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Dynegy urges Illinois regulators to act on support for downstate coal plants


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Dynegy urges Illinois regulators to act on support for downstate coal plants

Dynegy Inc. continued to urge state regulators in Illinois for action to support eight of its coal-fired power plants in the state that sell into the Midcontinent ISO market.

The competitive generator in reply comments dated Dec. 21 urged the Illinois Commerce Commission to address resource adequacy in MISO Zone 4, which covers central and southern Illinois and the service territory of distribution utility Ameren Illinois Co., a subsidiary of Ameren Corp. The comments were filed in response to a workshop that the ICC held on Dec. 7 where MISO, Dynegy and various stakeholders discussed whether market prices are adequate to ensure long-term supply. Dynegy, the largest coal generator in Illinois, owning 11 plants in the state, indicated in the comments that market conditions including slack demand growth and lower wholesale power prices have placed eight of its plants at risk of shutdown.

Illinois utility watchdog and consumer advocate the Citizens Utility Board said supply projections show no resource adequacy problem in Zone 4 until at least 2026, according to Dec. 21 comments from CUB Deputy Director Kristin Munsch and attorney and policy adviser Eric DeBellis. MISO's planning resource auction only provides about 15% of the capacity requirement in Zone 4. The majority of the capacity comes from a mix of self-supply contracts and fixed resource adequacy plans, which generators file with MISO, CUB said. The zone will also see substantial new renewable energy development from a new law the state adopted in 2016 called the Future Energy Jobs Act that requires more in-state development of solar and wind, CUB staff said.

Dynegy acknowledges that while MISO has thousands of megawatts of new renewable energy projects that are seeking to interconnect to its grid, the amount of capacity available to serve peak demand is much less. Using data from MISO, Dynegy estimates about 200 MW of new renewables capacity coming on between 2019 and 2023 that is available to serve peak load in Zone 4, according to its comments. Though MISO has new capacity coming on within its 15-state footprint, Dynegy said import limits will restrict some of that capacity from serving Zone 4.

Various stakeholders said the state should wait to act because of ongoing uncertainties. For instance, the Environmental Law and Policy Center, an environmental advocacy group, in its comments brought up the Federal Energy Regulatory Commission's expected response in January 2018 to a U.S. Department of Energy notice of proposed rulemaking or NOPR. In late September, the DOE directed FERC to issue new market rules that address cost recovery for power plants, specifically certain coal and nuclear plants, that provide resilience.

"Beyond the FERC NOPR, the merger of Dynegy and [Vistra Energy Corp.] raises significant questions about what Zone 4 resources are or are not actually vulnerable to shutdown," the center's senior attorney, Robert Kelter, and staff attorney, Justin Vickers, said. Texas generator Vistra on Oct. 30 announced the acquisition of Dynegy and sought federal and state approvals by March 2018.

But Dynegy, in its comments, says the acquisition is expected to generate capital that will be earmarked for reducing outstanding debt. "In any event, there is no reason why Vistra and Dynegy should be expected to use this capital to continue operating Illinois plants that are operating on a negative cash flow basis," Dynegy said.

In a Dec. 7 presentation, Dynegy proposed that Illinois develop a competitive market solution that require suppliers in Ameren's service territory to buy capacity three years or more into the future. MISO's current design only buys capacity one year out. The shift to a three-year procurement, similar to eastern grid operator PJM Interconnection's design, ensures that the capacity auction prices better represent long-term generation costs, Dynegy said in earlier comments filed on Nov. 30. Illinois is split into two power markets, with the northern part selling into PJM and central and southern parts in MISO.

Dynegy also backed a state-led solution contained in a pair of bills, Senate Bill 2250 and its companion, House Bill 4141, that were introduced in the Legislature this year.

The ICC held the workshop after the state this year began implementing the Future Energy Jobs Act, which among other things offers state assistance to two in-state nuclear plants. ICC staff, in a Nov. 1 white paper, said the state can consider several policy options including imposing additional capacity requirements, relying on its existing market structures, creating a reliability portfolio standard or reconfiguring its participation in a regional power market.

The ICC plans to hold a second workshop on Jan. 16, 2018, and issue a final report to the Legislature by Feb. 26, 2018.