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WSJ: Duke Takes Big Charge for Edwardsport IGCC Plant in Indiana; CAC Urges IURC to Reject Settlement May 1, 2012

Posted by Laura Arnold in Edwardsport IGCC Plant, Indiana Utility Regulatory Commission (IURC), Office of Utility Consumer Counselor (OUCC), Uncategorized.

Dear IndianaDG Readers:

I don’t know about you but this announcement of a proposed Settlement Agreement on the Duke Energy Indiana Edwardsport IGCC plant totally took me by surprise.

There is an in-depth article on the front page of the Indianapolis Star this morning describing this latest action by parties to the proceeding. Deal is reached over Duke. I encourage you to read it.

Here is a link to the other side of the story from the Citizens Action Coalition (CAC) website issued today (05/01/2012). http://citact.org/pdfs/Press_Release/5.1.12_DukeIGCC_OUCC_Settlement.pdf

Let me know what you think.

Laura Ann Arnold

BUSINESS–April 30, 2012, 9:49 p.m. ET.


Duke Energy Corp. DUK +0.79%said it would take a $420 million charge for cost overruns at its Edwardsport coal gasification plant in Indiana, one of the costliest fossil-fuel generating stations ever built.

The company also announced a settlement agreement that would allow it to pass on to its customers $2.6 billion of the plant’s expected $3.3 billion cost, if state utility regulators approve the deal. Duke, which previously took $265 million in charges for the plant, said rates would rise 9.6% on top of an earlier 5% increase attributable to the plant.

The plant is 99% complete and is expected to be put into service this fall.

The settlement agreement has the support of the state agency that represents ratepayers, a group representing industrial customers and Nucor Steel-Indiana, a large customer. Previously, they had recommended that Duke’s cost recovery be held to about $2 billion, which would have forced the utility to absorb the remainder of the cost.

But Citizens Action Coalition, a consumer group, said the settlement agreement should be rejected by the Indiana Utility Regulatory Commission because it saddles consumers with too much expense for a plant that, in the group’s opinion, shouldn’t have been built.

“Absolutely, we will oppose this settlement,” said Kerwin Olson, executive director of Citizens Action in Indianapolis. He said it was “unconscionable” to allow Duke to collect $2.6 billion when it “grossly mismanaged” the project and exercised undue influence over the regulatory process.

Indiana’s governor removed the head of the utility commission in late 2010, amid an email scandal that suggested an unusually chummy relationship between regulators and Duke executives.

In December 2011, the former commission chairman, David Lott Hardy, was indicted on three counts of felony misconduct by an Indianapolis grand jury. He has said he is innocent. Three Duke officials, including its second-in-command executive, behind chief executive Jim Rogers, stepped down.

When proposed in 2007, the Edwardsport plant was expected to cost less than $2 billion. Cost overruns and the utility’s management of the project were the subjects of lengthy hearings that started in October and concluded in January. Critics accused the utility of fraud and gross mismanagement.

At those hearings, Mr. Rogers, Duke’s chief executive, described Edwardsport as the cornerstone of his utility’s efforts to modernize its fleet of plants that serve the Carolinas, Kentucky, Indiana and Ohio.

But Duke’s effort to scale up a small demonstration plant in Florida were fraught with problems. For example, Duke underestimated the amount of steel, concrete and other materials needed.

“The estimates were just flat wrong,” Mr. Rogers testified on Jan. 9 at a hearing at the regulatory commission hearings. The utility’s principal problem was “we were a little ahead of our time,” he said, and tried to be a pioneer. He urged regulators to agree with him that expenditures were “reasonable and necessary.”

The commission could accept the settlement agreement or reject it and continue the current process, in which it is reassessing the appropriate amount of recovery.

If it accepts the agreement, as written, allegations of fraud and mismanagement “go away,” said a Duke spokeswoman, Angeline Protogere.

Write to Rebecca Smith at rebecca.smith@wsj.com

A version of this article appeared May 1, 2012, on page B5 in some U.S. editions of The Wall Street Journal, with the headline: Duke Takes Big Charge For Plant.



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