ILL. ELECTRICITY SUPPLIERS CHALLENGE FUTUREGEN POWER CONTRACT

Tamar Hallerman
GHG Monitor
3/1/13

Commonwealth Edison and a group representing alternative electricity suppliers in Illinois are separately challenging FutureGen’s 20-year power purchase agreement in court. The Illinois Competitive Energy Association, which represents alternative retail electric suppliers in the Prairie state, filed notice with the Illinois Appellate Court Feb. 28 that it would challenge the $1.65 billion carbon capture and storage project’s sourcing agreement, narrowly approved by the Illinois Commerce Commission (ICC) in December. Commonwealth Edison (ComEd), one of the state’s two main utilities, also announced its plans to challenge the sourcing agreement late last week. The challenges come a month after the ICC denied their requests for a rehearing on the power contract. 

The pair is challenging a portion of Illinois’ 2013 power procurement plan that requires all utilities in the state—as well as alternative retail electric suppliers indirectly—to purchase all 166 MW of gross electricity generated annually at the FutureGen 2.0 facility beginning in 2017 regardless of the price of power. While official arguments have yet to be filed, ComEd previously said that the ICC does not have the authority to require a utility to procure electricity from ‘clean coal’ sources for certain customers. The power producer has also voiced concerns regarding rate increases for its customers. “We are concerned about the negative impact on our customers from a requirement that would force utilities to buy subsidized generation at above-market prices,” ComEd spokesman David O’Dowd told GHG Monitor this week. In its order approving FutureGen’s sourcing agreement in December, the ICC said it has the right to require power producers to purchase electricity from facilities with CCS under Illinois’ Clean Coal Portfolio Standard, which requires that 25 percent of the state’s electricity come from ‘clean coal’ sources by 2025.

Meanwhile, the Illinois Competitive Energy Association will argue that the ICC exceeded its statutory authority when it approved the sourcing agreement. “The ICC cannot compel the competitive suppliers to bear the cost of this [sourcing agreement] because we are not the eligible customers,” Kevin Wright, president of the Illinois Competitive Energy Association, told GHG Monitor. “Our customers are the competitive supply customers, not the residential and small commercial customers that are still on utility supply service. We’re not regulated by the Commission. Wright added that the ICC does not have the authority to require power producers to purchase electricity from FutureGen because the facility does not fit the definition of a ‘clean coal’ facility under the state’s portfolio standard.

Durbin Calls Move a ‘Betrayal’ by Exelon

U.S. Sen. Dick Durbin (D-Ill.) a vocal advocate of the project, was quick to issue a strongly-worded statement slamming ComEd’s parent company Exelon  Corp. for challenging the project in court. “For more than two years Exelon was a member of the FutureGen Alliance and an intimate party to our state’s strategy to negotiate this historic energy research project and the 2,000 jobs it will bring to our state. Exelon sent its smiling representatives to press conferences lauding the value of FutureGen,” he said in a statement. “Then last month, Exelon abruptly resigned from the FutureGen Alliance without explanation and today we learned Exelon has filed an appeal challenging the ICC ruling which is critical part of our FutureGen strategy. This heavy-handed corporate betrayal has few parallels in Illinois history.” Durbin said he is prepared to “fight” the utility to save the project.

Durbin had sent a letter to Exelon CEO Christopher Crane last month expressing his disappointment in the utility’s withdrawal from the FutureGen Alliance’s board. “Your decision to depart from the board while disappointing will not undermine the project; however, your partnership would show the genuine commitment Exelon brings to the State of Illinois and our nation’s proven need to reduce carbon pollution,” Durbin wrote in the Feb. 14 letter. But in a response last week, Crane said the utility has become “increasingly concerned” about the rate impact of the project on its subsidiary’s customers. “Our decision not to join the project reflects our concern for the enormous financial burden the project will place on Illinois electricity consumers,” the Feb. 18 response states. Exelon said the company never officially joined the Alliance’s board, even though it began attending consortium meetings beginning in early 2010.

Phase II Work Continues

The legal challenges could prove to be another roadblock for the $1.65 billion CCS project, which has faced several challenges over the last 18 months in terms of project cost, internal politics and timing concerns. The Department of Energy recently approved a 16-month, $130 million front-end engineering and design (FEED) phase for the project, but the FutureGen Alliance cannot afford to lose any time as it races to meet project milestones and spend the entirety of its $1 billion stimulus grant ahead of the Sept. 30, 2015 federal deadline. Meanwhile, a second phase of hearings with the ICC continues as state regulators hash out details related to the oxyfuel retrofit project’s sourcing agreement.

FutureGen Alliance CEO Ken Humphreys said this week that the recent legal challenges are “part of the normal process” for such projects and are not a surprise for the industry consortium. “We expect an appellate court ruling will validate the ICC’s favorable order on the FutureGen 2.0 power purchase agreement,” he said in a statement provided to GHG Monitor. “While this process plays itself out, FutureGen 2.0 activities will continue to move forward with speed. Within the next few weeks, among other activities, the Alliance will publicly announce its CO2 pipeline routing and submit its CO2 storage permit application to U.S. EPA.”