a facility that emits less than 250 tons per year (TPY) is considered a “minor” source

under current State and federal environmental regulations. Many of the proposed

peaker plants are being permitted to allow for emissions just under this threshold and

are intended to emit much less than that. Due to their “peaking” nature, however, the

Board finds that these plants are unique. They can emit most, if not all, of their

permitted annual amount of emissions during a concentrated period of time. This

period is generally the summer months when the ozone risk is greatest.

The Board recommends that the Illinois Environmental Protection Agency

(IEPA) and the Board engage in rulemaking pursuant to the Environmental Protection

Act (Act), 415 ILCS 5/1

et seq

. (1998), to consider requiring these plants to use the

Best Available Control Technology (BACT) to control their air emissions. BACT is a

federally-derived regulatory methodology intended to determine the maximum degree to

which air emissions can be reduced in light of energy, environmental, and economic

impacts. In Illinois, BACT only applies to “major” sources, which are generally those

that emit 250 TPY or more.

In addition, the Board recommends codifying two practices that IEPA Director

Tom Skinner, in his administrative discretion, implemented to respond to public

concern over the proliferation of peaker plants: dispersion modeling and public

hearings for all proposed peaker plant construction permits.

Dispersion modeling is intended to ensure that peaker plant air emissions do not

cause or contribute to a violation of the National Ambient Air Quality Standards

(NAAQS). While not required for minor sources, IEPA has recently been requesting

this modeling information from peaker plant permit applicants during the permit

process. The modeling should use conservative parameters to determine the worst-case

impact, including any cumulative impact due to the clustering of peaker plants.

Noise Emissions

The Board first finds that a peaker plant can be a very loud noise source.

Without adequate noise controls, peaker plants can greatly exceed the Board’s numeric

noise standards. The Board also finds that Illinois’ current noise regulations are

adequate to address most concerns. Nonetheless, the Board recognizes that a gap exists

in current Illinois noise regulation. While Illinois has strict noise standards, IEPA does

not currently have a program in place to ensure at the time of air permitting that

facilities will meet the noise standards. The Board recommends remedying that

problem.

Siting

As to whether peaker plants should be subject to siting requirements beyond

local zoning, the Board stops short of making any specific recommendation on siting.

---

Instead, the Board provides the Governor with an informed discussion of the concerns

raised and potential solutions.

---

BACKGROUND

Governor Ryan’s Request

Citing the recent proliferation of peaker plants in Illinois, Governor Ryan asked

that the Board hold inquiry hearings on the following issues:

1.

Do peaker plants need to be regulated more strictly than Illinois’ current air

quality statutes and regulations provide?

2.

Do peaker plants pose a unique threat, or a greater threat than other types

of State-regulated facilities, with respect to air pollution, noise pollution, or

groundwater or surface water pollution?

3.

Should new or expanding peaker plants be subject to siting requirements

beyond applicable local zoning requirements?

4.

If the Board determines that peaker plants should be more strictly regulated

or restricted, should additional regulations or restrictions apply to currently

permitted facilities or only to new facilities and expansions?

5.

How do other states regulate or restrict peaker plants?

The Completed Proceedings on Peaker Plants

The Board opened this docket, R01-10, by order on July 13, 2000. Board Hearing

Officer Amy Jackson conducted seven days of public hearings at five different locations

throughout the State: August 23 and 24, 2000, in Chicago; September 7, 2000, in

Naperville; September 14, 2000, in Joliet; September 21, 2000, in Grayslake; and

October 5 and 6, 2000, in Springfield. All seven Board Members were present for each

day of hearing. Over 80 persons testified at these public hearings, including individual

citizens, representatives of citizen groups, representatives of State and local government,

and representatives of industry. A list of all hearing participants is attached as Appendix

B. The Board appreciates the thoughtful participation of each of those persons.

Each hearing was transcribed by a court reporter, which resulted in nearly 1,300

pages of transcripts. Hearing Officer Jackson admitted 69 hearing exhibits into the

record, a list of which is attached as Appendix C. The Board also received 195 written

public comments, a list of which is attached as Appendix D. The Board accepts all of

those public comments into the record of these proceedings and thanks each of those

commentors for their insightful remarks.

Simple Cycle and Combined Cycle

---

Peaker plants are facilities that generate electricity during periods of peak

electricity demand. The period of peak demand mainly occurs during summer months

due to use of electricity for air conditioning. In Illinois, a large number of power

plants using natural gas-fired turbines are being proposed to meet peak electricity

demand.

A basic gas turbine is a rotary internal combustion engine with three major

parts: an air compressor; one or more burners; and a power turbine. The air

compressor compresses the incoming air from the atmosphere. A portion of this air is

diverted to the burner where fuel is burned raising the temperature of compressed air.

This very hot air from the burner is mixed with the rest of the compressed air and

passed through the power turbine. The force of the expanding hot compressed air

drives the turbine shaft, which is connected to a generator that produces electricity.

A gas turbine that discharges hot exhaust gases directly into the atmosphere is

called a simple cycle turbine. A gas turbine with a waste heat boiler that uses the hot

exhaust gases to generate steam is called a combined cycle turbine. The steam

produced by a combined cycle plant may be used for generating electricity or for other

industrial applications.

Gas turbines are ideally suited for generating electricity to meet peak demand

for several reasons: they can be brought on-line relatively quickly, particularly simple

cycle turbines (five to ten minutes); they are simple to operate; and they emit pollutants

into the air at much lower levels than plants using other types of fuel such as coal and

oil.

Simple cycle turbines are suitable for producing electricity to meet hourly and

seasonal peak demand. Most of the recent air permit applications filed with IEPA have

been for natural gas-fired, simple cycle combustion turbines. The generation capacity

of simple cycle plants ranges from 25 to 800 megawatts (MW) per plant. Combined

cycle turbines are more efficient than simple cycle turbines and are more suited for

generating electricity to meet seasonal peak demand or intermediate demand, or for

operating year round to supply base-load electricity. The generation capacity of

combined cycle plants ranges from 336 MW to 2,500 MW.

A simple cycle turbine may be converted to a combined cycle turbine by

retrofitting the simple cycle turbine with a waste heat boiler, steam turbine, and cooling

system. It appears that a number of simple cycle plants ultimately may convert to

combined cycle plants.

As of November 2, 2000, IEPA had received 67 applications for constructing

natural gas-fired power plants, of which 56 are for plants with simple cycle turbines to

meet peak demand, eight are for plants with combined cycle turbines to meet base-load

demand, two are for plants where the permit applicants had not decided whether to use

---

simple cycle or combined cycle turbines, and one is for a plant with an aero-derivative

combined cycle turbine to meet peak demand. IEPA has limited the time that simple

cycle plants can operate as follows: from 2,000 to 4,000 hours (approximately 83 to

166 days) per year per turbine. IEPA has limited the time that a combined cycle plant

can operate to 6,000 hours (250 days).

The Board recognizes that most natural gas-fired peaker plants use simple cycle

turbines. However, in this Informational Order, the Board will, for a number of

reasons, consider plants that use combined cycle turbines as well as those that use

simple cycle turbines. Combined cycle plants are used to meet seasonal peak electricity

demand. As discussed below, combined cycle plants pose similar environmental

concerns with respect to air quality and noise pollution, and combined cycle plants may

significantly impact regional water resources. Simple cycle plants may be converted to

combined cycle plants. Finally, combined cycle plants, like simple cycle plants, are

being located in developed or developing areas of Northeastern Illinois, often near

residential areas.

BOARD ANSWERS TO GOVERNOR RYAN’S QUESTIONS

Question 1: Do peaker plants need to be regulated more strictly than Illinois’ current air

quality statutes and regulations provide?

Current Air Quality Regulation of Peaker Plants

Many sources of air emissions, such as coal-fired plants, emit greater total

amounts of pollutants into the air than do peaker plants. Peaker plants burn natural gas,

which is relatively clean. Nevertheless, it would be prudent for Illinois to consider

regulating peaker plants more strictly in several discrete areas with respect to air

quality.

Peaker plants emit various amounts of air pollutants as they burn natural gas to

generate electricity. The pollutants are combustion byproducts that include NO

x

,

carbon monoxide (CO), volatile organic material (VOM), particulate matter (PM), and

sulfur dioxide (SO

2

). Peaker plants emit NO

x

and CO, small amounts of VOM, and

negligible amounts of PM and SO

2

. NO

x

emissions are of particular interest because

they are precursors for ozone formation. Air emissions of NO

x

from identical gas

turbines used in a simple cycle and a combined cycle plant would be similar as long as

a duct burner is not used in the heat recovery applications of the combined cycle plant.

With a duct burner, the NO

x

emissions level for the combined cycle turbine would be

higher than that of the simple cycle turbine.

Many peaker plants are designated as “minor” sources of air emissions under

current regulations because they are permitted to have “potential air emissions” of less

than 250 TPY of NO

x

. Because these peaker plants are not considered “major” sources

---

of air emissions, they avoid the strict requirements for air quality impact modeling and

technology-driven pollution controls, such as BACT and the Lowest Achievable

Emission Rate (LAER).

A BACT analysis involves determining the maximum degree to which the

emissions of a source can be reduced in light of energy, environmental, and economic

impacts. LAER requires the source to meet the most stringent emission limit contained

in a State Implementation Plan or achieved in practice, without considering energy,

environmental, or economic impacts. Neither BACT nor LAER can be less stringent

than an applicable New Source Performance Standard (NSPS), which is an emission

standard prescribed for criteria pollutants from certain stationary source categories

under Section 111 of the federal Clean Air Act.

Generally, peaker plants using simple cycle gas turbines tend to be minor

sources, while combined cycle plants tend to be major sources. Because they generate

steam to produce electricity, combined cycle plants fall into a special category under

Prevention of Significant Deterioration (PSD) regulations, making their threshold for

major source status 100 TPY rather than the 250 TPY threshold applicable to simple

cycle plants.

Minor source peaker plants may emit their total annual permitted amount of

pollution, often just under 250 tons, into the air in a concentrated time period. As noted,

that time period tends to be the three or four months of summer because air conditioning

use creates a peak demand for electricity. The summer is the worst time of year for ozone

formation. Most peaker plants also are locating in the more densely populated

Northeastern part of the State, often near residential areas. In addition, peaker plants may

be sited in clusters, in part because each plant wants to be close to existing gas and electric

transmission lines.

Board Conclusions on Air Quality Regulation of Peaker Plants

To ensure that minor source peaker plant air emissions do not cause or

contribute to a violation of the National Ambient Air Quality Standards (NAAQS),

Illinois’ existing regulations should be enhanced. Specifically, when those plants apply

for air construction permits, they should be subject to air quality impact analyses using

dispersion modeling with respect to NAAQS. NAAQS are set at a level that protects

public health with an adequate margin of safety and that protects public welfare from

known or anticipated adverse effects. Existing regulations require this evaluation only

for major sources.

Conservative modeling parameters for plant operation and meteorological

conditions should be used to determine the worst-case impact. Modeling should

encompass any cumulative impacts due to clustering of peaker plants by accounting for

the emissions from other proposed or existing peaker plants in the area. A peaker

---

plant’s impact on air quality should be considered acceptable if the modeling results

show that the point of maximum impact at which the NAAQS are met lies at or within

the property line of the plant.

The Board recommends that IEPA propose a Board rulemaking to require that

new and expanding peaker plants designated as minor sources under the State’s PSD

regulations conduct air quality impact analyses. This recommendation would primarily

affect simple cycle plants because they tend to be minor sources. Combined cycle

plants tend to be major sources, and major sources are already subject to air modeling.

Public hearings also should be held before IEPA issues its final determination on

the permit application. The Board recommends that IEPA adopt a rule requiring that

the air construction permit application process for all combined cycle and simple cycle

peaker plants include a public hearing before IEPA makes its final decision.

As noted, IEPA Director Tom Skinner, in his administrative discretion, already

has been requiring these facilities to meet the air modeling and public hearing obligations.

Citizens applauded these practices and the Board recommends that the practices be

codified, as discussed above.

In addition, further consideration should be given to requiring minor source

peaker plants to use BACT to reduce their emissions of NO

x

into the air. Several other

states, including Michigan, Ohio, and Indiana, require BACT for sources that would

not trigger BACT under federal PSD rules. New gas turbines with readily available,

reliable emission control technology can routinely achieve very low air emission rates.

These emission rates are much lower than the only applicable technology-based

emission limitation, the potentially outdated NSPS. NSPS does not reflect BACT or

LAER for new turbines. Because they are subject only to NSPS and not the more

stringent control requirements, many peaker plants propose NO

x

emission limits to

IEPA that do not reflect the current emission control technology.

NO

x

emissions from peaker plants can be reduced either by combustion

modification techniques or add-on control devices. Combustion modification

techniques are capable of reducing NO

x

emissions to levels ranging from 3 parts per

million (ppm) to 25 ppm. Add-on control devices are capable of reducing NO

x

emissions from peaker plants to a range of 3 ppm to 4 ppm. Newer gas turbines are

being designed to routinely achieve NO

x

emission rates in the range of 10 ppm to 25

ppm. The requested NO

x

emission rates for simple cycle plants range from 9 ppm to

175 ppm, while the requested NO

x

emission rates for combined cycle plants range from

3.5 ppm to 4.5 ppm.

As of August 16, 2000, IEPA had made only three BACT determinations for

NO

x

emissions from simple cycle peaker plants because most of the plants are

---

developed as minor sources. In all three instances, IEPA determined that the

combustion modification technique known as the “Dry low-NO

x

” burner system is

BACT, with NO

x

limits ranging from 9 ppm to 15 ppm.

The Board recommends that IEPA propose a Board rulemaking to require new,

expanding, and existing peaker plants designated as minor sources under the State’s

PSD regulations to implement BACT for reducing NO

x

emissions. The rulemaking

proceeding would provide the opportunity to more fully assess whether BACT should

apply in these instances, including whether imposing it would be economically

reasonable and technically feasible.

A number of participants, including Mr. Keith Harley of the Chicago Legal Clinic

and Mr. Brian Urbaszewski of the American Lung Association, urged the Board to

recommend that the United States Environmental Protection Agency (USEPA) rescind the

NO

x

waiver. The waiver grants relief from New Source Review (NSR) requirements to

certain NO

x

emission sources in the Chicago nonattainment area (NAA). Those

requirements include a major source designation threshold of 25 TPY of NO

x

, LAER, and

NO

x

offsets in the ratio of 1.3 to 1.

The Board notes that repealing the waiver would have ramifications well beyond

the scope of these inquiry proceedings. The waiver applies to all types of sources in

the Chicago NAA, not just peaker plants. Its repeal therefore would have substantial

impacts on industries that are not the subject of this inquiry hearing process. Based on

the record of these proceedings, the Board recommends a more tailored approach—

namely, considering applying BACT to minor source peaker plants, as described above.

The Board agrees with IEPA that any decisions concerning the NO

x

waiver should be

made by USEPA in the context of its upcoming review of Illinois’ attainment

demonstration for the Chicago NAA.

The Board also declines to recommend that all peaker plant air permits

automatically contain specific limits on emissions resulting from the start-up and shut-

down of the plants. Gas turbines emit greater amounts of pollutants during start-up and

shut-down, resulting in a higher emission factor (pounds of pollutant per million British

thermal units). However, the lower load during those times compensates for the higher

emission factor. IEPA requires construction permits to account for all emissions,

including emissions during start-up and shut-down, to demonstrate compliance with annual

limits. While permits do not routinely have specific limits on the amount of emissions

during start-up and shut-down, IEPA may include those limits if elevated emissions during

those periods would threaten air quality.

Question 2: Do peaker plants pose a unique threat, or a greater threat than other types of

State-regulated facilities, with respect to air pollution, noise pollution, or groundwater or

surface water pollution?

---

Air Pollution

As noted, many sources emit greater total amounts of pollutants into the air than

do peaker plants. Peaker plants, however, pose a unique threat of air pollution when

compared to many other State-regulated facilities. Unlike many other sources, simple

cycle peaker plants may operate only or primarily during one season, the summer.

Those plants therefore may emit most, if not all, of their annual permitted amounts of

NO

x

, which are ozone precursors, into the air during the ozone season. This may cause

a greater impact on air quality than a comparable manufacturing plant permitted for the

same amount of emissions that operates over an entire year. Under existing

regulations, however, as discussed above, most simple cycle peaker plants avoid the

most stringent air quality requirements.

Noise Pollution

Peaker plants pose a greater threat of noise pollution than many other types of

State-regulated facilities. The engine used, though not necessarily identical to a jet air

craft engine, is a very loud noise source. Without adequate noise controls, peaker

plants can greatly exceed the Board’s numeric noise standards. Simple cycle and

combined cycle plants pose a similar threat of noise pollution because they use the same

type of engine.

While IEPA has received no noise complaints about existing peaker plants, a large

number of peaker plants plan to begin operating soon, often in close proximity to

residential areas. In addition, many of the existing peaker plants appear to be located at or

adjacent to electric utilities.

Local governments do not automatically request that peaker plant developers

perform noise analyses as part of the local zoning process. Local governments may

lack the technical expertise or resources to assess or conduct noise studies. Moreover,

when peaker plant developers do provide noise studies to local governments, the

methodologies and level of detail in proposing noise control measures, if any, can vary

considerably.

Director Skinner stated that one of the critical objectives of IEPA is to ensure

that no permit is issued to a peaker plant unless the permit applicant proves that the

facility will not violate existing environmental laws or regulations. He emphasized the

language of Section 39(a) of the Act:

When the Board has by regulation required a permit for the construction,

installation, or operation of any type of facility, equipment, vehicle,

vessel, or aircraft, the applicant shall apply to the Agency for such

permit and it shall be the duty of the Agency to issue such a permit upon

proof by the applicant that the facility, equipment, vehicle, vessel, or

---

aircraft will not cause a violation of this Act or of regulations hereunder.

The Agency shall adopt such procedures as are necessary to carry out its

duties under this Section. 415 ILCS 5/39(a) (1998) (emphasis added).

The Board has adopted a thorough set of noise regulations for Illinois under the

Act. See 35 Ill. Adm. Code 900, 901. The problem is that IEPA has no mechanism to

ensure that peaker plants (or practically any other noise sources) receiving permits from

IEPA will not violate Illinois’ existing noise standards. Accordingly, there is a gap in

Illinois’ current regulatory approach to noise. While Illinois has stringent numeric

noise standards and thorough procedures for measuring noise, it has no regulatory

scheme for reviewing noise emitters during air permitting to ensure their compliance.

IEPA does not currently have the funding or staffing to perform that function for all

peaker plants.

The Board recommends that IEPA, in connection with its existing air permitting

programs, review demonstrations from combined cycle and simple cycle plants for

compliance with the Board’s current numeric noise standards. Existing facilities should

take sound measurements in accordance with applicable procedures, as part of their

permit renewals. Proposed facilities should perform noise modeling as part of their

construction permit applications.

IEPA agreed that with additional funding and staff, it could readily review noise

information submitted with air permit applications. In fact, for several years, IEPA has

been reviewing demonstrations of compliance with numeric noise standards as part of

the land permit application process for gas turbines used to generate electricity from

landfills. IEPA should seek and be granted adequate funds to provide the important

function that the Board recommends.

Some citizens argued that the Board’s existing numeric noise standards do not

adequately ensure that existing noise levels in quiet residential areas are maintained.

The Board’s current noise regulations impose statewide numeric limits on the sound

levels that can be emitted from one property to another. The regulations take into

account different land uses, with residential land having the most protective standards.

The regulations require sound measurements to be corrected for background noise,

which is generally the noise from sources other than the source at issue. This is done

to determine the noise attributable to the noise emitter being studied. Some citizens are

concerned that if one or more peaker plants move into a quiet area, they will raise the

background noise level in that area, without any one peaker plant violating the numeric

noise standards.

It appears that these citizens seek, in essence, to freeze noise levels currently

existing in certain neighborhoods. The Board recognizes this concern but believes it

could apply to any type of industrial or commercial growth. It does not appear to be

unique to peaker plants, the subject of these proceedings. This type of concern about

---

preserving a lifestyle by preventing the encroachment of industrial or commercial

development into quiet residential areas may be better addressed through local zoning

and planning.

The Board agrees with IEPA that peaker plant noise emissions do not warrant

changing the Board’s current numeric noise standards. Of course, residents and local

governments can bring nuisance noise enforcement actions before the Board that do not

allege a violation of the numeric noise standards.

Water Pollution

The record of these proceedings does not suggest that discharges from peaker

plants pose a unique threat, or a greater threat than other State-regulated facilities,

regarding water pollution. Nor does the record reveal any gap in existing water

pollution regulations with respect to wastewater discharges to surface waters or publicly

owned treatment works, or stormwater discharges. The Board therefore makes no

recommendation for additional regulations to address potential water pollution from

peaker plants. The Board emphasizes, however, that peaker plants do raise concerns

about water use, which the Board discusses below.

Question 3: Should new or expanding peaker plants be subject to siting requirements

beyond applicable local zoning requirements?

Currently in Illinois, local governments applying local zoning ordinances make

decisions on siting simple cycle and combined cycle plants. Environmental permits are

addressed separately by IEPA. Three primary concerns with the current siting process

were identified during the hearings:

•

Energy Planning. Some participants expressed concern that these plants are

being sited without the State first determining that there is a need for the

electricity that they will generate. They called on the State to develop an

energy plan to help guide the siting of electric generating plants.

•

Environmental Impacts That May Extend Across Political Boundaries.

Some participants asserted that local government cannot effectively address

environmental impacts from simple cycle and combined cycle plants that

may extend across political boundaries, including cumulative impacts from

clusters of plants.

•

Public Participation/Cross-Jurisdictional Authority. Some participants

pointed out that officials and residents of neighboring communities cannot

effectively participate in the siting process of the local host government. For

---

example, one municipality can approve the siting of a combined cycle or

simple cycle plant just within its border, away from its residences but near

the residential area of a neighboring municipality. The neighboring

municipality has no meaningful voice in the process. Some participants

requested that these neighboring communities be able to effectively

participate in the siting process and that neighboring officials have a

meaningful say in the ultimate siting decision, including, for example,

ensuring compliance with county standards.

The Board addresses each of these concerns below.

Energy Planning

Peaker plants are proliferating in Northeastern Illinois because of many factors,

including deregulation, rising energy costs, increased demand for power, close

proximity to users as well as existing gas and electric transmission lines, low

construction costs, the closure of base-load electric plants, and opposition to building

new transmission lines. Mr. Patricio Silva, Midwest Activities Coordinator of the

Natural Resources Defense Council, described Illinois’ current energy market as an

“Oklahoma land rush” and called for Illinois to have a “comprehensive energy planning

process, encompassing functions once carried out by the Illinois Commerce

Commission.”

Many persons expressed concern that peaker plants are being sited without the

government first determining that they are needed. For example, Mr. Jim LaBelle,

Chairman of the Lake County Board, called for the State to take a leadership role in

developing an energy plan to help guide the siting of electric generating plants. He

asserted that Illinois should have a plan that: identifies the power generation and

transmission needed to support continued economic growth in Illinois; assures that

power generated in a particular location will provide direct benefits to the surrounding

county and region; and considers alternatives such as improved transmission capacity to

reduce the need for additional generation in certain areas.

Industry representatives, on the other hand, asserted that the market should

determine when additional generating capacity is needed. They warned that imposing

stricter siting requirements in Illinois might result in power shortages, higher costs for

power, reliability problems, and delays in siting.

The question of whether the State should allow new electric generating plants to

be sited only if they are consistent with a statewide energy plan is in many ways a

question about whether the proliferation of peaker plants is an unwanted byproduct of

restructuring the electric industry.

---

Before restructuring, electric utilities requested approval from the Illinois

Commerce Commission (ICC) to build new generating plants at specific sites. A utility

seeking to build a new plant was required to demonstrate need for the new generating

capacity. If the utility succeeded, the ICC would grant the authority, including, if

required, powers of eminent domain.

A few years ago, Illinois embarked upon deregulation. It chose a market-based

approach for restructuring, and the General Assembly passed the Electric Service

Customer Choice and Rate Relief Law of 1997 (Illinois Electricity Choice Law) to

accomplish it. See 220 ILCS 5/16-101 through 16-130 (1998). Because of the Illinois

Electricity Choice Law, the ICC no longer has a formal role in assessing Illinois’

electricity needs or mandating additional capacity. Instead, market forces are expected

to spur innovation, attract competition, drive the appropriate supply/demand balance,

and attract new power suppliers to the State.

In addition to the introduction of market-based restructuring at the State level,

the electric utility industry also experienced increasing levels of competition on the

federal level. For example, the Federal Energy Regulatory Commission’s Order 888 of

1995 required electric utilities to provide open access to their transmission system to

any entity interested in moving or “wheeling” electricity from one part of the national

grid to another for wholesale purposes. This opened the interstate transmission system

to wider access and made interstate electricity sales even more economically attractive.

In light of the evolving nature of deregulation nationwide, a brief review of

other states’ siting approaches is warranted. (A lengthier discussion of siting options is

set forth later in this Informational Order.) As Mr. Charles Fisher, Executive Director

of the ICC explained, some states have taken approaches to siting similar to that of

Illinois, while others have established state siting committees either as part of or

separate from state public utility commissions.

States With Restructuring Laws. Like Illinois, California, New York, and Ohio

have enacted electric restructuring laws. Unlike Illinois, these states use state siting

committees to determine where peaker plants should be sited. Texas also has enacted

an electric restructuring law. It has a system similar to the current system in Illinois:

local zoning boards control siting, and the state environmental agency controls

permitting.

States Without Restructuring Laws. Wisconsin, which has not enacted an

electric restructuring law, requires traditional certificates of convenience and necessity

for peaker plants. Kentucky, which also has not enacted an electric restructuring law,

does not require any approvals, other than state environmental permitting and local

zoning, as long as the peaker plant sells the electricity it generates wholesale on the

market.

---

In Illinois, merchant generators do not have to request the ICC’s siting approval

or demonstrate to the ICC that they are needed to meet energy demand. Nor is the ICC

involved in any formal energy planning for the State. When assessing any impacts of

restructuring, the Governor may wish to consider whether the State should have an

energy plan that could, among other things, guide the introduction of new generating

capacity into Illinois.

Environmental Impacts That May Extend Across Political Boundaries

Environmental impacts from peaker plants, such as from air emissions, noise

emissions, and water use, may extend across political boundaries. Multiple peaker

plants may be sited close to each other for close proximity to natural gas and electric

lines and because certain local jurisdictions may offer less stringent zoning

requirements than other jurisdictions. Concentrations of peaker plants may lead to

cumulative environmental impacts.

Earlier in this Informational Order, the Board recommended approaches to

address these concerns with respect to air and noise. The air modeling recommended

will address cross-boundary impacts and air emissions from other sources. The noise

compliance demonstration recommended will help to ensure that peaker plant noise

emissions meet Illinois noise standards in every jurisdiction. As proposed, potential

impacts from air or noise emissions, including emissions from multiple sources, would

be assessed by IEPA at the time of air permitting.

The Board also notes that Governor Ryan created the Water Resources Advisory

Committee (WRAC) to assess the use of groundwater and surface water. The WRAC’s

work includes assessing the impacts that users, including peaker plants, have on these

supplies of water and recommending action. The WRAC should address the virtual

absence of State controls or plans regarding water use. To assist the WRAC in its

work, Chairman Manning, who sits on the WRAC on behalf of the Board, forwarded a

letter to the WRAC, attaching summaries of information on water use from these

inquiry hearing proceedings and on the regulatory frameworks that other Midwestern

states have with respect to water use. In her letter, Chairman Manning calls on the

WRAC to focus its attention on “the development of a workable regulatory framework

for the conservation and fair allocation of water resources in this great State: one that

meets the needs of all concerned citizens and entities.” Various industry

representatives referred to this letter in their public comments to the Board in these

proceedings. Chairman Manning’s submittal is attached as Appendix E.

Accordingly, concerns over environmental impacts from air emissions, noise

emissions, and water use can be addressed through State or regional regulatory

mechanisms outside of a siting process. For example, the record shows that the

Board’s recommendations with respect to air and noise, if implemented, should be

protective without any need to have them addressed in a siting process. If such

regulatory mechanisms are not implemented, however, these types of concerns could be

---

addressed in a siting process, as they are in the New York and California processes

discussed below.

Water use is a particular concern. As noted, Illinois has no regulatory program

to manage and preserve the quantity of its many surface water and groundwater

resources. Because of its high water use for cooling purposes, a plant using a

combined cycle turbine will have a greater impact on regional water resources than a

plant with a simple cycle turbine. Simple cycle plants use about 0.07 to 2 million

gallons of water per day, while combined cycle plants use approximately 5 to 20

million gallons of water per day. As mentioned, many simple cycle plants may convert

to combined cycle plants.

Dr. Derek Winstanley is the Chief of the Illinois State Water Survey, a division

of the Office of Scientific Research and Analysis of the Illinois Department of Natural

Resources. He stated that proper use of groundwater resources is not best determined

on a “town-by-town” basis because groundwater aquifers cut across political

jurisdictions. He advocated regional planning and management of water resources,

including groundwater aquifers, river basins, and water sheds.

Dr. Winstanley’s concerns were echoed by numerous local and State

government officials and representatives, including State Senator Terry Link, Mr.

Daniel J. Kucera, an attorney with Chapman & Cutler appearing on behalf of the Lake

County Public Water District, Mr. Mike Shay, Senior Planner with Will County, and

Ms. Bonnie Thomson Carter, Lake County Board Member for the Fifth District and

Chair of the Public Works and Transportation Committee. Each of them testified that

potential environmental impacts from individual or multiple peaker plants cannot be

addressed effectively by local government. Many local zoning authorities may lack the

financial resources or technical expertise to competently assess these aspects of peaker

plant proposals.

The Board agrees that current local zoning processes alone generally do not

adequately consider environmental impacts from simple cycle and combined cycle

plants that may extend across political boundaries, including any cumulative effects

from the clustering of these plants. As noted, however, these concerns can be fully

addressed through regulatory mechanisms outside of a siting process.

Public Participation/Cross-Jurisdictional Authority

As noted, currently in Illinois, the siting of peaker plants is addressed only by

local government through local zoning or land use ordinances. Generally in Illinois,

municipalities control zoning matters within their borders. Accordingly, neither the

officials of a neighboring municipality or surrounding county, nor the citizens residing

in those jurisdictions, can effectively participate in a given municipality’s zoning

approval process to site a peaker plant.

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Representatives of DuPage County, Will County, and Lake County explained

that their zoning authority is limited in this way. A number of local and State officials,

including State Representative Mary Lou Cowlishaw and Ms. Vivian Lund, Mayor of

Warrenville, expressed concern that residents and officials in neighboring

municipalities and surrounding counties have no meaningful say in a given

municipality’s zoning approval process for a peaker plant, despite the potential for

environmental impacts of peaker plants to cross political boundaries.

Participants requested that neighboring communities be able to effectively

participate in a municipality’s siting process and that neighboring officials have a say in

the ultimate siting decision, including, for example, ensuring compliance with county

standards.

Potential Solutions

As noted above, states across the country use different types of processes for

approving electric power generating plants. Some states, like Illinois, have a

decentralized or segmented process of approving peaker plants. Under that approach,

the siting decisions are made by local governments applying their zoning ordinances,

while environmental permits are obtained from the different state bureaus. Other states

have a centralized or coordinated process. Those states empower one state board or

commission to grant or deny all siting proposals. In California and New York,

environmental permitting is a component of the power plant siting process and the state

environmental regulators participate in that process.

Below, the Board discusses the New York and California processes for siting

electric generating plants, as well as Illinois’ process under the Act for siting pollution

control facilities.

New York and California Siting Processes. The siting processes in New York

and California were most frequently referred to in this record. New York’s siting

process applies to an electric generating facility with a capacity of 80 MW or more.

Siting decisions are made by a state board. The application for siting must include: (1)

studies of impacts on air, water, visual resources, land use, noise levels, and health, (2)

proof that the proposed facility will meet state and federal health, safety, and

environmental regulations, and (3) applications for air and water permits.

To facilitate the ability of local government and the public to evaluate the

proposed project, New York requires that the applicant provide funds for intervenors to

use in the siting process. The applicant must pay a fee of $1,000 per MW of capacity,

not to exceed $300,000, to be used as an intervenor fund. The funds are awarded to

municipal and other local parties to help pay for the expenses of expert witnesses and

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consultants. Any municipality or resident within five miles of the proposed facility can

become a party to the proceeding.

The state environmental agency reviews the air and water permit applications as

part of the siting process and must provide the permits to the siting board before the

board decides whether to approve siting. The siting board reviews the siting request

based on a number of criteria, including cumulative air quality impacts and public

health and safety. Interestingly, one of the criteria requires the siting board, before it

can grant siting, to determine either: (1) construction of the facility is reasonably

consistent with the state energy plan, or (2) the electricity generated by the facility will

be sold in a competitive market. The state siting board may supercede local

requirements if it finds them unreasonably restrictive. Please refer to Appendix F for a

more detailed description of New York’s siting process.

California has given exclusive authority to a state commission to conduct a

consolidated approval process for siting all power plants that will have electric

generating capacities of 50 MW or larger. The commission’s siting responsibilities

include statewide planning analysis. The siting process allows the project applicant to

submit a single application for all necessary state and local approvals and provides

analysis of all aspects of a proposed project, including need, environmental impact,

safety, efficiency, and reliability.

While the state commission’s authority supercedes the authority of other state

and local agencies, the commission solicits their participation in the siting process to

ensure compliance with all applicable requirements, including local requirements.

Under this approach, the applicant seeks a single regulatory permit from the state

commission. The California siting process has public hearings and allows the public to

participate. It includes a state-appointed public adviser responsible for ensuring that the

public and other interested parties have full opportunities to participate in the siting

process. Please refer to Appendix G for a more detailed description of California’s

siting process.

Pollution Control Facility Siting in Illinois (SB 172). In Illinois, the Act sets

forth a process for siting pollution control facilities, including landfills. The process,

commonly known as “Senate Bill 172” or “SB 172,” was discussed many times in this

record as a potential model for siting peaker plants. SB 172 changed the Act in 1981 so

that local governments would decide whether to grant siting approval for pollution

control facilities. See 415 ILCS 5/39.2 (1998). Previously, the only way local

governments could participate in the approval of pollution control facilities within their

borders was to provide comments in IEPA’s environmental permitting process. Those

comments were not binding on IEPA.

With SB 172, the applicable local unit of government to decide siting is the

county board if the facility’s proposed location is in an unincorporated area, or the

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governing body of the municipality if the proposed location is in an incorporated area.

See 415 ILCS 5/39(c) (1998). The local government must conduct public hearings to

determine whether to grant siting. The process also provides for various public notices.

Participation of neighboring officials and residents in the process is allowed. For

example, Section 39.2(d) of the Act, after prescribing how to notify these officials,

provides:

Members or representatives of the governing authority of a municipality

contiguous to the proposed site or contiguous to the municipality in

which the proposed site is located and, if the proposed site is located in a

municipality, members or representatives of the county board of a county

in which the proposed site is to be located may appear at and participate

in public hearings held pursuant to this Section.

The local siting authority must determine whether the proposed facility meets

each of nine statutory criteria. See 415 ILCS 5/39.2 (1998). Those criteria are set

forth in Appendix H. The criteria, which include both land use and environmental

considerations, apply to the siting decision in lieu of local zoning or local land use

requirements. See 415 ILCS 5/39.2(g) (1998). IEPA is not directly involved in the

local government’s hearing process. However, IEPA cannot issue a development or

construction permit for a pollution control facility unless the permit applicant submits

proof that it obtained local siting approval under SB 172. See 415 ILCS 5/39(c)

(1998). Local siting decisions are appealable to the Board. See 415 ILCS 5/40.1

(1998).

Many of the SB 172 siting criteria are specific to waste facilities. Criteria,

however, could be tailored for siting peaker plants. Because the SB 172 approach

requires the statutory criteria to apply instead of local zoning, concern was expressed in

the record that local governments would lose some control over peaker plant siting by

using the SB 172 approach. Modified SB 172 approaches were suggested. One

approach would have State-identified siting criteria serve as minimum criteria that must

be met, but which would not operate in lieu of local zoning. Another approach would

have State-identified siting criteria serve to inform local governments of siting issues,

but be voluntary. Under that approach, local governments would not have to apply the

criteria, but could look to the criteria for guidance if they chose to do so. Another

approach would involve creating regional siting authorities to make these

determinations. Several participants suggested that siting decisions should be

appealable to the Board, as they are under SB 172.

Board’s Concluding Remarks on Siting. State-run approaches to siting can

provide for broader public participation in siting and ensure that a larger perspective is

brought to bear on environmental issues and energy planning when selecting sites for

power plants. They also offer a more uniform application of siting criteria over a state

than a patchwork of individual local zoning decisions. A centralized or coordinated

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type of process, however, is not without potential drawbacks. For example, this type

of siting process has caused delays in siting electric plants, including delays in

California leading to changes in an effort to speed up its process. Also, in most states

with these comprehensive siting processes, the state board can overrule local

jurisdictional authority. Accordingly, state boards typically can approve siting over the

objection of the local host government.

Any number of permutations to existing siting schemes could be fashioned for

combined cycle and simple cycle plants. For example, environmental permitting

programs might be made a component of the siting process, as in New York and

California, or they might remain separate from the siting process, as they are now in

Illinois. To enhance public participation and the ability of local governments to assess

peaker plant proposals, the State might require peaker plant developers to provide

something akin to the “intervenor” funds required in New York. Local siting decisions

might be based on State siting criteria and made appealable to a State board, as in SB

172. State siting criteria might operate in lieu of local zoning requirements, or serve as

minimum standards to which local authorities may add local requirements. Of course,

concerns raised about siting schemes, including delays, power shortages, increased

costs, reliability problems, and loss of local control, should be considered.

Determining whether local zoning is adequate or whether additional siting

requirements are necessary in Illinois depends on what concerns the siting scheme seeks

to address. As discussed, the three primary concerns raised with the current siting

process in Illinois were: (1) the lack of a State energy plan, (2) the inability of local

government to address environmental impacts that may reach across political

boundaries, and (3) the inability of neighboring residents to effectively participate in a

local government’s siting process, and the inability of neighboring jurisdictions to

ensure that their standards are being met.

If the State decides that it should step into the energy planning void left by the

restructuring of the electric industry, then a centralized State siting board might make

sense. The State might decide, on the other hand, that the void is a proper result of

restructuring and that State regulatory solutions should be implemented to address

concerns over air emissions, noise emissions, and water use. In that case, the State

might limit any change in the current siting process to require that neighboring

communities be allowed to effectively participate in a local government’s zoning

decision on a peaker plant.

As for the first concern, this Informational Order provides helpful information

to assist the Governor in his consideration of whether the State should renew its role in

energy planning after restructuring. The second concern, on potential environmental

impacts from air emissions, noise emissions, and water use, can be addressed through

State or regional regulation independent of any siting process. As noted, the Board has

recommended statewide regulatory solutions to address air and noise. The record

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demonstrates that those approaches should be protective. Regarding water use, the

Board would expect the WRAC to recommend an effective regulatory framework

sorely lacking now on that important issue. If adequate regulatory schemes are not

implemented, however, those types of environmental concerns might need to be

addressed through a siting process.

Finally, regarding the third concern, legislation might be pursued that would

allow the input of neighboring communities in siting decisions. Local government

officials and citizens almost uniformly called for State action to address this concern.

Question 4: If the Board determines that peaker plants should be more strictly regulated

or restricted, should additional regulations or restrictions apply to currently permitted

facilities or only to new facilities and expansions?

The Board’s recommended regulation concerning air quality impact analyses and

public hearings should be required for new and expanding peaker plants seeking air

construction permits. Whether BACT should apply to control emissions from minor

source peaker plants should be evaluated in a rulemaking before the Board. At that time,

the technical feasibility and economic reasonableness of applying BACT to new,

expanding, and existing minor source peaker plants can be examined.

The demonstration of compliance with existing numeric noise standards should

be made by existing peaker plants and by new peaker plants and expansions. Existing

peaker plants have been subject to the Board’s numeric noise standards and therefore

should be able to demonstrate that they comply with those standards by taking the

appropriate sound measurements. Existing facilities should make those demonstrations

upon air permit renewals. The demonstrations of new and expanding facilities could

include noise modeling and should be submitted at the time of air construction permit

applications.

Finally, while the Board makes no recommendation on siting, any legislative

amendment for siting procedures should apply only to new facilities and expansions.

Question 5: How do other states regulate or restrict peaker plants?

Please refer to Appendix I for a comprehensive table on other states’ laws and

regulations that may affect peaker plants. For example, Michigan requires BACT for

all new sources of VOM emissions, which is a more stringent threshold for triggering

BACT than the federal standards. Many other states have no noise regulations, or have

very minimal noise regulations compared to the noise standards in Illinois. Unlike

Illinois, most other Midwestern states have regulatory programs for water withdrawals.

As for siting, a number of states have state boards review requests to site electric

generating plants, while others, like Illinois, leave siting decisions to local governments

applying their zoning ordinances.

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CONCLUSION

Peaker plants have proliferated in Illinois in the wake of restructuring the

electric power industry. The largest influx of peaker plants is occurring in developed

and developing parts of the greater Chicago metropolitan area, often close to residential

areas. This has raised public concerns over potential environmental impacts posed by

these plants.

In response to those public concerns, Governor Ryan requested the Board to

conduct inquiry hearings on peaker plants, which the Board has done. The Governor

asked the Board to determine, based on the inquiry hearing process, whether additional

safeguards are necessary to address concerns over air pollution, noise pollution, water

pollution, and siting with respect to peaker plants.

The Board has carefully reviewed the voluminous record of this inquiry hearing

process, which includes the comments of individual citizens and citizen groups, local

and State government, and industry. Based on that record, the Board recommends that

the State take action to protect the environment by tightening current environmental

regulations concerning peaker plants.

Industry representatives asserted that environmental impacts from peaker plants

are far less than many other industries and therefore peaker plants should not be subject

to any additional requirements unless all such industries would similarly be subject to

new requirements. The Board recognizes that other industries may cause greater

environmental impacts than peaker plants. This, however, is not a reason to fail to act

on the problems presented in this record. Governor Ryan asked the Board to determine

whether additional requirements should be imposed on peaker plants, not other

industries. Moreover, the “legislature need not choose between legislating against all

evils of the same kind or not legislating at all.” Chicago National League Ball Club v.

Thompson, 108 Ill. 2d 357, 367, 483 N.E.2d 1245, 1250 (1985).

The Board recommends that IEPA initiate a rulemaking with the Board to require

permit applicants to conduct air modeling when IEPA reviews air construction permit

applications for peaker plants designated as minor sources under the State’s PSD

regulations. The Board also recommends that IEPA adopt a rule to require public

hearings on air construction permit applications for all peaker plants.

The Board recommends that IEPA initiate a rulemaking with the Board to require

new, expanding, and existing peaker plants designated as minor sources under the State’s

PSD regulations to use BACT for reducing NO

x

in their air emissions. The rulemaking

would provide a forum to more fully address the appropriateness of imposing BACT,

including its economic reasonableness and technical feasibility in these instances.

The Board recommends that IEPA require peaker plants to demonstrate that

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their noise emissions do not exceed the Board’s numeric noise standards. This

demonstration should be required of existing and proposed plants at the time of air

permitting.

Finally, on the question of whether peaker plants should be subject to siting

requirements beyond local zoning, the Board does not make any specific

recommendation on siting. Instead, the Board provides the Governor with a thorough

discussion of the concerns raised and potential solutions.

The Board is honored to have served Governor Ryan and the citizens of Illinois

through this inquiry hearing process.

IT IS SO ORDERED.

I, Dorothy M. Gunn, Clerk of the Illinois Pollution Control Board, hereby

certify that the above order was adopted on the 21st day of December 2000 by a vote of

7-0.

Dorothy M. Gunn, Clerk

Illinois Pollution Control Board