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Illinois residents sue over Prairie State coal plant

By: Jacob Barke |

Electric customers in Batavia, Ill., are suing promoters of the Prairie State Energy Campus, accusing them of misrepresenting construction and electricity costs in order to persuade the Chicago exurb to participate in the plan to build the troubled coal plant.

Nine Batavia residents are seeking class action status in their lawsuit, filed Monday in Kane County Circuit Court against the Indiana Municipal Power Agency and its CEO, Raj Rao.

The lawsuit also names a subsidiary of the Indiana Municipal Group and a Chicago consulting and engineering firm. Rao did not return a call for comment.

Delays and cost overruns have plagued the 1,600 megawatt coal plant that has since 2012 supplied electricity to public power agencies in several Midwestern states, including Missouri and Illinois. Some towns that signed on to the project say they were promised cheap coal power but are paying far more for electricity and are on the hook for a construction tab that ballooned from less than $2 billion to more than $5 billion.

The original promoter of the plant and adjacent coal mine 50 miles southeast of downtown was St. Louis-based coal miner Peabody Energy. Peabody retains a 5.06 percent interest in the campus, according to the company’s financial disclosures.

While not named as a defendant in the Batavia lawsuit, Peabody is named as a party subject to discovery, and the suit calls the Prairie State project “a scheme by Peabody to create a market for its high-sulfur, high-ash coal reserves in Southern Illinois.”

Peabody said in a statement that forecasts show that Prairie State’s electricity will be “extremely competitive” with other fuels in the long term.

The involved public power and electric cooperatives decided Prairie State was “the right project,” following “extensive research and investigating all options for new long-term power sources,” Peabody said.

Michael Duffy, a Chicago attorney representing the plaintiffs, said that the complaint could be amended to add parties subject to discovery as defendants.

The plant was promoted by several state power agencies that serve publicly owned utilities and cooperatives, including the Missouri Public Utility Alliance. The CEO of the Missouri Public Utility Alliance, Duncan Kincheloe, in May took over as interim CEO of Prairie State after the sudden departure of its last CEO. An entity of the Missouri Public Utility Alliance is also named as a party subject to discovery.

Some communities have tried to exit the contract with Prairie State. Marceline, Mo., was able to get out of its power purchase agreement last year.

The Batavia lawsuit says the city was pressured into signing a contract to buy power from Prairie State. It says the promoters did not disclose that a “capped” price for electricity was removed from Batavia’s contract and the plant was not designed for use with high-sulfur Illinois coal.

The city, which was told it would pay around $46 per megawatt hour, has ended up paying more than $100 per megawatt hour in recent months, and has spent $19.8 million more because of it, according to the lawsuit.

The lawsuit also says Peabody knew as early as 2005 the cost of the plant would be far more than originally advertised. It cites a lawsuit Peabody filed against Wisconsin Public Power Inc., which had planned to participate, where the coal company sought to void a contract and alleged a $45 per megawatt hour price would provide a “windfall” to the Wisconsin group.