Blaming a recent electricity auction that it says failed to cover its costs, the largest power plant owner in downstate Illinois is threatening to shutter approximately 30 percent of the power plant capacity in the region.

Houston-based Dynegy Inc. said Tuesday it planned to shut down at least 1,800 megawatts of coal-fired power at two of its downstate Illinois power plants. On top of that, it says it is considering shutting down another 500 megawatts of coal-fired capacity.

The decision follows Dynegy’s announcement last year that it planned to shut down its 465-megawatt Wood River coal plant in Alton. That plant’s retirement will occur June 1.

While aging coal plants across the country are retiring, Dynegy says the dynamic in Illinois has more to do with electricity markets than pollution controls or natural gas prices. And it says Illinois lawmakers can act to save the plants, joining big nuke operator Exelon in putting pressure on lawmakers to help power plants struggling with low electricity prices.

The shutdowns announced Tuesday would reduce capacity at Dynegy’s Baldwin coal plant an hour southeast of St. Louis and its Newton, Ill., coal plant two hours east of St. Louis. Dynegy acquired the Newton plant in 2013 from Ameren Illinois when the St. Louis-based utility sold its five Illinois coal plants to Dynegy and exited the Illinois power generation business.

Both plants would continue to operate one power unit if the shutdowns are approved by the regional electric grid operator.

The Midcontinent Independent System Operator, known as MISO, must determine the shutdowns don’t hurt the transmission system’s reliability before giving Dynegy the green light.

Dynegy’s decision follows a drop in the price for a component of electricity in Downstate Illinois. MISO holds an annual auction to set so-called capacity prices, fees paid to power plant owners to ensure they’re ready to meet electricity demand at peak times.

Last year, the southern Illinois price set by the auction jumped nine-fold, garnering unusual attention for the esoteric event. The Illinois Attorney General and public interest groups eventually lodged a complaint with the Federal Energy Regulatory Commission, accusing Dynegy of owning enough power in the region to manipulate electricity prices.

In response, FERC ordered MISO to redesign parts of the auction so more power from beyond the region could bid into the market. Following that, prices dropped by half in the most recent auction, held last month.

Unlike most of MISO, where utilities like Ameren Missouri are regulated by state commissions, downstate Illinois is deregulated, and customers can shop for electricity.

Dynegy argues that because regulated utilities are not dependent on the auctions to recover their costs, letting them bid too much of their power into southern Illinois depresses prices.

Dynegy says allowing it to join PJM Interconnection, the grid operator for Chicago and Mid Atlantic states, would put it on equal footing with other power plant owners. Many of the states in PJM are deregulated.

Another solution would be to make downstate Illinois a regulated electricity market again, Dynegy CEO Bob Flexon said in prepared remarks on the company’s website.

Jacob Barker — 314-340-8291

@jacobbarker on Twitter

[email protected]

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