Commentary: How Prairie State puts small towns at risk

Bowling Green, Ohio. (Photo by Pierre Metivier via Creative Commons)

Bowling Green, Ohio. (Photo by Pierre Metivier via Creative Commons)

By Neocles Leontis

All across the Midwest, communities manacled to Prairie State Energy Campus are seeing their electricity rates go through the roof.

These small towns and cities, which include Paducah, Ky., Batavia, Ill., Galion, Ohio, and Bowling Green, Ohio—where I live—invested heavily in Prairie State Energy Campus after being sold a promise in 2007 of 50 years of cheap, clean, and reliable coal-fired electric power.

That promise was engineered by Peabody Energy and its utility-industry and Wall Street allies. The Prairie State Energy Campus web that ultimately ensnared so many communities came about mostly because Peabody had a mine full of dirty, low-grade coal to unload. The dream, as it was pitched, boiled down to this: Prairie State would operate off cheap coal from a Peabody mine just across the street, and the plant—in part because of its “mine-mouth” location—would be a low-cost generator providing customer communities with affordable electricity that would cost in the ballpark of $48 per megawatt hour.

Things turned out otherwise. The power that Prairie State generates is not cheap, clean or reliable. When the plant finally went online in 2012, its construction and activation costs had exceeded $5 billion, double the original projections, and its two 800-megawatt boiler systems operated erratically, resulting in frequent unplanned outages. The plant’s poor performance meant that communities like Bowling Green had to pay more for each megawatt of Prairie State power due to the high fixed costs needed to service the debt, mine the coal, and operate the plant. Prairie State, in other words, was a fiasco out of the gate, and it continues to fail to deliver power at the price promised.

In my community, households and businesses have seen their electricity rates rise to $121 per megawatt hour—which is about $1,000 annually for the average household. That may not seem like all that much on its face, but it’s a price that masks the dangers ahead. American Municipal Power (AMP), the wholesale entity through which our city receives its Prairie State electricity, and Bowling Green Municipal Utilities (BGMU), the local conduit, are hiding the full cost of the electricity the city is locked into buying from Prairie State. “Stabilization” and “levelization” schemes put in place by AMP and BGMU are obscuring the true price. AMP, for example, is borrowing money from Wall Street banks to keep our rates artificially low in the hopes that the plant might operate as promised some day and that it (and ratepayers) can recover those outlays when that happens. It’s a kick-the-can-down-the-road strategy that puts towns and cities at risk.

How did Bowling Green get into this mess?

Prairie State was marketed successfully by Peabody and AMP without adequate mention of the risks involved. Consequently, our local utility bought a large stake in the project in a take-or-pay contract that requires the city to buy 50 percent of its power from Prairie State (whether or not it’s producing, so we also end up having to buy electricity on the wholesale market). The contract is for 50 years, and a large part of the funds go to pay off the bonds that underwrote the construction of the plant. Once that debt is paid off, Bowling Green electricity users will own the power plant, the coal mine (with whatever coal is left in it) and a mountain of coal ash, whose disposal hasn’t even been factored into the prices we are paying now.

The best-case scenario for Bowling Green residents should this arrangement remain in place is for electricity rates to remain much higher than they would otherwise be, and the cost to the community and the Bowling Green economy — shocking though it may sound — will total $80 to $100 million through 2021.

There are ways out of this bad deal, though, and in Bowling Green, we’re keeping an eye on how Batavia and Paducah in particular are challenging the notion that the Prairie State ripoff is irrevocable.

Neocles Leontis is a professor at Bowling Green State University and president of Citizens for a Livable Future.

One thought on “Commentary: How Prairie State puts small towns at risk

  1. Good piece. It’s worth noting that it wasn’t just Peabody and AMP marketing Prairie State. The Illinois Department of Commerce and Economic Opportunity spent millions of taxpayer dollars subsidizing and promoting the completion of this plant through their coal development program. In Illinois, some potential customers had the authority of state government officials reminding them coal is cheap and reliable.