Dynegy’s Ill. coal units land on the chopping block

By Edward Klump, Jeffrey Tomich | 05/04/2016 07:31 AM EDT

Dynegy Inc. followed repeated complaints about the Illinois power market by announcing its intention yesterday to shut almost one-third of the generating capacity in the southern half of the state.

The Houston-based electricity company said two units at the 1,815-megawatt Baldwin station and one at the 1,230 MW Newton station are slated to stop operations over the next year. The units are among the power plants that didn’t clear the Midwest grid operator’s recent capacity auction, according to Dynegy.

The company is asking the Midcontinent Independent System Operator (MISO) to remove 1,835 MW from the southern Illinois power market. Another 500 MW in the region could also be shut, Dynegy said, with a decision likely sometime this year. That’s in addition to the 465 MW at the Wood River station previously targeted for retirement in June.


Dynegy said some 2,800 MW of power will be lost from Illinois in all, or about 30 percent of the capacity in southern Illinois. Merchant generation in the area can’t compete under MISO’s current market design, which puts the company at a disadvantage against utilities in fully regulated states that can bid into the market at lower costs, the company said.

"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," Dynegy CEO Robert Flexon said in a statement, referring to the PJM Interconnection market. "This must change."

Dynegy indicated that it’s seeking help from leaders in Illinois state government.

"In the limited time left before closures occur, we are ready to work quickly with MISO, the state of Illinois, union leadership, and all stakeholders to rectify the situation and preserve the jobs and economic base in downstate Illinois, while continuing to provide safe, low cost, and reliable power to the region," Flexon said.

MISO will handle a reliability review on the units, according to Dynegy. The company estimated that the affected Newton unit could be shut in September, followed by one Baldwin unit in October and another next March, if they’re not needed.

Howard Learner, executive director of the Environmental Law & Policy Center, took issue with some of Dynegy’s comments.

"Dynegy appears to now be asking Illinois legislators to force consumers to pay higher utility bills to subsidize Dynegy’s old, uncompetitive power plants," Learner said in a statement. "That’s just not fair. Illinois legislators should advance policies to support investment in the new clean energy technologies that keep electricity costs affordable while creating new jobs and spurring economic growth."

The plan to phase out some coal units "is a signal of the profound shift that’s happening right now in America’s energy landscape," Jack Darin, director of the Illinois Chapter of the Sierra Club, said in a statement.

"It is essential that we invest in the livelihoods of workers and communities historically dependent on coal, and work to maximize opportunities for the skilled workforce at the plants impacted by Dynegy’s announcement," Darin said.

Dynegy also issued earnings yesterday, saying guidance for 2016 adjusted EBITDA — earnings before interest, taxes, depreciation and amortization — remains $1 billion to $1.2 billion.