Utility sued over Southern Illinois power plant

ST. LOUIS -- Peabody Energy Corp. is asking a judge to settle a dispute with a Wisconsin power supplier over a $2.5 billion coal-fired power plant planned for Southern Illinois.

Wisconsin Public Power Inc. has argued that its deal with St. Louis-based Peabody entitles it to buy electricity at a fixed price from the proposed Washington County, Ill., plant for 25 years starting in 2010, according to a lawsuit filed in St. Louis Circuit Court.

But in asking the court to enforce its interpretation of the deal, Peabody counters that a letter of intent drawn up last year between the parties isn't binding.

And Peabody said the cited price "would result in a massive windfall for (WPPI) and corresponding financial burden" for the project because its cost has risen sharply.

WPPI, based in Sun Prairie, Wis., supplies power to 40 municipalities that sought to be a partner in the Prairie State Energy Campus. The company signed the letter of intent to buy a 6 percent stake in the Prairie State project in exchange for 99 megawatts of output.

That deal was amended late last year so the company could buy the electricity even if regulators in the state barred it from taking an ownership stake.

In March, Wisconsin utility regulators approved of WPPI's involvement in the project.

WPPI spokeswoman Anne Rod¿riguez said the company had no comment on the lawsuit.

Messages left Wednesday with Peabody spokeswoman Beth Sutton were not immediately returned.

The Prairie State project, which also will include a nearby coal mine that will supply fuel for the 1,600-megawatt plant, was proposed five years ago. But delays getting required environmental permits have held off construction.

The Sierra Club and other environmental and public health groups have argued the plant would worsen air pollution -- releasing high levels of sulfur dioxide, mercury and other pollutants -- and harm visibility in southeast Missouri's Mingo National Wildlife Refuge.

Peabody has said construction should begin in 2007 and take about four years to complete.

Peabody has partnered with Michigan-based utility holding company CMS Energy Corp. to develop the project.

Under terms of that deal, CMS Energy subsidiary CMS Enterprises and Peabody each will own 15 percent of the project through a shared limited liability company. Other stakes will be held by various Midwest utilities and cooperatives.

More than half the plant's output from its dual 800-megawatt units has been spoken for by a consortium of six Midwest utilities, Peabody has said.

Peabody expects the project to create 450 permanent jobs and pump some $100 million into the local economy each year.

Electricity from the plant would be distributed through the Illinois power grid and transmitted to Midwest communities and other energy suppliers.