Dive Brief:

• Independent generator Dynegy will decide by the end of the year whether to fully exit the MISO Zone 4 wholesale power market in southern Illinois, the company's CEO told Crain's Chicago Business this week. 

• Dynegy has 5,500 MW of generating in capacity in Zone 4, but last year announced plans to shut 1,835 MW of capacity in southern Illinois following low prices in a MISO capacity auction. 

• The plants slated for closure are all fired by coal and are struggling to compete against nuclear plants that now benefit from a subsidy passed into law by Illinois late last year. Without support for the coal plants, CEO Bob Flexon said more closures are inevitable. 

Dive Insight:

Capacity prices plummeted in MISO’s most recent capacity auction, falling to $1.50/MW-day. Last year capacity prices in six of MISO’s 10 zones hit $72/MW-day, including in Zone 4, which includes southern Illinois.

Southern Illinois is home to coal-fired and nuclear plants. Two nuclear plants owned by Exelon got a break last year when they were granted a subsidy by the state legislature.

In one iteration of the legislation, coal plants in the southern part of the state were in line for a subsidy, as well, but those provisions were removed from the final version. Now it looks like the fallout from that legislative move could see Dynegy exit the market entirely.

On Monday, Dynegy CEO Bob Flexon told a FERC technical conference that coal generation in Zone 4 would "vanish" if the nuclear subsidies continue. In a later interview with Crain's, he said the company would make a decision in the coming months on whehter it will continue to have a presence in the region. 

Last year, Dynegy said it decided to close its plants after they “failed to recover their basic operating costs in the most recent MISO capacity auction.” The move followed an earlier decision to shut its 465 MW Wood River station in June for similar reasons.

Generators, including Dynegy, in February filed a lawsuit in federal district court challenging the legality of Illinois’ nuclear subsidies.

In an interview, Flexon said that unless the nuclear subsidies are halted or the coal plants are granted some form of subsidy, more coal plant closures are likely. Flexon blamed Exelon’s subsidized nuclear plants for suppressing capacity prices in MISO.

“The governor handed Exelon a hammer, and they used it on us,” Flexon told Crain’s Chicago Business.

MISO Zone 4 has proved problematic for Dynegy in the past as well. The company's generation decision comes as it is under investigation by FERC for charges of using its market power to manipulate capacity auction prices in that MISO region. Flexon has also repeatedly criticised the MISO market, saying it is the "worst model" and "doomed to failure" at the FERC conference. 

Correction: An earlier version of this post misstated that Dynegy made an announcement to close 1.8 GW of coal generation this week. That decision actually came in May of last year.