IndyStar: Duke Energy Indiana customers owe $2.5 billion-plus for Edwardsport plant December 28, 2012Posted by Laura Arnold in Duke Energy, Edwardsport IGCC Plant, Indiana Utility Regulatory Commission (IURC), Office of Utility Consumer Counselor (OUCC), Uncategorized.
Tags: Duke Energy Edwardsport IGCC Plant, Kerwin Olson Citizens Action Coalition
Dear IndianaDG Readers:
The story about the IURC order on Duke Energy Indiana’s Edwardsport IGCC plant was the front page banner story in this morning’s Indianapolis Star print edition. At the end of the article is a summary of the timeline of events. This matter is not over since it is anticipated that parties such as Citizens Action Coalition of Indiana et al., that were intervenors that did not sign the proposed settlement agreement are expected to appeal the IURC decision.
For additional perspectives on this matter please also see:
- Original article below: http://www.indystar.com/article/20121227/BUSINESS/121227022/Duke-Energy-customers-owe-2-5-billion-plus-Edwardsport-plant
Duke Energy coal gasification power plant, Edwardsport, Ind.
8:31 PM, Dec 27, 2012 Written by John Russell
Follow Indianapolis Star reporter John Russell on Twitter at @johnrussell99 or call him at (317) 444-6283.
Finally, after years of legal fighting, it’s official: Duke Energy Corp.and its 790,000 Indiana customers will split the $3.5 billion cost of the Edwardsport power plant — one of the largest, most expensive and most disputed construction projects in Indiana history.
But it’s not an even split, and how much each side will have to pay is likely to produce some grumbling.
The Indiana Utility Regulatory Commission ruled Thursday that Duke Energy must swallow about $900 million for the plant, which in 2010 became enveloped in an ethics cloud involving a revolving door between the regulatory commission’s staff and the utility’s ranks.
The commission ruled that Duke should have managed the project more prudently and that it failed to hold its contractors accountable in allowing costs to spiral from the original estimate of $1.985 billion.
“We do not find it reasonable for ratepayers to pay for the imprudent actions of Duke’s contractors,” the ruling said.
But the commission ruled that the 618-megawatt plant ias necessary to meet the future energy needs of Indiana. It said customers must pay the bulk of construction costs: $2.595 billion, plus millions of dollars in financing costs.
Duke said the ruling will result in customers’ bills climbing 14 percent to 16 percent. Of that, a 5 percent rise already has taken place. The remainder will occur in two steps: Customers will see a rate hike of 3 percent to 4 percent in January, and two other hikes totaling 6 percent to 7 percent by early 2014.
The company said construction of the huge plant, near Vincennes, is nearly complete. It expects to put the plant into commercial operation by the middle of next year. Already, it has produced its first electricity from gasified coal during start-up and testing. The plant uses a coal-gasification technology to turn coal into electricity.
The ruling “allows us to focus on bringing into service a plant that will help us meet increasingly strict federal environmental regulations while still using an abundant local resource, Indiana coal,” Duke Energy said in a statement.
The IURC said that if Duke recovers any additional funds through litigation, the surplus must be returned to customers. Duke has strongly hinted it would take its contractors to court for engineering and construction problems.
The commission also directed Duke to credit customers for certain incentive payments that were found to be unwarranted “given the delays that arose from the project cost overruns.”
And in a major victory for the utility, the commission found that Duke did not commit fraud, concealment or gross mismanagement with the project. Those charges were leveled by several customer and citizens groups and resulted in months of public hearings.
In large part, Thursday’s ruling reflects a new settlement that Duke reached with its largest customers and the Indiana Office of Utility Consumer Counselor in April. The agreement and ruling apparently end more than two years of uncertainty and bitter fighting among those organizations over who should pay for a string of huge cost overruns.
The deal replaces an earlier agreement, reached in 2010, that had called for customers to pay about $2.9 billion of the plant’s costs. That settlement fell apart after The Indianapolis Star revealed secret meetings and conversations between state regulators and Duke executives stretching back several years.
David Stippler, the state’s consumer counselor, said Thursday the ruling means that more than $835 million in construction cost overruns will be borne by Duke, not its customers.
“At the same time, all Hoosiers will benefit from the reliability and stability this project will add to the grid,” Stippler said in a statement.
The agreement did not satisfy everyone. Citizens Action Coalition of Indiana, which has long fought the plant as unnecessary, said customers could have to pay tens of millions of dollars in additional funds for ongoing financing of the plant, which could push their share of the cost to $2.65 billion.
“Customers should not have to pay for any cost overruns which are attributable to imprudence or mismanagement of the project,” said Kerwin Olson, the group’s executive director. His group said it would appeal the ruling to the Indiana Court of Appeals.
The plant came under severe criticism from the outset. Some critics said the technology was unproven and the additional generating capacity wasn’t needed.
Others weighed in after The Star exposed numerous emails and internal documents that showed utility executives had a chummy relationship with some state regulators.
Those revelations cost four high-ranking people their jobs, including David Lott Hardy, former chairman of the regulatory commission, who was fired by Gov. Mitch Daniels in late 2010. Others who lost their jobs were Duke’s No. 2 executive, the company’s former Indiana president and a Duke lawyer named Scott Storms.
The ethics scandal began, in large part, when Storms joined Duke in 2010 from the IURC, where he had been working as a chief administrative law judge. In that role, he oversaw the IURC’s regulation of the Edwardsport project while negotiating for a job with utility.
Duke said Thursday it looked forward to getting the controversy behind it and getting the plant in operation.
“Edwardsport will serve the electric energy needs of our Indiana customers for decades to come,” the company said.
TIMELINE OF EVENTS
>> Aug. 31: Duke Energy offered a job to Scott Storms, general counsel for the Indiana Utility Regulatory Commission.
>> Sept. 9: The Indiana Ethics Commission ruled that Storms could take the job without a one-year cooling-off period typically required for utility regulators.
>> Sept. 22: Consumer groups, including the Citizens Action Coalition, raised serious concerns about Storms’ hiring and the relationship between utilities and state regulators.
>> Sept. 24: Duke Energy said it would impose stricter limits on Storms’ work for Duke, saying it wouldn’t let him do any work for Duke with the IURC for a year or work internally for Duke on any regulatory cases involving Duke pending with the state.
>> Sept. 27: Storms began working for Duke.
>> Oct. 5: Gov. Mitch Daniels terminated and replaced David Lott Hardy as chairman of the IURC, citing the violation of an ethics policy. As a result, Duke announced it had put its Indiana president, Michael W. Reed, on paid leave as he played a role in hiring Storms away from the IURC. Reed formerly was an IURC executive director.
>> Dec. 9: Under pressure from large industrial customers, Duke agreed to renegotiate an agreement that had customers paying for much of the latest cost overruns at Duke’s coal-gasification plant in Edwardsport.
>> May 12: An ethics panel ruled that Storms violated state law when he participated in cases involving Duke while talking to the utility about a job.
>> June 30: The state’s utility consumer agency withdrew support for a deal with Duke in which ratepayers would shoulder $530 million in extra construction costs for the Edwardsport plant.
>> July 14: The utility consumer agency and Duke’s industrial users called for regulators to force the utility to pay for $1 billion in cost overruns on the Edwardsport plant and not pass those costs on to consumers. The Citizens Action Coalition argued that consumers should pay nothing toward the cost of the plant.
>> Oct. 27: The IURC kicked off weeks of testimony about Duke’s handling of the Edwardsport project.
>> Dec. 9: A Marion County grand jury indicted Hardy on three counts of official misconduct.
>> July 2: Duke Energy agrees to merge with Progress Energy. Hours after gaining regulators’ approval, Duke Energy’s board ousted Progress Energy CEO Bill Johnson, who was supposed to take over the combined company, in favor of Duke Energy CEO Jim Rogers. The deal created the nation’s largest electric company.
>> Nov. 29: Rogers agrees to retire at the end of 2013 as part of a settlement with North Carolina utilities regulators over the July 2 action.
>> Dec. 27: The Indiana Utility Regulatory Commission approves an agreement that would shift $900 million in cost overruns on the Edwardsport plant to Duke.
— Source: Star archives