Midwest coal plant expensive for cities, utilities-report

Aug 29 (Reuters) - A coal-fired power plant in Illinois is expected to be costly for scores of cities and electric cooperatives in eight U.S. states, according to a report on Wednesday.

The Prairie State Energy Campus, a 1,600-megawatt power station under construction near Marissa, Illinois, is way over budget and has yet to produce low-cost electricity for those cities and cooperatives that bought into the project, the report by the Institute for Energy Economics and Financial Analysis said.

The plant was developed by Peabody Energy, which shifted 95 percent of its exposure onto 217 municipalities and 17 cooperatives in Illinois, Indiana, Kentucky, Michigan, Missouri, Ohio, Virginia and West Virginia, the report said. It added that with the plant's estimated construction cost hitting as much as $4.9 billion versus an initial price tag of $1.8 billion, energy costs will rise.

"Far from being a low-cost source of energy, the first year cost of power from Prairie State is 40 to 100 percent higher than the current cost of power in the Midwest wholesale markets and is expected to remain higher than market prices for the next 10 to 13 years, if not longer," said Tom Sanzillo, the institute's finance director, in a statement.

This will result in "significant fiscal problems" for the participating communities and higher utility bills for 2.5 million ratepayers, the group said. In addition, hundreds of millions of dollars of bonds were also sold by municipal power agencies for the Prairie State project, including Ohio's American Municipal Power and the Indiana Municipal Power Agency, according to the group.

A Peabody Energy spokesperson called the report "an advocacy piece in the guise of serious research."

"Prairie State includes multiple partners, each assuming an equity position proportionate to their power needs a common approach for major projects such as this one," the spokesperson said in an email. "Ultimately, when the scorecard is complete, we firmly believe Prairie State will continue to provide reliable, clean low-cost electricity for the benefit of millions of customers in multiple states for decades to come."