North Antelope Rochelle Mine inWyoming. Baldwin's capacity factor for 2015 was almost 65%, its lowest figurein seven years, according to S&P Global Market Intelligence data. Out ofaround 528,000 tons, Newton bought 120,000 from North Antelope Rochelle and322,000 tons from Arch CoalInc.'s Black Thunder mine, also in Wyoming. Newton's capacityfactor for 2015 was 46.39%.