Dynegy to Shut Down 30% of Southern Illinois’s Power Generation Capacity

Dynegy Inc. announced on May 3 that it plans to shut down multiple Illinois coal-fueled units due mainly to the failure of the plants to recover basic operating costs in recent Midcontinent Independent System Operator (MISO) capacity auctions.

According to the company, the generation that will be lost is 2,800 MW—about 30% of the total power generation capacity in southern Illinois. The units include Baldwin Power Station Units 1 and 3, Newton Power Station Unit 2, and Wood River Power Station (which was announced earlier this year).

“This is a difficult decision, and we don’t take it lightly. For 40 years, the employees of the Baldwin and Newton Power Stations have generated reliable and affordable power for the people of Illinois,” said Robert C. Flexon, CEO of Dynegy. “The men and women of these stations, just like the Wood River employees, have proudly and professionally served and safely operated these facilities for decades while contributing greatly to their communities.”

Dynegy believes there are serious flaws in the hybrid models being employed in the market. Specifically, the design of MISO Zone 4—which is an unregulated market—was questioned. Dynegy said that competitive generating assets, regardless of fuel type, are unable to support their operating costs in the existing market design.

“Generators are compensated in two ways—through the capacity market and through the energy market. The out-of-state utilities offer their capacity into the annual auction at little to no cost since they are more highly compensated through their home state regulatory process, putting competitive generators at a tremendous disadvantage,” the company said.

It also noted that the same situation applies to the energy market in Zone 4. Utilities can offer energy at no cost and continuously dispatch their baseload plants, because they are able to pass through variable costs to ratepayers. Dynegy said if Newton and Baldwin were located in the PJM Interconnection, as its northern Illinois plants are, or if Zone 4 was regulated as the other MISO generators outside of Illinois are, shutting down the plants would not have been required.

“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,” Flexon said. “As has been demonstrated repeatedly, there is a large disparity between how central and southern Illinois competitive generating stations are treated compared to generating stations in northern Illinois and MISO participants outside of Illinois. 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.”

As part of the shutdown process, a notice filed with MISO for each unit triggers a reliability review. If MISO determines the units aren’t needed for reliability, Dynegy expects to shut down operations at Newton Unit 2 in September 2016, Baldwin Unit 1 in October 2016, and Baldwin Unit 3 in March 2017. The Wood River plant is already slated for closure in June.

Aaron Larson, associate editor (@AaronL_Power, @POWERmagazine)