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Industry News

Dynegy Announces Plan to Close Coal-Fired Power Generation Units in Illinois

LCG, May 5, 2016--Dynegy Inc. announced Tuesday that it plans to close multiple coal-fueled units in Illinois. Dynegy will request that MISO remove 1,835 MW from MISO Zone 4. An additional 500 MW are targeted for shutdown, and a final determination is likely later this year. Earlier this year, Dynegy announced the 465 MW Wood River Power Station would also retire. In total, 2,800 MW of generation from Illinois are expected to be retired, which equates to approximately 30 percent of the power generation capacity in Southern Illinois.

Dynegy will close units one and three at the Baldwin Power Station and unit two at the Newton Power Station over the next year. The decision to shut down these units was made after they once again failed to recover their basic operating costs in the most recent MISO capacity auction. As part of the shutdown process, a notice filed with MISO for each unit triggers a reliability review by MISO. If MISO determines the units aren't needed for reliability, Dynegy expects to shut down operations at Newton unit two in September 2016, Baldwin unit one in October 2016, and Baldwin unit three in March 2017.

The CEO of Dynegy stated, "This is a difficult decision, and we don't take it lightly. For 40 years, the employees of the Baldwin and Newton Power Stations have generated reliable and affordable power for the people of Illinois. The men and women of these stations, just like the Wood River employees, have proudly and professionally served and safely operated these facilities for decades while contributing greatly to their communities."

Dynegy believes the MISO capacity auction is flawed because it allows regulated utilities from surrounding states to bid their capacity into the auction at little to no cost, as these regulated utilities receive higher guaranteed compensation from their respective state-regulated markets. In contrast, Central and Southern Illinois market participants operate in a deregulated, competitive market and must rely on the MISO capacity auction for fair compensation. Combining generating assets from these two different regulatory regimes into the same capacity auction puts all generating units in Central and Southern Illinois at financial risk, regardless of fuel type. This same issue also applies to the energy market, where utilities also offer their energy in at no cost and continuously dispatch their baseload plants regardless of price as they are able to pass through their variable costs to ratepayers.

"This is a losing model that exports southern and central Illinois jobs and economic base to the surrounding states resulting in a catastrophic economic outcome for downstate Illinois," said Dynegy's CEO. "As has been demonstrated repeatedly, there is a large disparity between how central and southern Illinois competitive generating stations are treated compared to generating stations in northern Illinois and MISO participants outside of Illinois. Central and southern Illinois competitive units in MISO Zone 4 are wrongly grouped with out-of-state utilities rather than the competitive power producers in northern Illinois and PJM. This must change."
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