Review of the Taylorville Energy Center's Facility
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REVIEW OF THE TAYLORVILLE ENERGY CENTER’S FACILITY COST REPORT PRESENTED TO THE ILLINOIS COMMERCE COMMISSION BY BOSTON PACIFIC COMPANY, INC. AND MPR ASSOCIATES, INC. Boston Pacific Company, Inc. MPR Associates, Inc. Craig R. Roach, Ph.D. Jim Bubb, P.E. [email protected] [email protected] 1100 New York Avenue, NW, Suite 490 East 320 King Street, Suite 400 Washington, DC 20005 Alexandria, VA 22314 (202) 296-5520 (703) 519-0200 June 8, 2010 BOSTON PACIFIC COMPANY, INC. TABLE OF CONTENTS EXECUTIVE SUMMARY ....................................................................................................TAB 1 TASK 1 REPORT – A BACKGROUND REVIEW OF IGCC AND CARBON CAPTURE AND SEQUESTRATION PROJECTS TO DATE .............................................TAB 2 TASK 2 REPORT – AN ASSESSMENT OF TAYLORVILLE’S COMPLIANCE WITH THE ILLINOIS CLEAN COAL PORTFOLIO STANDARD LAW .........................TAB 3 TASK 3 REPORT – ASSESSMENT OF REASONABLENESS OF CAPITAL COSTS AND OPERATION COSTS FOR THE PROPOSED TAYLORVILLE ENERGY CENTER ................................................................................................................TAB 4 TASK 4 REPORT – ASSESSMENT OF POTENTIAL FOR THE TAYLORVILLE ENERGY CENTER TO COME ON-LINE AS PLANNED AND WITHIN THE PROPOSED TIMEFRAME ...................................................................................................TAB 5 TASK 5 REPORT – AN ASSESSMENT OF THE ABILITY TO FINANCE THE TAYLORVILLE FACILITY ..................................................................................................TAB 6 TASK 6 REPORT – A COMPARISON OF TAYLORVILLE ELECTRICITY COSTS WITH THOSE OF OTHER GENERATION OPTIONS AND AN ASSESSMENT OF TAYLORVILLE’S EFFECT ON OTHER MARKET PARTICIPANTS ....................................................................................................................TAB 7 TASK 7 REPORT – AN ANALYSIS OF THE LONG-TERM RATE IMPACTS OF TAYLORVILLE ON ILLINOIS CONSUMERS ...................................................................TAB 8 CONFIDENTIAL WORK PAPERS ......................................................................................TAB 9 i ABOUT BOSTON PACIFIC COMPANY, INC. Boston Pacific is a consulting and investment services firm, located in Washington, D.C., specializing in the electricity and natural gas industries. For 23 years we have provided information and insight to our clients who span the full range of stakeholders: state regulatory commissions, regional transmission organizations, energy consumers, competitive power producers, electric utilities, gas pipeline companies, and electric transmission companies. We are nationally recognized experts on the electricity business as documented by our service as expert witnesses throughout North America. Boston Pacific also is an industry leader in monitoring major power procurements for State Commissions across the country. And for six years we have advised the Board of Directors of the Southwest Power Pool RTO on its full range of issues. As to the specific issues addressed herein, Boston Pacific has substantial experience with and expertise in Integrated Gasification Combined Cycle (IGCC) projects. Most recently, we served as an independent advisor to the Mississippi Public Service Commission on the proposed Kemper County IGCC Project; the Mississippi Commission just set the ground rules for moving forward with Kemper. We are also currently serving as market or financial advisors to the Department of Energy’s Loan Guarantee Program on a range of technologies including gasification projects. Additionally, we have previously evaluated an IGCC project in the Northwest for the Oregon Public Utility Commission. For more information on Boston Pacific please visit us at www.bostonpacific.com ABOUT MPR ASSOCIATES, INC. MPR Associates is an employee-owned engineering services firm founded in 1964 and has provided engineering services relating to the design and operation of electric generating stations since its inception. MPR has a staff of over 200 persons located at our headquarters office in Alexandria, Virginia and other offices in Houston, TX, East Lyme, CT and Albany, NY. MPR clients include the world’s leading energy companies and financial institutions as well as various U.S. government agencies. MPR has a long history supporting the development, construction and operation of large power projects and has also supported the evaluation and development of gasification technologies and projects. We have an extensive background in commercial due diligence for project, project portfolio and corporate acquisitions. MPR has performed technical and commercial reviews for literally hundreds of energy and process facilities for commercial and government clients and have advised clients on purchase or financing of assets valued at well over $30 billion. More information about MPR Associates can be found at our website: www.mpr.com ii EXECUTIVE SUMMARY REVIEW OF THE TAYLORVILLE ENERGY CENTER’S FACILITY COST REPORT PRESENTED TO THE ILLINOIS COMMERCE COMMISSION BY BOSTON PACIFIC COMPANY, INC. AND MPR ASSOCIATES, INC. Boston Pacific Company, Inc. MPR Associates, Inc. Craig R. Roach, Ph.D. Jim Bubb, P.E. [email protected] [email protected] 1100 New York Avenue, NW, Suite 490 East 320 King Street, Suite 400 Washington, DC 20005 Alexandria, VA 22314 (202) 296-5520 (703) 519-0200 June 8, 2010 BOSTON PACIFIC COMPANY, INC. TABLE OF CONTENTS I. INTRODUCTION AND BACKGROUND ............................................................................ 1 A. Key Substantive Requirements of the Illinois Clean Coal Law .......................................... 2 B. Key features of the Taylorville proposal ............................................................................. 3 II. CAN THE TAYLORVILLE FACILITY BE BUILT WITHIN THE SCHEDULE AND BUDGET PRESENTED IN THE FACILITY COST REPORT? ........................................... 5 A. Construction Schedule ......................................................................................................... 5 B. Capital Cost Estimate ........................................................................................................... 5 C. Operations and Maintenance Cost Estimate ........................................................................ 7 D. Fuel Supply Estimate ........................................................................................................... 8 III. WILL THE TAYLORVILLE FACILITY PERFORM AS PLANNED? ............................... 9 A. Facility Performance ............................................................................................................ 9 B. Reliability and Availability ................................................................................................ 11 C. Environmental Performance .............................................................................................. 12 D. Power Deliverability .......................................................................................................... 13 E. Hybrid vs. Conventional Integrated Gasification Combined Cycle .................................. 13 IV. HOW MUCH WILL ILLINOIS CONSUMERS BE CHARGED FOR ELECTRICITY FROM TAYLORVILLE? ..................................................................................................... 15 A. Capital Revenue Requirement ........................................................................................... 15 B. Total Net Revenue Requirement ........................................................................................ 16 V. WHAT ARE THE RISKS WITH TAYLORVILLE AND WHO BEARS THEM? ............. 18 A. Natural Gas Price and Carbon Regulation Risk ................................................................. 18 B. Capital Cost Overrun and Escalation Risk ......................................................................... 20 C. Operating Performance and Cost Risk ............................................................................... 20 D. Combination of Risks ........................................................................................................ 21 E. Implications of Risk ........................................................................................................... 22 VI. HOW DOES TAYLORVILLE’S PRICE FOR ELECTRICITY COMPARE TO THAT FROM OTHER NEW POWER PLANTS? ........................................................................... 24 VII. WILL TAYLORVILLE’S PROPOSAL COMPLY WITH THE ILLINOIS CLEAN COAL LAW? .................................................................................................................................... 26 A. Prudent and Reasonable? ................................................................................................... 26 B. Rate Impact Limit Met? ..................................................................................................... 26 C. At least a 50% reduction in carbon dioxide emissions? .................................................... 27 i BOSTON PACIFIC COMPANY, INC. D. A nameplate capacity of 500 MW or more? ...................................................................... 27 E. Uses primarily coal? .......................................................................................................... 27 F. Initial Clean Coal Facility provides 5% of Illinois power? ............................................... 27 G. Pass through revenue and financing benefits? ..................................................................