Cities Ask Ohio AG to Investigate Prairie State Energy Campus

CHICAGO — A group of four city council members, including one from Cleveland, have asked the Ohio Attorney General to launch an investigation into the controversial bond-financed Prairie State Energy Campus that opened last year after cost overruns and delays.

The March 20 letter was sent after two of the utilities that are part owners of the plant disclosed that they received subpoenas from the Securities and Exchange Commission tied to the project.

Ohio-based American Municipal Power, which has a 23% interest in the coal-fired plant, and Peabody Energy Plant, the company that led initial efforts to develop the joint power agency-owned project and later sold most of its share, disclosed within the last two months that they have received SEC subpoenas.

The southern Illinois coal-fired plant, which includes a coal plant and adjacent coal mine, has come under fire for construction delays and cost overruns that drove up the price for energy beyond what public utilities had expected to pay when they bought into the project.

Public utilities in Illinois, Indiana, Kentucky, Missouri, and Ohio issued $4.5 billion of debt, up from original projections of $1.8 billion. The bonds are secured payments from more than 200 municipalities that have contracts with the project.

The letter to Ohio Attorney General Mike DeWine asks for an investigation into any potential fraud or misrepresentations that led the municipalities in Ohio and seven other states that have long-term contracts — particularly those that are locked into so-called take-or-pay contracts — to invest in the project.

“The financial impact of the project is already placing small communities under severe financial distress,” the letter, signed by representatives from the cities of Galion, Painesville, Cleveland, and Martinsville, Va., said.

“When these contracts were marketed to the communities, we were promised ‘economic and reliable’ power. However, the promises have been broken. The communities have taken on a staggering debt burden for a plant that has produced electricity at a price at least 50% over what was promised and has had a number of operational problems in its first eight months of operation.”

The municipalities are four of the 217 that entered into energy contracts with the plant. Of those, 82 communities entered into ‘take or pay’ contracts with the utility providers, including 60 from Ohio.

A spokesman for DeWine said the Attorney General has received the letter and that it is under review. It is the only request the office has received about the project and a timeline for response is uncertain, a spokesman said.

Andrew Flock, the Painesville council member who signed the letter, said it is the second time the small city of 70,000 has been forced to pay for entering into a take-or-leave contract with AMP. The city was under contract for a coal plant in Meigs County that AMP later canceled amid ballooning cost projections. Painesville, which has an annual budget of $70 million, had to pay $2.7 million toward the canceled project, Flock said.

“I voted for it because the information I was given was that Prairie State was under construction and the plant would be in operation and we would go ahead,” Flock said. “However Prairie State failed to go online at the right time and we were forced to pay,” he said, saying the city paid $602,000 for construction overrun costs. 

“AMP Ohio could have been more upfront with us about this project as well as Meigs County,” Flock added. “A lot of the communities got involved in this and I think they looked at AMP-Ohio as being in good faith and that hasn’t been the case.”

Frost said the city’s requests to meet with an AMP representative have been turned down. But the utility’s chief financial officer did meet with the Galion City Council in February, according to the letter.

At that meeting, AMP’s CFO told council members that  “the costs of the plant are so high that AMP has already decided to dip into the bond reserves of the project to reduce the monthly bills to the communities.”

The letter asks DeWine to look into the whether the municipalities were given accurate information when they signed the contracts; whether the project now threatens the stability of the Ohio municipalities; whether the project threatens “other bonding arrangements” throughout Ohio; and whether the project has been transparent.

“The scope of this PSEC power deal is just beyond the ability of the individual municipalities to properly investigate, and we look to you as a state watchdog of public funds to do so, as the results of this PSEC deal are far-reaching for our communities and the state of Ohio,” the letter says.

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