ILL. REGULATORS APPROVE 20-YEAR POWER CONTRACT FOR FUTUREGEN

DOE Must Now Approve Phase II Application, Novation Request, Ameren Agreement 

Tamar Hallerman
GHG Monitor
12/21/12

The Illinois Commerce Commission this week approved a power procurement plan for the state that requires utilities to purchase all of the electricity generated at the FutureGen 2.0 facility for 20 years, handing the FutureGen Alliance a key victory. Regulators on Dec. 19 voted 3 to 2 to adopt the Illinois Power Agency’s procurement plan for 2013. The order requires Commonwealth Edison (ComEd) and Ameren Illinois to purchase all 166 MW of gross electricity generated annually at the $1.65 billion facility beginning in 2017, when the plant is expected to begin operations. It also allows ComEd and Ameren to collect costs for the project from the state’s alternative retail electric suppliers. A digitized record of the ICC’s order was not made available for review as of press time. Members of the Commissions did not respond to requests for comment following the decision.

The ruling removes a key hurdle for the Alliance as it moves forward on the project, which aims to retrofit oxyfuel combustion technology onto a 200 MW oil-fired unit at Ameren’s mothballed Meredosia power plant in western Illinois. The project, which received $1 billion under the 2009 American Recovery and Reinvestment Act, faced several challenges over the last 18 months when cost estimates spiraled and Ameren, the project’s utility lead, announced it would be walking back its role in the venture. In order to salvage the project, the Alliance said it identified up to $260 million in cost savings. It also applied for novation with DOE under a single cooperative agreement and negotiated an option to purchase the electric generating unit at Meredosia that will host the project from Ameren. Both of those requests must be approved by the Department of Energy.

In a statement provided to GHG Monitor following the ruling, the Alliance said it “commend[s]” the ICC for approving the project’s sourcing agreement. “The Alliance is going to review the decision over the next few days and determine next steps for the project,” the industry consortium said.

DOE Expected to Act Soon on Project Applications

With the ICC’s decision now out of the way, all eyes are now on DOE, which must now make a trio of determinations related to FutureGen that will ultimately determine the fate of the project, considered by many to be DOE’s flagship large-scale CCS demo. In addition to ruling on the Alliance’s novation request and agreement with Ameren to purchase the Meredosia generating unit, DOE must soon determine whether to approve the project’s Phase II applications. If granted by the Department, the Alliance would be able to move forward on a 16-month front-end engineering and design (FEED) work phase. The industry consortium would also be able to submit pipeline and injection permit applications to state regulators if the project is allowed to move into Phase II, Alliance CEO Ken Humphreys previously said. DOE is under pressure to make those determinations quickly given the tight timeframe developers have before the stimulus funding expires on Sept. 30, 2015.

Within hours of the ICC ruling, U.S. Sen. Dick Durbin (D-Ill.), an early supporter of the project, called for Energy Secretary Steven Chu to “quickly approve” all pending applications before the Department. “With the power purchase agreement approved, I urge the Department of Energy to move quickly to approve the FutureGen Alliance’s pending novation and execute the next phase of the cooperative agreement,” Durbin said in a letter to Chu. “The State of Illinois has acted, and once the Department of Energy finalizes the cooperative agreement, this project can formally move into the next phase—retrofitting a power plant in Meredosia. Much work has been done already.” Durbin said he met with Chu Dec. 6 to discuss the issue. 

DOE remains “committed” to demonstrating CCS technologies at commercial scale, a Department spokesperson told GHG Monitor after the ruling. “[This week’s] decision by the Illinois Commerce Commission to approve a power procurement plan is a positive step forward for the FutureGen project. DOE is reviewing the details of the ICC’s decision as well as the Alliance’s application to assume an expanded role and will make a decision about Phase II of the project in the coming weeks,” the spokesperson said.

Judge Recommended that ICC Reject Project’s Sourcing Agreement

The victory for the Alliance notably came after the ICC’s Administrative Law Judge recommended that the Commission reject FutureGen’s sourcing agreement because of its potential to raise rates for customers. The judge also highlighted what he said is a “tension” between the state’s Clean Coal Portfolio Standard—which requires that 25 percent of the state’s electricity to be generated from clean coal sources by 2025—and another statute that requires the state’s annual procurement plan to “ensure adequate, reliable, affordable, efficient and environmentally sustainable electric service at the lowest total cost over time, taking into account any benefits of price stability.”

Coal advocates in the state cheered this week’s ruling. “The ICC decision on power pricing lines up with a sequence of strong signals sent by Governor Quinn, statewide leaders and prospective host communities that FutureGen is welcome, and the project will succeed in Illinois,” a spokesperson for the Illinois Department of Commerce and Economic Opportunity, a state agency dedicated to promoting business opportunities in Illinois, told GHG Monitor. “The world is still watching. Illinois has shown its will to be a leader. We look forward to moving ahead.”