A report issued by the Illinois Commerce Commission (ICC) last week to the state’s General Assembly lambastes the proposed $3.5 billion Taylorville Energy Center (TEC) as too costly “with uncertain future benefits.” The commission also questioned the 716-MW integrated gasification combined cycle (IGCC) facility’s construction timeline, concluding that uncertainties could “potentially add to already-significant costs.”

The commission’s report serves as an official analysis of the TEC’s facility cost report, submitted in February 2010. The commission was designated to carry out the analysis by the Illinois Clean Coal Portfolio Standard Law (better known as the Clean Coal Act). However, the report does not contain a recommendation about whether to proceed with the project; that decision will be made by the General Assembly, which must enact legislation before construction can begin.

The ICC alleged that the cost associated with power generated by the TEC was “substantially higher” than that associated with other types of generation facilities. “The TEC’s expected base case electricity cost of $212.73 per MWh (or over 21 cents per kWh) would cost significantly more than wind ($88.80 to $121.97), nuclear ($101.45 to $128.03), traditional coal ($141.08 to $153.03), or combined cycle combustion turbine ($154.05 to $160.78) facilities,” the report said.

One repercussion is that the rate impacts on residential and small business customers will likely approach or meet the full 2.015% rate impact cap, the commission warned. If the rate impact cap were met, because there was no concurrent rate impact cap for alternative retail electric suppliers, they would disproportionately bear the project’s additional costs and cost overruns, it added.

Finally, among its key findings, the commission said that the likelihood that the plant could be commercially operable by 2016 was “uncertain.” It reached this conclusion because elements and details were “missing” from Tenaska’s construction schedule. “The start of construction is contingent on whether and when the Illinois General Assembly passes authorizing legislation,” it said. “If the start of construction is delayed beyond August 2011, the TEC might not commence commercial operation before 2016.”

In a lengthy statement, Tenaska, a managing partner of the project proposed for construction in central Illinois, said that many of the issues raised by the ICC were at odds with policy choices made by the General Assembly in its 2008 passage of the Clean Coal Act. It also alleged that a companion report prepared by consulting firm Boston Pacific for the ICC validated “Tenaska’s technical approach, capital cost, rate impact projections, and assessment of environmental performance.”

The facility cost report analyzed by the ICC was based on an “extensive” Front End Engineering and Design (FEED) study, Tenaska said. The report had estimated that the project’s construction cost—including escalation, financing costs, and contingency—was $3.522 billion.

“The estimated, average residential rate impact of 1.81%, or a cost of roughly six pennies a day, is well under the Clean Coal Law’s mandatory rate impact cap of 2.015% for electric utilities’ residential customers,” the company added. “No rate impact can occur until the plant becomes operational starting in 2015.”

The company also pointed out that the “project’s technical feasibility is consistent with the certification made by the U.S. Department of Energy as part of the recent award to TEC of an unprecedented $417 million investment tax credit.”

Regarding the allegation that power generated by the TEC would cost more than other generation types, Tenaska admitted that clean coal power is not currently the least cost resource—but said that it had never claimed that power from the facility would be the cheapest option. “Our goal was to come in under the 2.015% limit, but not to be cheaper than conventional technology that neither uses Illinois coal nor sequesters carbon,” it said.

In response to concerns about the project’s timeline, the company said, “There is some uncertainty on when we are going to finish because right now we don’t know when we are going to start.”

“The ICC report suggests a number of things (including a doubling of the time that it has to review the form of sourcing tariff [the power purchase agreement]) that will further slow the process. We are determined to move forward as quickly as the State will permit, but are not in control of many factors that will determine whether we will be permitted to start construction in time to be finished before 2016.”

Sources: POWERnews, Tenaska, ICC