CHICAGO - Batavia, Ill., officials plan to ask state Attorney General Lisa Madigan's office to examine the city's 2007 decision to purchase power from the controversial bond-financed, coal-fired Prairie State Energy Campus.
A committee-of-the-whole of the council voted this week to draft a letter requesting the probe and once final it will go before the council for approval, said city administrator Bill McGrath.
The action comes after a group of ratepayers from the Chicago suburb filed suit in the summer, seeking compensation for steep energy rate hikes and other taxes they've paid beginning in 2012 due to construction delays and cost overruns that drove up the cost of the project by more than $1 billion to $5 billion.
The Washington County, Ill. campus includes a coal-fired plant that generates 1600 megawatts of electricity, and an adjacent mine to provide the coal. Public utilities in Illinois, Indiana, Kentucky, Missouri, and Ohio issued $4.5 billion of debt to finance their ownership.
Peabody Energy Inc. initially sponsored the project and still owns a small stake along with two rural power cooperatives. As the costs for the project rose so did the costs passed along to local government users.
Batavia administrators recommended the probe and council members, many of whom were elected after the decision on Prairie State was made, agreed.
None have alleged any wrongdoing on the part of city officials who participated in the decision or the joint power agency the city partnered with to purchase power, but they want an external review of the decision given unrest among ratepayers over the higher-than-projected energy costs.
"We will ask the attorney general to examine the agreement and the events leading up the city's commitment" to purchase power through the Northern Illinois Municipal Power Agency, according to a city statement. "We don't think there was anything inappropriate or criminal or fraudulent" in the city decision but "the city wants transparency involving its decision."
City officials are hampered somewhat in publicly releasing all information related to the agreement because of confidentiality agreements. While the city must answer to ratepayers and residents who elect its council members, it is a participant in the project with a fiscal stake should any wrongdoing be uncovered that impacts the plant's status or bonds. Documents from one of the joint power agencies previously disclosed that the Securities and Exchange Commission had launched its own probe.
The complaint filed by Batavia ratepayers in Kane County, Ill. Circuit Court alleges negligent misrepresentation by five consultants and advisors Batavia used to assess whether to enter into a 28-year take-or-pay contract.
Peabody defended the long-term economics of the project in a statement after the lawsuit's filing.
The city was told the cost of power from the plant would be approximately $46 per megawatt-hour. The actual rate charged hit $179.92 per delivered megawatt-hour in November 2013. In recent months, city officials have dipped into Batavia's $2 million electric reserve funds and raised both the city's sales tax and its electric rates to offset the rising cost of power.
City losses have been heightened due to open market conditions as local governments with excess power to sell have received less than originally expected. Batavia considered selling its share in the project but could not find acceptable offers.
The project has been the subject of calls for more regulatory scrutiny by local, state, and federal authorities over how it was represented to local officials. The Paducah, Ky. Board of Commissioners recently approved a resolution demanding the Electric Plant Board, the governing body of Paducah Power System, hire an independent expert to investigate the information on which the decision to invest in the Prairie State campus was made.
Rating agencies have said even with the higher than expected costs, the project offers financial benefits over the long term as it provides a stable price and reliable source of energy. Bond investors remain protected by the sturdy protections afforded by the contracts.
