Clean Coal Portfolio Standards Law: Impact on Third Party Suppliers - PowerPoint PPT Presentation


PPT – Clean Coal Portfolio Standards Law: Impact on Third Party Suppliers PowerPoint presentation | free to download - id: 6eb8f4-YWY3Z


The Adobe Flash plugin is needed to view this content

Get the plugin now

View by Category
About This Presentation

Clean Coal Portfolio Standards Law: Impact on Third Party Suppliers


Clean Coal Portfolio Standards Law: Impact on Third Party Suppliers & Large Electric Customers IIEC Annual Meeting Kevin Wright President ... CA Analysis: If the ... – PowerPoint PPT presentation

Number of Views:12
Avg rating:3.0/5.0
Slides: 18
Provided by: Owne2452
Learn more at:


Write a Comment
User Comments (0)
Transcript and Presenter's Notes

Title: Clean Coal Portfolio Standards Law: Impact on Third Party Suppliers

Clean Coal Portfolio Standards Law Impact on
Third Party Suppliers Large Electric Customers
  • IIEC Annual Meeting
  • Kevin Wright
  • President
  • Illinois Competitive Energy Association
  • June 16, 2010

Overview of ICEA and Competitive Suppliers
  • ICEA members include Ameren Energy Marketing,
    Champion Energy, Constellation NewEnergy, Direct
    Energy, Exelon Energy Company, Integrys Energy,
    MC Squared Energy, and Nordic Energy Services.
  • Our customers include manufacturers, retail
    merchants, small businesses, the State of
    Illinois and other governmental units, school
    districts, park districts, cultural, religious
    and sporting facilities, hospital, hotels,
    restaurants, ranging from Main Street to the
    Fortune 500.
  • ARES provide more than half of the electricity
    consumed in Illinois over 74 of commercial and
    industrial, governmental and other
    non-residential load is served by ARES. The
    states largest CI customers procure 97 of
    their electricity from ARES.

Clean Coal Portfolio Standard Law (CCPSL)SB
1987, P.A. 09-1027, 1/12/09
  • CCPSL encourages advanced clean coal technologies
    that capture and sequester CO2 emissions to
    advance environmental protection goals and to
    demonstrate viability of coal and coal-derived
  • Initial Clean Coal Facility is narrowly defined
    so that Tenaskas TEC is the initial clean coal
    facility CCPSL goal By 1/1/25, 25 of
    electricity used in State shall be generated by
    cost-effective clean coal facilities.
  • CCPSL implicitly requires 100 of TECs output be
    purchased by Illinois utilities and ARES through
    long-term PPAs up to 30 years.
  • CCPSL provides a 2.015 rate cap for utility
    served customers, but provides NO rate cap for
    ARES served customers.

Status of Tenaskas TEC Project
  • CCPSL requires TEC to submit a Facility Cost
    Reportincluding a FEED Study, facility costs,
    financing method, OM coststo ICC, IPA, and GA.
  • TECs FCR submitted to ICC on 2/26/10 ICC has 6
    months, in consultation with its expert and IPA,
    to submit a report to the Legislature setting
    forth its analysis of the TEC FCR.
  • ICC Report shall include, but not be limited to
  • a comparison of costs associated with electricity
    generated by other types of generation
  • an analysis of the rate impacts on residential
    and small business customers over the life of the
    sourcing agreements (NB Rate Impact to CI
    customers is not required)
  • an analysis of the likelihood that the initial
    clean coal facility will commence commercial
    operation and be delivering power to the
    facilitys bus bar by 2016.

Status of Tenaskas TEC Project (cont.)
  • CCPSL provides that GA, based on the FCR and ICC
    Report, must enact authorizing legislation
  • price, stated in cents per kwh
  • project impact on residential small business
    customers bill (NB CI Customer Rate Impact is
    NOT Required)
  • maximum allowable ROE for project (CCPSL 11.5
    ROE and 55 debt-45 equity ratio)
  • ICC provided a comment period for interested
    parties comments will be attached to ICCs
    Report to the GA. ICC Report to GA possibly in
  • The STOP (Stop Tenaskas Overpriced Power)
    Coalition, comprised of ICEA, business groups,
    and trade associations, submitted comments
    including a Christensen Energy Consulting
    Associates (CA) analysis of TECs FCR.

STOP Coalition Comments--CA Analysis
  • TEC Will Result in Significant Electric
    Increases for Illinois Electric Customers.
  • TECs Cost Report If the TEC were built on time
    and on budget, it could cost electricity
    customers an average of 386M more per year for
    30 years (or about 11.6B) over power from other
  • But additional Cot are Excluded from the TEC
    Cost Report
  • CA Analysis If the costs of building and
    operating TEC are higher than expected and if
    certain revenues are lower than forecasted,
    Illinois electricity consumers could plausibly
    pay 100M more per year over 30 years than is
    suggested in TECs Cost Report projections.
  • And, TECs costs could be even higher for Illinois
  • TECs Cost Report If TEC were unable to store its
    captured CO2 either by delivering it through the
    proposed Denbury pipeline or by sequestering it
    on-site, consumers would bear an additional
    137M in costs per year on average over 30 years.

Significant Rate Increases to Illinois Electric
  • Rate Impact of TECs Above-Market Electricity
  • At best, utility served customers will pay an
    average of 152M per year b/c of the rate cap
    ARES served customers will pay b/t 140M to 244M
    of this burden b/c there is NO rate cap
    protection for C I customers.
  • CA Analysis TECs CR incorrectly applies the
    benchmark 2009 rate for residential and small
    commercial customers to ALL load served by
    utilities and ARES. This flaw significantly
    understates the rate impact on ARES served
    customers. ARES customer rates will rise b/t 3.0
    and 7.1.
  • BOTTOM LINE Retail businesses, manufacturers,
    government agencies, schools, hospitals, hotels,
    and other entities vital to the Illinois economy
    will be saddled with all of the remaining
    above-market costs beyond the utility rate cap,
    costing businesses hundreds of millions of
    dollars per year at a time when they can least
    afford it and causing irreparable harm to the
    competitive electric market in Illinois.

TECs Green Benefit Is Speculative At Best
  • The proposed Denbury pipeline is in grave
    legislative trouble and underground storage of
    CO2 is unproven.
  • KY and IN failed to enact legislation to move
    forward the Denbury pipeline to transport 50 of
    the CO2 from TEC to the Gulf of Mexico.
  • Alternative mechanisms for CO2 sequestration are
    just as uncertain geologic sequestration costs
    much more than the pipeline and its feasibility
    is unproven.
  • CA Analysis Absent these 2 options, CO2 disposal
    would cost billions and significantly increase
    costs to Illinois ratepayers.

Net Negative Impact on Jobs and Illinois Economy
  • TECs Report claims significant jobs creation
    benefits b/c of TECs construction and operation.
  • CA Analysis However, the study only examines the
    gross impacts to build and run the plant. What
    really matters is the net impact on job creation.
  • The report completely overlooks the negative
    impact of an increase in electric rates on the
    broader Illinois economy and job outlook.
    Moreover, some of those jobs would be created
    elsewhere in Illinois if TEC were not built.
  • CA Analysis The net impact to the Illinois
    economy from forcing consumers and businesses to
    purchase high cost, above-market generation is
    the real issue. The result will make Illinois a
    less attractive place to do business and will
    reduce business investment and jobs.
  • CA Analysis When both positive and negative
    consequences are considered, the TEC project will
    result in a net job and income loss for IL.

What Others Are Saying About the TEC Project
ComEd/Northbridge Report
  • BOTTOM LINE TEC is a step backward in the
    attainment of the states environmental goals,
    will not appreciably advance the goal of
    demonstrating the viability of coal since it
    depends so heavily upon purchased natural gas and
    fails to protect consumers from the risk of
    paying exorbitant amounts for the energy from the
  • TEC Does Not Advance the Goals of the Clean Coal
  • TEC Will Emit 50 More CO2 Than a Comparable
    CCGT Facility
  • A CCGT Facility Would Displace 50 More CO2 Than
  • 35 of Energy Generated by TEC Will be Fueled by
    Purchased Natural Gas
  • The cost from TEC is more than twice the
    expected future cost of comparable supply
    procured from the PJM market it is 50 higher
    than the expected future cost of energy from a
    CCGT Facility.
  • Illinois consumers must bear the cost of this
    very expense source of energy and bear all the
    risk that the price could rise significantly

ComEd/Northbridge Report
  • Tenaskas Proposed Sourcing Agreement Ignores the
    Consumer Protections Contained in the Clean Coal
  • TEC is Extremely ExpensiveWith Lifetime
    Above-Market Costs Projected at 8.7 Billionand
    Its Costs are Uncertain
  • Tenaskas Circulated Sourcing Agreement ignores
    each and every one of the consumer protections
    enacted by the GA It proposes a full cost
    recovery mechanism, not a per kilowatt-hour
    price does not provide for ICC review/approval
    in price changes and effectively circumvents the
    cap on the amount of costs that can be charged to
  • The Commission and the General Assembly Should
    Consider All of Their Options Before Approving
  • Other clean coal projects are underway in
    Illinois TEC will use up all available funding
    for clean coal facilities GA should consider the
    one project which advances the Acts goals at the
    least cost to customers.

What Others Are Saying About the TEC Project
Sierra Club/Schlissel Technical Consulting Report
  • BOTTOM LINE TEC does not reasonably demonstrate
    that the proposed facility will only have a minor
    impact on the bills of Illinois electric
    ratepayers. Its claims and conclusions and its
    supporting analyses are biased in favor of the
    proposed Taylorville facility by a number of
    extremely optimistic assumptionsTenaska will not
    bear any significant risks from TEC. Instead,
    the ratepayers of the states investor-owned
    utilities and alternative electric suppliers will
    bear the main risks and burdens of the project.
  • Tenaska assumes that TECs rate impact will be
    heavily mitigated by revenues from the sales of
    SYN gas, CO2, sulfur, NOx allowances and plant
    capacity. Tenaska does not offer any guarantees
    that these revenues actually will be obtained.
    Instead, the risks associated with these sales
    are passed along to the ratepayersthrough
    30-year sourcing agreements.

Sierra Club/Schlissel Technical Consulting Report
  • The Rate Impact Analysis results are heavily
    biased by the assumption that TEC will achieve
    extremely low heat rates and that TEC will
    achieve high annual capacity factors, which is
    dependent upon the technology performing well and
    Tenaska obtaining must run status.
  • The analysis is distorted by the assumption of
    high natural gas prices the FCR significantly
    understates the potential for higher coal prices.
  • The FCR is not persuasive in its claim that TEC
    will capture more than 50 of the CO2 that would
    otherwise be emitted Tenaska assumes a very low
    cost for sequestering the CO2 from TEC.
  • The overall reductions in regional CO2 emissions
    attributable to the proposed TEC may be
    significantly overstated.

What Others Are Saying About the TEC Project
Doug Whitley, IL State Chamber President
  • Clean Coal projects hold promise for Illinois
    economy. However, the state cannot afford to
    build cleaner coal projects (or other energy
    projects for that matter) at any cost to
    consumersespecially business consumers.
  • Tenaska is attempting to have the entirety of the
    investment underwritten and secured by a
    legislative mandate that electricity customers in
    Illinois buy power from the project no matter how
  • The current plan Tenaska is pitching will result
    in above-market costs of electricity and a
    subsequent, negative impact on job creation that
    could outweigh the job creation benefits of
    building the plant.
  • BOTTOM LINE No one hopes more than I do that
    cleaner coal plants find the technological,
    economic and environmental sweet spot to make
    them viable in our state. But giving a private
    entity a guaranteed long-term rate on the backs
    of thousands of business customers in our state
    isnt the answer.

What Others Are Saying About the TEC Project
Greg Baise, IL Manufacturers Assoc. President
  • Illinois businesses have been hit hard by the
    recession and this is not the time to consider
    unnecessary increases in electric rates to make a
    private venture viable.
  • BOTTOM LINE The 4,000 businesses across this
    state that I represent will have little
    patience for any legislation that raises energy
    costs needlessly.

What Others Are Saying About the TEC Project
Gary Hickey, Forsyth, IL--Private Citizen and PE
  • The TEC project should be terminated ASAP, based
    on its lack of value as a demonstration project
    and its devastating economic impact to Illinois
    consumers. Each of the TECs 385 permanent jobs
    will cost 730,943 per year or 281,420,040 in
    higher electric rates.
  • TECs plant cost is already 45 more than the
    Clinton Nuclear Power Station All-in cost of
    TEC plant is 3.5B. Summertime rating is 533MW or
    6,604 per kilowatt. Clinton is 4.25B for 933MW,
    or 4,555 per kilowatt.
  • TECs true economic impact is masked by how the
    proposal is packaged
  • BOTTOM LINE Assuming a new based load plant is
    even needed, the least cost base-load capacity
    alternative to the IGCC facility is a combined
    cycle natural gas plant.

Tenaska/TEC Take-Away Messages
  • TECs Formula Increased Electricity Costs Job
    Loss Environmental Risk
  • Commercial and industrial customers, the engine
    driving Illinois economy, will bear a highly
    disproportionate cost to subsidize this unproven
    project from Nebraska-based Tenaska, the 16th
    largest privately-owned company in the US.
  • From rate impacts, to job creation benefits, to
    environmental outcomes, the TEC Cost Report
    consistently offers scenarios that put TEC in the
    best possible light and that mask the full range
    of rate impacts to all consumers that the TEC
    plant project could impose.
  • The TEC project is bad public policy and is