The decision to retire the Wood River facility is due to its uneconomic operation stemming from a poorly designed wholesale capacity market in central and southern Illinois that does not allow competitive generators to recover costs, according to Dynegy.
The current market design of the Midcontinent Independent System Operator Inc. (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, Dynegy said. Central and southern Illinois market participants operate in a state with a deregulated competitive framework and must rely on the MISO capacity auction for fair compensation. Mixing these two regimes together in the same capacity auction puts all generating units in central and southern Illinois at financial risk, regardless of fuel type, shifting jobs and the economic benefits of hosting generating plants from central and southern Illinois to neighboring states, Dynegy said.
“Wood River has been an important part of the local community for many years providing safe, reliable, and cost-effective power while also being a responsible corporate citizen,” said Robert C. Flexon, president and CEO of Dynegy. “Dynegy is committed to working with MISO, the state of Illinois, union leadership, and all stakeholders to redesign the MISO capacity market to one that properly functions and fairly compensates competitive generators or alternatively, to transition Illinois fully into PJM. Otherwise, all generating plants in the MISO portion of Illinois will face a future of financial challenge. If Wood River was located in the PJM market, like Dynegy’s northern Illinois generating units, it is unlikely this retirement would be occurring,” Flexon said.
Dynegy expects to formally file a retirement notice with MISO by December 1. This retirement notice will trigger a reliability review by MISO, which the company expects to be completed in the first quarter of 2016. If MISO determines the plant is not needed for reliability, Dynegy expects the retirement to occur in mid-2016.