During ?the closing hours of their spring session, legislators debated whether the state should change its rules so a Nebraska-based energy company could invest in a central Illinois coal plant using pollution-control technology.

The plan fell just shy of the votes needed, further delaying the $2.5 billion project that’s been in the works for years.

It’s the second time the General Assembly rejected the plan, making supporters question whether that’s the final straw for Tenaska Inc. to give up on constructing the proposed Taylorville?Energy Center.

“I’m not sure at this point whether Tenaska will be moving forward with their efforts,” says Dave Lundy, Tenaska spokesman. “It’s hard to construct a scenario that says, ‘Yes, it’s really worth spending more of your millions of dollars to develop this project in a state that doesn’t appear to want you there.’”

The debate isn’t just about one power plant. It includes decisions that would shape the state’s energy portfolio and environmental impact for the next 30 years. And underlying all of those issues is the question of how consumers would be affected in the meantime.

At the center of the debate is Attorney General Lisa Madigan’s office, which has a role to protect consumers. As electricity prices threaten to increase, the state’s policy decisions affect the environment. So the attorney general steps in, says Susan Hedman, Madigan’s senior policy adviser.

“The attorney general feels strongly about playing a role in shaping policy because getting the policy right going forward will protect consumers and the environment a lot more efficiently than having to bring lawsuits after the fact,” she says.

The intent of the legislation, SB?1987, is to set the standard that Illinois’ energy portfolio include coal-fired power plants equipped with technology to drastically reduce pollution. But it also would have initiated a study to find out whether it would be feasible to build the so-called clean coal plant near Taylorville. The General Assembly would then review the study before deciding whether Tenaska could break ground.

Rep. Gary Hannig, whose district includes Taylorville, sponsors the measure. The Litchfield Democrat said during floor debate last spring that the study would allow the state to take the first small but painless step to revive the state’s coal industry because the plant would be required to use only Illinois coal. It also would be required to use technologies that capture harmful carbon dioxide emissions and prevent other pollutants from being produced in the first place.

“It seems to me that this is the kind of thing that we in Illinois need to be trying to promote so that we can see the coal that lies beneath our feet used in way that’s burned cleanly, produces electricity, produces jobs, produces a tax base for us and does so in a way that doesn’t cost consumers anything more than the normal kind of coal plant,” Hannig said.

Republican Rep. Dave?Winters of Shirland opposes the legislation because he says it was rushed and tried to do too many things in one step. He says, however, that he supports the study of the pollution-reducing technologies.

“Illinois-based coal is something that I would be very supportive of, but it’s got to be a finished product. It can’t be a bowl full of ideas thrown together and stirred up and then passed. All that means is that we’ll have to come back and fix the problems,” he says. “Let’s work on it a little longer, make sure the cake is baked before we try to serve it up.”

If the legislature enacted the House version, lawmakers also would take a step toward requiring utilities to buy electricity from the clean-burning coal plant, tightening pollution standards and offering incentives to clean up existing coal plants that otherwise could go offline.

Under the proposal, if a new coal plant were active by 2015, it would have to capture about 50 percent of carbon dioxide emissions. Plants active by 2016 would have to capture 75 percent, and it goes to 90 percent for plants scheduled to be active after 2016. It also would have to limit emissions of sulfur dioxide, carbon monoxide and mercury.

If any power plants couldn’t meet the new standards, then the measure sets up a system for so-called carbon tax credits.

“Basically,” Hedman says, “you’re paying someone else not to pollute or you’re talking about planting something that will sequester carbon.”

That could include paying for the planting of a forest.

If the power plants still failed to satisfy the requirements, the attorney general could sue the owners to force them to live up to their contracts with the state.

Under the plan, as much as one- fourth of the electricity used in Illinois would be generated by clean coal facilities by January 1, 2025.

The long-term effect on consumers, however, isn’t as defined.

Winters and Rep. Kevin McCarthy, an Orland Park Democrat, both receive their electricity from Commonwealth Edison, which serves northern Illinois. They say they expect that if the plan went forward, they would hear complaints from constituents about paying for power generated in the territory of Ameren Illinois, the major utility serving downstate.

Hedman says that wouldn’t happen unless legislators first approved the results of the feasibility study, which would project the cost of the power, the impact on consumers’ bills and the amount of money that Tenaska would expect to collect over time. Consumers would not pay for anything during construction of the plant.

If the plant were built and activated, then all customers, whether they received electricity through the major utilities or through alternative suppliers, would help pay for power supplied by the plant. But ComEd and Ameren utility customers would be protected by a cap on the annual percentage increase of the cost per kilowatt-hour.

Winters and McCarthy also say they heard no guarantees that the plan would result in cheaper power or protect consumers if things didn’t go as planned.

Hedman says the House version improves protections that weren’t in the initial plan, which the Senate unanimously approved last summer. The attorney general’s office opposed that legislation.

“We were worried that the smallest consumers in the state — residential and small businesses — would have been the ones that were bearing the highest costs and the largest risks for the plant,” Hedman says.

She adds that the House version, if legislators approved the results of the study, would spread those costs across all customers in Illinois so that everyone would pay “their fair share.”

Opponents, however, are concerned that the measure would open the door to long-term contracts between utilities and power suppliers that could span 30 years.

That’s something Tenaska needs, according to Lundy, to stretch out the cost of the contract.

“You’re talking about at least a $2.5 billion project. You can’t finance $2.5 billion in three years,” he says. “It’s like trying to buy your house in three years instead of getting a 30-year mortgage.”

Per the legislation, power suppliers also would be able to retrofit old coal plants with new pollution-controlling technologies. To do that, they would be able to propose financing the projects through long-term contracts with the new Illinois Power Agency.

The General Assembly approved legislation to create the independent agency to oversee the purchasing of power. It will buy electricity on behalf of the utilities, which will then distribute it to customers. 

Hedman says the long-term contracts are intended to encourage companies to clean up old coal plants so they re-enter the mix of utilities’ energy portfolios.

“We would look at that as consumer advocates, and we would say, ‘Is this likely to be, over time, a lower cost than continuing to operate these plants and buying zillions of carbon credits every year?’”

The attorney general’s office is confident that the Tenaska legislation could become law with more discussion to help legislators digest the complicated details of the plan. They already have consensus from some key groups, Hedman says.

“Even in the short time we had available, we had agreement between the coal companies and labor and environmentalists and consumers. And it’s very rare that you get that kind of broad agreement. So, yes, we are optimistic.”

The longer legislators wait to act, the higher the risk that Tenaska could abandon ship. The state could lose an opportunity to create as many as 1,500 full- and part-time jobs related to construction and 663 jobs related to plant operations, according to a study by Northern Illinois University’s Regional Development Institute in DeKalb.

The project is not dead, however, if Tenaska pulls out, says Lundy. It would revert to the former developer, which could decide how to proceed. 

But he warns that if Illinois fails to develop clean coal power plants before the aging plants go offline, then customers could expect their bills to spike. The state would increasingly rely on natural gas plants, which generate cleaner power. But it’s far more expensive power because it’s produced during times of highest demand, such as during the summer when other types of power plants can’t keep up with air conditioning use.

“The more you rely on gas peaker plants, the more the market prices are set by the most expensive power possible,” Lundy says. “That means that the price rises that we have seen in recent years, we ain’t seen nothing yet.”

Lawmakers may have to act soon to keep the plan alive. But even if legislators push the green button to initiate the feasibility study, they still have a chance to push the red button if the plant doesn’t seem suitable to drastically change the state’s long-term energy policy.

The debate isn’t just about one power plant. It includes decisions that would shape the state’s energy portfolio and environmental impact for the next 30 years.

Bethany Jaeger can be reached at capitolbureau@aol.com.

Illinois Issues, June 2008