A proposed synthetic natural gas plant in Chicago could subject consumers and businesses to rate hikes regardless of the market price for natural gas.
There's a bill sitting on Gov. Pat Quinn's desk that would pave the way for a coal gasification plant on Chicago's southeast side.
Why should you care?
Because if the governor does not veto the bill by Aug. 10, you'll help pay for it for the next 30 years.
We think that Quinn should veto the bill, and here's why. It forces suburban Chicago and downstate consumers to pay for the synthetic natural gas and for the bulk of construction costs for the plant, even though it is in Chicago, through 30-year contracts signed with the utilities Ameren and Nicor.
Over the course of the 30 years, the plant could actually prove to be a good deal for consumers, but gas prices would have to increase three to four times from their present rates. Most experts don't see that happening any time soon, since gas supplies are plentiful with new techniques yielding more, but of course 30 years is a long time.
So it essentially is a gamble, with your money on the line.
The plant, which would be developed by Leucadia National Corp. at a cost of $3 billion, has some attractive aspects.
— The developers say it would use Illinois coal and other carbon-based stock to convert to natural gas to use for homes and businesses in the state, and of course the state's coal industry could use a shot in the arm, and that it would retain $10 billion in economic activity in Illinois.
— Proponents call it a "clean coal" project because it is required to capture 85 percent of emissions. Indeed, there are no emissions released through smokestacks as with traditional power plants, and Leucadia plans to move 85 percent of the carbon dioxide to other facilities outside the Chicago area through underground pipelines.
— The developers estimate the plant would create 2,000 jobs in the construction phase and 200 permanent jobs.
— It would be built on a polluted 140-acre "brownfield" site, an abandoned industrial site that will be cleaned up.
But business, environmental and agricultural groups have lined up against the project and urged Quinn to veto the bill, including the Illinois Manufacturers' Association, Sierra Club, Chemical Industry Council of Illinois, Citizens Utility Board, Grain and Feed Association of Illinois and others.
They say that the cost of the gas would be three to four times higher than what Ameren and Nicor could buy on the open market and that it would amount to an average $170 a year increase for consumers and much more for businesses. For example, opponents claim that the bill would increase gas costs for drying by an average $35,000 a year for grain elevators. They say it would amount to an $8.5 billion rate increase for consumers over 30 years.
Leucadia answers that interests of consumers and utilities are protected through a guarantee that rates would not increase more than 2 percent a year and through a $150 million escrow-type account that will increase by $50 million a year until it reaches $1.5 billion.
The proposed plant has a complicated history. Gov. Quinn approved a law a year ago for the plant that required construction to begin by 2015. Four utilities were required to purchase the gas the plant would produce: Ameren, Nicor, and People's Gas and North Shore Gas in the Chicago area. People's and North Shore bowed out because of the cost of the gas and instead opted to take a provision that allowed them to go through rate hike hearings every two years.
Leucadia is taking the position the law authorizing the plant in 2011 requires the two remaining utilities to finance nearly the entire capital cost of the plant even though no utility would be required to purchase more than 42 percent of the gas. The utilities argued that they should not be required to pay more than 42 percent of the capital costs, which would leave 16 percent not accounted for and the project not financeable.
Nicor appealed to the Illinois Commerce Commission, which sided with the two utilities.
On the last day of the spring session, the Legislature passed SB 3766, which would force the commerce commission to approve the payment plan, and it's this bill that awaits Quinn's action.
We believe that it's bad public policy to force the two utilities to pay for the capital and operating costs of the plant and to subject consumers and businesses to rate hikes regardless of the market price of natural gas. Gov. Quinn should veto the bill.