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Co-ops building a new generation of power plants to meet growing demand.

America is in a time of transition, and it's a painful one.

We're going from a period of unlimited electricity supply to a time when the supply will be tighter and the price will be higher. Some blame deregulation of the electric industry. Others say the problem is simply an imbalance between supply and demand caused by our growing appetite for electricity.

The booming digital economy, increasing population and soaring temperatures created a power drain on the entire system. At the same time the uncertainties deregulation brought to the marketplace kept most utilities from investing in new power plants and transmission line. Nobody knew if a multi-million dollar investment in a power plant would pay off in a deregulated market. A low-risk, blue chip business had suddenly become high risk.

With shortages looming, the electric co-ops of Illinois are taking positive action to see that their members have the electricity they need, at a price they can afford.

The well-publicized electricity shortfall in California last summer forced the closing of colleges, office buildings and industrial plants, to route power to other vital areas and keep the power grid running. New York and Arizona have found themselves in similar situations. Blackouts and brownouts threatened many areas of the U.S.

Here in Illinois the summers of 1998 and 1999 were real energy-supply nail-biters, and some utilities used load controls and pre-planned service interruptions to avoid brownout conditions.

With that in mind, Illinois cooperatives are dealing with the problem before it gets worse. Several Illinois co-ops hope to provide better system reliability, and more stable rates, by building new power plants and/or upgrading existing ones. Some are building fairly substantial units, while others are installing small peaker plants, which are smaller generators, used to supplement electrical power during periods of high usage.

Corn Belt Energy Corporation

(CBEC), Bloomington, is doing both. Ron Hopkins, director of distributions/automation and regulatory affairs for the co-op explains how Corn Belt Energy is working to insulate its member from price shock.

"Over the last couple of years, he says, "Illinois has seen problems like California has had, but on much smaller scale. The availability of generation has been very limited and as a result, that spurred us on."

CBEC plans to build a new 91-megawatt coal-fired plant near Elkhart, in Logan County. The plant will cost some $137 million, and will use cutting-edge technology to burn high-sulfur Illinois coal cleanly.

The new plant will be a boon the Elkhart area. Hopefully this demonstration of clean coal technology

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Employees

Corn Belt Energy Corporation's decision to build a coal-fired plant at Williamsville will help assure job security to such miners as Kevin Hawley, left, and Ted Hall. It will also help the co-op shield its members from rate spikes and demonstrate clean coal technology.

will have an even bigger economic impact for Illinois coal, long thought to be too "dirty" to burn without violating antipollution laws. It will be the first coal-fired plant built in Illinois in 14 years.

While smaller than the average coal-fired power plant, the unit will be big enough to provide most of the power required by the co-op's 26,000-plus members.

Jeff Reeves, president/CEO of Corn Belt, notes that most of the funding for the plant is locked in. "We're working closely with local, state and federal officials," he said, "and we believe we've covered our bases. There are still a few hurdles to overcome, but we believe everything is going to fall into place."

The plant will be built on Turris Coal Company property, will receive its coal from that firm, and will provide electricity for the mine. The plant is expected to generate 24 full-time permanent positions and use about 380,000 tons of coal a year. The plant will also create hundreds of construction jobs during the building phase.

CBEC also installed five two-megawatt diesel generation plants on its system this summer. The co-op was careful to place its units at co-op substations so they would provide minimal impact on the public.

Hopkins adds that the plants could provide power for sale, if the economics dictate such sales.

As the deregulated market environment makes its presence felt, co-ops are seeking to offer their members more options and convenience. That's one reason CBEC has become a marketer through NICOR, a major natural gas supplier in the northern third of Illinois.

Dave Hawkinson, director of marketing and public affairs for CBEC, says, "Our relationship with NICOR has allowed us to expand our member base, and we're providing electricity as well as natural gas to some of our customers, which we couldn't do before. Another benefit is that CBEC customers can select just one bill for both electricity and natural gas."

But will the cooperative enter a deregulated electricity marketplace? According to Ron Stack, vice president of utility services, Corn Belt's board has gone on record as saying it wants to give the members a choice, but, he says, "We haven't made any decision to go out into any other service territory yet."

Perhaps Hawkinson sums it up best when he says, "Corn Belt Energy is a forward-looking and has a vision for meeting a number of energy needs for our members through natural gas, propane and electricity."

Southwestern Electric Cooperative

(SWEC) in Greenville is working hard too. That co-op recently sunk some $25 million into a new generation facility that is described as a peaking facility, although it's far bigger than most. Kerry Sloan, SWEC's CEO, notes that part of the reason is to take advantage of those astronomical prices during times of high demand, since SWEC has a power contract with another supplier that keeps it from using its own power until 2004.

The co-op decided to build for a basic, member-driven reason: low long-term costs for the membership.

Employees

Southwestern Electric's Freedom Power Station

This generating station is intended to help buffer the co-op's members from rising electricity costs. Pictured in the foreground are, from left, Kerry Sloan, executive vice president and general manager, David Boone, director of business development and marketing, and Lou Drenner, general manager of the power plant.

JANUARY 2001 ILLINOIS COUNTRY LIVING 11


Breaking ground

SIPC power plant south of Marion

Ground was broken for a new plant on October 27, at the site of the Southern Illinois Electric Cooperative (SIPC) power plant south of Marion. SIPC will upgrade its old boilers and will build a peaking plant. Wayne Davis, left, shift manager at the plant, and Robert Tiberend, chairman of the board of SIPC, turn a shovelful of dirt. Tim Reeves, SIPC president/CEO, and Richard Moss, board member, look on.

"We didn't want our members to be at the mercy of an unpredictable wholesale power market for the next 10 years," Sloan says, "and our ability to generate power will help us weather the price fluctuations on the open market."

While those distribution co-ops are getting into generation, the granddaddy of Illinois electric generation and transmission (G&T) co-ops is getting ready to make a $200 million upgrade to its facility.

Southern Illinois Power Cooperative

(SIPC) has been generating electricity at its plant south of Marion for nearly 40 years, and it's set to add capacity in a big way. SIPC will replace three outdated boilers used since the plant was built, and will use a circulating fluidized bed boiler to continue burning Illinois coal cleanly. The new system will deal with the sulfur that makes Illinois coal so costly to burn, as well as lowering the nitrogen oxide (NOx) emissions.

Timothy W. Reeves, manager of SIPC, notes that the Marion plant will be one of the first in the state to use the new emissions technology, which is common in Europe. While the power co-op will receive a $1 million grant from the Clean Coal

Review Board, the project will still pose a major expense, and the six member-cooperatives involved will see fairly minor rate hikes in the near future. SIPC also has plans to build two 70-megawatt combustion turbines, or peakers, near the current plant. These additions in generating capacity will allow SIPC to serve three new distribution co-ops and provide stable long-term rates to all six co-ops.

In addition to providing electricity for southernmost Illinois, the plant provides jobs for people and tax revenues for area governing bodies. It's projected that the plant will pay out more than $330 million in federal, state and local taxes, and will pump $433 million into the economy in the form of employee payrolls. In addition, indirect economic impact will amount to 1,350 jobs and $215 million annually.

"We originally started generating power in 1963, with three 33-megawatt coal-fired units," Reeves says. "Those units have begun to age, and they're not as reliable as they should be. And another issue facing us today is the new pollution control laws, in particular the sulfur dioxide restrictions, which deal with the amount of sulfur released when the coal is burned. NOx, which comes out with the flue gas, is also a problem.

Power plant

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Light bulb "We've looked at several alternatives to address those problems. We decided to build a new fluidized bed boiler to replace the three small boilers on the 33-megawatt units. With that, they should be extremely reliable.

"Our second project is to remove NOx from unit four, which, at 173 megawatts is our biggest unit. We're going to have to install a scrubber to accomplish that", says Reeves.

The distribution co-op members served by SIPC are:

SouthEastern Illinois Electric Eldorado
Egyptian Electric Steeleville
Southern Illinois Dongola
Monroe County Electric Waterloo
Tri-County Electric Mt. Vernon
Clinton County Electric Breese

Soyland Power Cooperative

Before the summer of 1999 Soyland Power Cooperative added four combustion turbine peaking units. The 100 megawatts of new capacity was added in record time and will save an estimated $1.5 million in power cost during a normal summer's peak demand season. All four turbines will burn natural gas but can also use #1 fuel oil.

This spring Soyland Power joined Allegheny Electric Cooperative, another G&T based in Harrisburg, Pa., to form Continental Electric Cooperative Services (CCS). "We're creating a G&T approximately 50 percent larger in size with a much larger market presence," says Frank M. Betley, president and CEO of Allegheny Electric. "This alliance makes sense on several levels," adds Joseph Firlit, retiring President/CEO of Soyland. Soyland owns 168 megawatts and Allegheny owns 241 megawatts of generating capacity.

"By increasing size and negotiating power, CCS will be well-positioned to better achieve our original G&T mission — providing a reliable source of power for cooperative consumers at the most competitive price," says James Coleman, Soyland board chairman and President/CEO of Shelby Electric Cooperative, Shelbyville.

The distribution cooperative members of Soyland are:
Adams Electric Camp Point
Coles-Moultrie Electric Mattoon
Eastern Illini Electric Paxton
Farmers Mutual Electric Geneseo
Illinois Rural Electric Winchester
McDonough Power Macomb
M.J.M Electric Carlinville
Menard Electric Petersburg
Rural Electric Convenience Auburn
Shelby Electric Shelbyville
Spoon River Electric Canton
• Western Illinois Electrical Carthage

EnerStar Power Corp

Enerstar and CMS Energy Corporation have announced plans to build, own and operate a 400-mega-watt power plant serving EnerStar Power's co-op members. In addition, EnerStar has signed a long-term agreement with CMS Energy's marketing unit, CMS Marketing, Services and Trading, under which CMS-MST will become the principal energy supplier to EnerStar for the next 10 years.

The $120 million, natural-gas fueled combustion turbine power plant will be built on a reclaimed coal mine site east of Tuscola. EnerStar and CMS Energy have obtained endorsement of the project by the Douglas County Board of Commissioners and have started environmental permitting efforts with the Illinois Environmental Protection Agency.

EnerStar and CMS Energy will work together over the next 18 months to secure permitting, begin construction, and bring the plant into commercial operation.

EnerStar will own one-third of the project. CMS Energy will own the rest, and will operate the plant.

Tom Hentz, president/CEO of EnerStar, explains why the co-op plans to build. "As we told our cooperative's members at the last annual meeting, we need a diversified power supply portfolio in order to control our power supply costs. We've seen the risk involved in the new deregulated market and one way to control risk is by diversifying. We also want to control our own destiny and one way to do that is to own a portion of our own generating plant."

EnerStar is also the first cooperative in Illinois to become a certified Alternative Retail Electric Supplier (ARES). Under the Customer Choice Law, EnerStar now delivers electricity to retail customers outside its certificated service area.

While all these projects serve different purposes, they all have one thing in common. They're intended to provide members of the co-ops with better, more reliable power, at prices as low as possible. That's what electric co-ops have been about for the last 65 years.

For more information about AIEC and it's member cooperatives visit us at: www.aiec.org

JANUARY 2001 ILLINOIS COUNTRY LIVING 13


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