Betting on Indiana coal: Duke wants ratepayers to fund retrofits, environmentalists cry foul January 23, 2013Posted by Laura Arnold in Duke Energy, Indiana Utility Regulatory Commission (IURC).
Tags: Duke Energy Indiana Cause No. 44217, Frank Ackerman with Synapse Energy Economics, Kerwin Olson with Citizens Action Coalition
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The Gibson Generating Station in southwest Indiana. (Photo by Duke Energy via Creative Commons)
Coal-fired power plants around the country are closing due to environmental regulations and competition from cheap natural gas, but during hearings before the Indiana Utility Regulatory Commission earlier this month, officials from one of the state’s largest utilities sought to buck the trend.
Duke Energy Indiana is seeking permission from the state regulatory commission to bill ratepayers for making retrofits to three of its Indiana coal-fired power plants in order to comply with looming federal environmental regulations, most importantly the Mercury and Air Toxics Standard (MATS) with a 2015 deadline.
Environmental groups that submitted testimony at the hearing argued that investing in the aging coal plants is a bad deal for ratepayers, who will pick up the cost since Indiana is a regulated energy market. And, they say, it unwisely continues a dependence on electricity sources that emit high levels of carbon dioxide, further contributing to climate change.
Instead, they told the commission, Duke should invest in natural gas, energy efficiency and other options. The Indiana Citizens Action Coalition, Valley Watch, Save the Valley and the Sierra Club intervened in the regulatory proceedings (the Sierra Club is a member of RE-AMP, which also publishes Midwest Energy News).
The commission is currently considering Duke’s request to pass on about $400 million worth of pollution control investments to ratepayers for its Cayuga, Gibson and Gallagher coal plants, as phase two of an ongoing retrofit program. Duke told the commission it plans to close a fourth coal plant, the Wabash River station, though there is a possibility one of its units would be retrofitted as a natural gas plant. The average age of the four coal plants is 45 years.
A Duke fact sheet says the requested phase two investments would mean less than a one percent rate increase in 2013-2014, scaling up to a 6.3 percent rate increase by 2017. In filings the company also indicated it would seek about $945 million for phase three of the retrofit project, possibly in coming months.
Weighing the options
In making its request to the commission, Duke was required to consider various ways it could meet its power obligations.
The coal plants would have to close in coming years if they don’t make the expensive pollution control upgrades, including installing 200-foot-tall SCRs (selective catalytic reduction equipment) that remove nitrogen oxides; and activated carbon injection to control mercury.
Duke indicated to the regulators that after evaluating different scenarios, it decided retrofitting and continuing to run the coal plants through at least 2034 is its best option.
On November 29, the environmental groups filed testimony they had commissioned from Frank Ackerman, a senior economist at Synapse Energy Economics. Ackerman charged that the range of options explored by Duke was too narrow.
“The Company should have examined the possibilities of increasing their use of energy efficiency and demand response measures, expanding their portfolio of renewable energy, and increasing purchases of energy from other generators within MISO,” wrote Ackerman in his testimony.
“In making this statement, I am not suggesting that any one of these alternatives alone could replace any of the Company’s coal units. Rather, combinations of these alternatives may contribute to the least-cost alternatives to continued operation of some existing coal plants.”
(Enter case number 44217 at this link to see Ackerman’s testimony and other filings in the docket.)
Indiana’s electric demand could be reduced considerably in coming years with improvements in the energy efficiency of buildings and appliances and improvements on the grid to better move electricity where it’s needed. Duke is required to invest a certain amount in energy efficiency through 2020 under a state program.
Speaking at the Midwest Energy Efficiency Alliance’s annual conference in Chicago last week, Duke official Tim Duff said, “Energy efficiency has been a longstanding priority for the company” and cited awards Duke has won for energy efficiency projects. “Duke also believes you can’t just look at the customer side of the meter, you have to look at the utility side to deliver the power as efficiently as possible.”
However, Ackerman said Duke failed to adequately consider the possibility of continually escalating gains in energy efficiency beyond 2020, and his testimony also said the company did not consider the possibility of lower-than-expected demand in general.
Clean-energy advocates say that even without state mandates, Duke should plan to make greater investments in energy efficiency in the future.
The American Council for an Energy-Efficient Economy’s 2012 State Energy Efficiency Scorecard listed Indiana as 33rd in the nation in energy efficiency, ranking below all Midwestern states except North Dakota and Kansas. In efficiency savings as a percentage of retail sales, Indiana ranked 42nd in the nation.
Relatively low electricity rates in the Midwest mean energy efficiency efforts have a lower rate of financial return, but Ackerman noted that other Midwestern states ranked high in efficiency savings as a percent of retail sales – Minnesota was number four – even though they also have relatively low energy prices.
Duke based predictions on the assumption that energy efficiency gains would continue after 2020 at proportionally the same levels mandated under the existing state program. Thomas Cmar, an Earthjustice attorney representing the environmental groups, said Duke should aim to do better (Earthjustice is also a member of RE-AMP).
“Duke can do more on efficiency than the bare minimum, and it should do more if the money spent on efficiency gives more bang for the buck for ratepayers than spending it on generating the same amount of electricity,” Cmar said.
A carbon price and other factors
Duke senior engineer Michael Geers told the commission that while the company doesn’t expect Congress to enact climate change legislation in the near term, they based their predictions on Congress passing a price on carbon that would take effect in 2020 at $17 a ton and escalate to $44 a ton by 2032.
In answers to questions posed by the commission, Duke said that a 2020 starting carbon price of $21 per ton would render un-economic the biggest portion of its retrofits: SCRs at the Cayuga plant.
Synapse came up with its own “mid-case” prediction for the impacts of a carbon dioxide price, “based on a review of dozens of utility and other forecasts” as Ackerman’s testimony said.
Ackerman concluded that even Duke’s modeling promised only small benefits to retrofitting the coal plants versus other options, and he said these benefits could quickly evaporate with a carbon price or other conditions different than Duke had predicted.
Cmar noted that even lower carbon prices than Synapse’s “mid-case” scenario would make the Cayuga SCRs un-economic.
“In other words, a carbon price lower than Dr. Ackerman predicts would, by itself, completely wipe out the value of Duke’s largest coal retrofits even if Duke is correct on every other assumption,” Cmar said.
Both Duke and the environmental groups have also brought up the possible future costs of new federal regulations on coal ash, which are currently being debated but still have not been finalized; and expected new federal regulations regarding the disposal of waste water from coal plants. The environmental groups say that these regulations could mean significant new costs that will have to be passed on to ratepayers, if the coal plants stay open.
“Some of these plants have old coal ash landfills that would need to be cleaned up,” said Cmar. “And with scrubbers a lot of waste ends up in the wastewater; the EPA is in the process of requiring additional wastewater treatment.”
A bias toward coal?
In 2011, 93 percent of Duke Energy Indiana’s generation came from its coal plants, with just two percent of its generation from natural gas and three percent from renewables, according to testimony filed before the regulatory commission in June 2012 by Duke Energy Indiana president Douglas Esamann.
Last year, Duke’s Indiana generating capacity was 64 percent coal and 24 percent natural gas. Since many natural gas units are only run as needed, actual generation is usually skewed toward reliance on coal plants. Esamann testified that Duke does expect to increase its overall reliance on gas in coming years, though the change he predicted by 2016 wasn’t overly striking: a shift to 88 percent coal and 4 percent gas generation; and 58 percent coal and 27 percent gas capacity.
Meanwhile coal accounts for 85 percent of Indiana’s total power generation, according to Duke, and the company is the largest coal buyer at about 12.5 million tons a year. Duke has already invested $2.8 billion in pollution controls since 1990 to keep its four coal plants going, and it is completing a new “clean coal” plant in Edwardsport, Indiana that is not part of the request before the commission.
Duke noted that the phase two investments it is seeking would create 285 construction jobs and contribute to the continued existence of mining and transportation jobs.
Indiana Citizens Action Coalition executive director Kerwin Olson thinks state officials and Duke executives are biased toward the coal industry in part because of its political clout among Indiana lawmakers.
“Duke is the largest consumer and purchaser of Indiana coal so they get a lot of political support because of their use of Indiana coal,” said Olson. “We have adopted so many (state) statutes that incentivize the continued use of coal, particularly Indiana coal, so they’ve gamed the system politically to favor this option.”
Indianapolis Power & Light has also sought to bill ratepayers for the cost of adding pollution controls to coal plants to keep them running, even as environmentalists including Indiana Citizens Action Coalition say the money would be better spent on wind energy and energy efficiency.
If Duke built new natural gas plants and retired its four archaic coal plants, it could still pass the costs of the gas plants on to ratepayers. But Cmar thinks Duke stands to gain more from investments in capital improvements on the coal plants than it could on natural gas plants. That’s partly because it can continue billing ratepayers for the depreciated value of its coal plants in addition to billing for the value of new investments.
Cmar said the retrofits might also qualify for an incentive for “clean coal” development under a state statute that allows regulated utilities to collect an extra three percent return on their clean energy investments. He cited June 2012 testimony by Joseph Miller, general manager of analytical and investment engineering for Duke Energy Business Services LLC. Miller’s testimony focused largely on how the retrofits would qualify as “clean coal” and “clean energy” projects.
Duke spokesperson Angeline Protogere said the clean energy incentive did not figure in to Duke’s calculations. “We’re not aware if the Indiana Commission has ever authorized the extra three percent incentive provided for under Indiana code, but we have not asked them to do so in this proceeding,” she said. “It had no impact on our decision making.”
Predicting the future
The environmental advocates also believe Duke’s predictions of future fuel prices unrealistically favor coal, without adequately considering what would happen if coal became relatively more expensive compared to gas than they had forecast.
Protogere said that Duke evaluated its options based on a range “developed using statistical analysis of a portfolio of future gas and coal prices.” She said she couldn’t elaborate on how they reached those prices because of proprietary information.
Protogere added that while Duke believes retrofitting its three Indiana plants makes economic sense right now, in general “our integrated resource planning model does favor natural gas-fired generation over the next 20 years.”
“If we switched immediately to more new gas plants and renewable energy sources, customers would have the burden of paying for new facilities years before they would have otherwise been needed,” said Protogere. “We take seriously the job of planning to supply our customers with safe and reliable electricity. When we make electricity greener, we do so with customers’ costs in mind.”
“While Duke Energy Indiana cannot predict the future, neither can others,” she added. ”What we can do is to make the best decisions for the future based on what we know today.”
Cmar and Olson said the company is taking a short-term view.
Olson said the company has an “inability to think outside the box and move into the 21st century. They’re stuck in the 20th century belief in baseload power plants that bring them a lot of money and political support.”
Cmar decried the fact that Duke’s analysis only goes through 2034:
“Even if everything that Duke is predicting comes true, when 2034 rolls around Duke could either have decades-old coal plants at or near the end of their useful lives, or relatively new natural gas plants that will continue to operate for decades after that.”
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
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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
IURC Decision Limits Cost Recovery on Duke Energy Edwardsport IGCC Plant on Indiana December 27, 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
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Dear Indiana DG Readers:
The Indiana Utility Regulatory Commission (IURC) this afternoon (12/27/12) approved a modified Settlement Agreement in the Duke Energy Indiana Edwardsport case.
Please find below the official IURC News Release. Download the IURC News Release HERE > http://www.in.gov/iurc/files/IURC_Decision_Limits_Cost_Recovery_on_Duke_Energy_Edwardsport_Plant.pdf
Download a copy of the order HERE > http://www.in.gov/iurc/files/Order_in_Cause_No_43114_IGCC_4_S1.pdf
The order is 134 pages but most of the order summarizes the case and the procedural history.
The Commission Discussion and Findings begins at p. 109.
A copy of the Settlement Agreement starts at p. 123 of the 134 page document., however, since this was not a settlement signed by all the parties to the proceeding this is likely not over. More details will be covered as they unfold. Watch this blog for further developments.
Laura Ann Arnold
IURC News Release
Indiana Utility Regulatory Commission
101 W. Washington St.
Suite 1500 E.
Indianapolis, IN 46204
For Immediate Release
December 27, 2012
Office: (317) 232‐2297
IURC Decision Limits Cost Recovery on Duke Energy Edwardsport Plant
Commission approves modified settlement agreement and credits ratepayers an additional $28 million
INDIANAPOLIS – Today the Indiana Utility Regulatory Commission (IURC) modified and approved a settlement agreement reached in the Duke Energy Indiana case involving the revised cost estimate for the electric utility’s new integrated gasification combined cycle facility (IGCC) in Edwardsport, Ind.
The settlement agreement set a hard cost cap for the project at $2.595 billion (as of June 30, 2012), which prohibits Duke Energy from recovering project construction costs above this amount from retail electric customers, excluding costs related to force majeure situations defined in the agreement. It also requires the utility to absorb nearly $900 million in cost overruns given the plant is now projected to cost approximately $3.5 billion.
Although Duke Energy is limited in its recovery of project costs, the settlement agreement does allow the utility to recover financing charges accrued to fund the project’s construction. This arrangement is otherwise known as allowance for funds used during construction (AFUDC) and has been approved thus far in this case in accordance with state law.
Through a modification to the settlement agreement, the IURC also provided $28 million in additional value to ratepayers by directing Duke Energy to credit customers for cost control incentive payments found to be unwarranted, given the delays that arose from the project cost overruns. The IURC also modified the settlement agreement in such a way that if Duke Energy should recover through litigation claims more than the IGCC project costs absorbed by its shareholders, any surplus recovery is required to be returned to ratepayers.
The investment recovery sharing coupled with the other terms of the settlement agreement created value that was found to be in the public interest. The settlement agreement was reached by the utility, Nucor Steel Indiana, the Duke industrial group, and the Indiana Office of Utility Consumer Counselor. Packaged with the settlement agreement is also a guarantee by Duke Energy that it will not file a rate case prior to March 2013, nor implement one before April 2014.
For your reference, the IURC’s decision under Cause No. 43114 IGCC 4 S1 can be found online at http://www.in.gov/iurc. To read the “Commission Discussion and Findings” section, please go to page 109. If you need to access other case‐related documents, visit our Electronic Document System at https://myweb.in.gov/IURC/eds/. Instructions on how to best use this database can be found at http://www.in.gov/iurc/2666.htm.
The Commission is a fact‐finding body that hears evidence in cases filed before it and makes decisions based on the evidence presented in those cases. An advocate of neither the public nor the utilities, the IURC is required by state statute to make decisions that balance the interests of all parties to ensure the utilities provide adequate and reliable service at reasonable prices. For more information, please visit: http://www.in.gov/iurc.
Progress, Duke want to slash payments for green energy in N.C. | RenewablesBiz; What are the implications for Indiana? December 27, 2012Posted by Laura Arnold in Duke Energy, Uncategorized.
Tags: N.C. Utilities Commission, Progress Energy, Renewable Energy Certificate (REC)
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Dear IndianaDG Readers:
This action by Duke Energy in North Carolina is troubling and probably does not bode well for us as we participate in the Stakeholder Meetings with Duke Energy Indiana as they work to prepare their Integrated Resource Plan (IRP) by November 2013.
Also watch for another post today after the weekly conference of the Indiana Utility Regulatory Commission (IURC) where an order on the Edwardsport plant is on the agenda. See http://www.in.gov/iurc/files/20121221153142111.pdf
Laura Ann Arnold
At a time that Progress Energy is seeking a 14 percent rate increase for residential customers in North Carolina, the Raleigh power company wants to slash payments as much as 29 percent for electricity it buys from solar generators and other renewables producers. If approved by the N.C.
Dec 25 – The News & Observer
At a time that Progress Energy is seeking a 14 percent rate increase for residential customers in North Carolina, the Raleigh power company wants to slash payments as much as 29 percent for electricity it buys from solar generators and other renewables producers.
If approved by the N.C. Utilities Commission, the request would reduce rates the electric utility pays for green energy to levels not seen since 1984, when there was no green energy to speak of in North Carolina.
The power company’s request is tied to the plummeting cost of natural gas, which is lowering the market price of electricity nationwide. Progress contends that it is now overpaying for the green energy it has to buy under state law, and passing on those inflated costs to its customers, who ultimately bear the financial burden in their monthly bills.
The move to cut rates comes at a crucial time for solar power in the state as the industry has nearly weaned itself off a key subsidy.
Only a few years ago, power companies paid solar generators a premium of about 12 cents for every kilowatt hour of power, roughly twice as much in subsidy support as the solar producers made from selling electricity. Today, solar producers typically receive less than 1 cent a kilowatt hour as a subsidy.
The shrinking subsidy — known as a “renewable energy certificate” — had solar advocates congratulating themselves for creating a self-sustaining industry in relatively short order. With the subsidy expected to go away in the near future, North Carolina’s solar industry is operating on razor-thin margins and could come to a standstill if Progress significantly cuts payments for electricity, advocates warn.
“There would be a big curtailment,” said Richard Harkrader, chief executive at Carolina Solar Energy, a Durham developer. “The stuff under contract would go ahead, but it would be very difficult to build any new (solar projects).”
Cuts up to 29% sought
Both Progress and its parent company, Charlotte-based Duke Energy, are requesting to cut the electricity rates they pay to green energy projects with a capacity of 5 megawatts and less.
Projects larger than 5 megawatts are not covered by regulated rates. They negotiate power purchase agreements with utilities individually. However, any rate established by the Utilities Commission for the smaller producers is expected to set a precedent for the way power companies deal with the entire renewables industry, Harkrader said.
The two utility companies want to offer similar rates, but Progress, which currently pays more than Duke, is asking for a greater reduction to achieve price parity.
Progress is asking for cuts between 14 percent and 29 percent for 15-year contracts to buy power from solar, biomass and wind power producers. Duke is asking for cuts between 3 percent and 14 percent. There are more than two dozen rates, based on various factors.
“It is important that the costs paid to qualifying facilities reflect the utilities’ true cost,” said Progress spokesman Mike Hughes. He said utilities must “ensure that retail customers do not have to subsidize energy sources priced above the market.”
Charge more, pay less?
Hughes said there’s nothing hypocritical for the company to ask households to pay more for electricity while it seeks to pay less for electricity bought from solar producers. From an accounting perspective, not all electricity is equal.
The rate increase for retail customers is designed to cover the cost of transmission line upgrades, new power plant construction and other operating expenses.
The cost for electricity bought from green energy producers reflects something much more specific: the avoided cost of not having to build a “peaker” power plant that runs only a few weeks out of the year.
The N.C. Utilities Commission has scheduled a public hearing for Feb. 12. Given the complexity of the case, the commission is not expected to decide until this summer at the earliest.
Progress and Duke are required to use a certain amount of green power, even if they have to pay subsidies, to comply with a 2007 state energy law. The subsidies were intended as a temporary step to jump-start green industries.
North Carolina solar producers also benefit from a 35 percent state tax credit that can be combined with a 30 percent federal tax credit to reduce the material, equipment and installation costs of a project by more than half.
Reasoning raises questions
The utilities’ requests for lower rates are based on two factors. One factor — historically low natural gas prices — is indisputable. The other factor is anything but: Progress and Duke say that building power plants is becoming cheaper because modern plants are more efficient and last longer.
Those claims will be scrutinized by experts hired by renewables producers and by the staff of the N.C. Public Staff, the state’s consumer advocacy agency.
“They’re not actually using the cost of a power plant they’re building,” said Gisele Rankin, a senior lawyer at the Public Staff. “They’re using a hypothetical one that a consultant came up with.”
Progress officials felt the urgency to reduce the rate paid for clean power was so great that they asked the Utilities Commission to approve the rate cut Nov. 1, rather than wait until next year for a decision. Facing charges of blatant unfairness, however, the company backed down and instead agreed to let the current (higher) rate apply to any green energy project proposed by Dec. 1. The Utilities Commission is expected to rule on this proposed deadline soon.
In a Dec. 5 filing to the Utilities Commission, Progress dismissed the green industry’s position as self-serving: “It is unlikely that (alternative energy developers) would fault this proposal if (Progress Energy’s) proposed rates were increasing, and not decreasing.”
In the month leading up to the deadline, about 130 alternative energy producers, most of them solar, filed proposals for new projects representing more than 200 megawatts of power, Hughes said.
There’s no guarantee all will be built, but for now they have locked in at the higher rates.
(c)2012 The News & Observer (Raleigh, N.C.)
Visit The News & Observer (Raleigh, N.C.) at www.newsobserver.com
Distributed by MCT Information Services
Pro/Con: Edwardsport Power Plant; Duke Energy (IN) Pres. Doug Easamann v. Columbus (IN) Attorney Michael Mullett December 10, 2012Posted by Laura Arnold in Duke Energy, Edwardsport IGCC Plant, Indiana Utility Regulatory Commission (IURC), Office of Utility Consumer Counselor (OUCC), Uncategorized.
Tags: Columbus (IN) Attorney Michael Mullett, Duke Energy Indiana President Doug Esamann
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Duke Energy Indiana 2013 Integrated Resource Plan (IRP) Stakeholder Engagement Workshop Dec. 5, 2012 November 30, 2012Posted by Laura Arnold in Duke Energy, Indiana Utility Regulatory Commission (IURC).
Tags: Duke Energy Indiana IRP, Indiana Integrated Resource Plan (IRP) rulemaking, Jim Rogers CEO Duke Energy
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Dear IndianaDG Readers:
Just when I was hoping things might slow down for the Holidays, energy/utility events and activities seem to be accelerating. Please find below information about Duke Energy Indiana’s Integrated Resource Planning (IRP) upcoming “stakeholder engagement process”. To get a flavor of what is involved and/or contained in an electric utility’s IRP please scroll down to download a copy of Duke’s last IRP from 2011. You can also find a copy of this document on-line at http://www.duke-energy.com/pdfs/2011_Indiana_IRP_Plan.pdf.
Two other things happened yesterday involving Duke Energy yesterday:
Don’t blink or you might miss something!
Laura Ann Arnold
Duke Energy Indiana has established a stakeholder engagement process to inform our 2013 Integrated Resource Plan (IRP) in compliance with the proposed Commission IRP rule. Duke Energy Indiana has hired Dr. Marty Rozelle of The Rozelle Group, Ltd. to help design and facilitate the IRP stakeholder engagement process. She is an independent public participation specialist who regularly works with companies, government agencies, and local communities on stakeholder outreach activities.
Duke Energy Indiana has four main objectives for this stakeholder engagement process.
- Listen: Understand our stakeholders’ concerns and objectives.
- Educate: Increase stakeholders’ understanding of Duke Energy Indiana’s current and future energy situation, challenges, choices, complexity of resource decisions and need for flexibility.
- Feedback: Provide a forum for productive stakeholder feedback on specific topics at key points in the IRP process to inform Duke Energy Indiana’s decision-making.
- Comply: Comply with the proposed Commission IRP rule.
Advisory process overview
Duke Energy Indiana will seek participants’ feedback throughout the IRP development process. At the core of the process is a series of four workshops.
Integrated Resource Plan Overview
Duke Energy Indiana will be filing its 2013 Integrated Resource Plan (IRP) for the State of Indiana with the Indiana Utility Regulatory Commission by November 1, 2013. This plan, a 20-year forecast required by the Commission, outlines how we will serve our existing and future customers in a reliable and economic manner. Duke Energy Indiana uses the resource planning process to identify the best options to serve customers’ energy and capacity needs in the future. As reference, the 2011 Duke Energy Indiana’s IRP is available for download through the link in Related Links above right.
Download HERE > 2011_Indiana_IRP_Plan_Duke Energy Indiana
Midwest Energy News: Indiana coal controversy prompts push for more transparency in utility planning; Impact on IRP Rule? October 14, 2012Posted by Laura Arnold in Duke Energy, Edwardsport IGCC Plant, Indiana Michigan Power Company (I&M), Indiana Utility Regulatory Commission (IURC), Indianapolis Power and Light (IPL), Northern Indiana Public Service Company (NIPSCO), Uncategorized, Vectren.
Tags: Bowden Quinn--conservation organizer for the Hoosier Chapter of the Sierra Club, Certificate of Public Convenience and Necessity (CPCN), Citizens Action Coalition (CAC), Columbus (IN) attorney Mike Mullett, Ed Simcox with the Indiana Energy Association, Hoosier Environmental Council Executive Director Jesse Kharbanda, Indiana Energy Association (IEA), Indiana Integrated Resource Plan (IRP) rulemaking, Indiana Utility Regulatory Commission
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The Edwardsport coal-to-gas plant under construction in Indiana. Cost overruns and other controversy surrounding the project have helped drive efforts to reform Indiana’s utility planning process. (Photo via Duke Energy)
For the first time in 17 years, Indiana’s public utility commission is rewriting the state’s rule governing how utilities develop long-term plans to meet electricity demand.
The new rule could force the state’s five investor-owned utilities to face more public scrutiny in developing their plans, and perhaps move more quickly than they might otherwise toward reducing carbon emissions.
But the utilities are pushing back, saying that since they have the most skin in the game, they should have the most say over their plans.
Public comments have already been taken on the rule, known as the Integrated Resource Planning Rule, and the state’s public utility commission will issue the final rule in a few months.
Under Indiana law, utilities must obtain a permit called a Certificate of Public Convenience and Necessity before beginning construction of a new power plant. To obtain this permit, they must show that the new power plant is needed to meet electricity demand and is the best, most affordable way to do so. They do that via an Integrated Resource Plan, which they have to file with the public utility commission, known as the Indiana Utility Regulatory Commission (IURC).
In the past, the integrated resource plans “have been very black-box procedures,” said Bowden Quinn, conservation organizer for the Hoosier Chapter of the Sierra Club, who has led that group’s effort in pushing for a new rule.
“There was no avenue for participation,” he said. “They just filed them.”
Coal-to-gas plant controversy
IURC began updating the rule in large part because of the perception that they let too much slide on the controversial Edwardsport coal gasification project, which ran significantly over budget and spawned a huge scandal involving cozy relations between Duke Energy and the IURC, said Mike Mullett, an attorney from Columbus, Indiana, who represents the Hoosier Chapter of the Sierra Club, other environmental groups and the consumer advocacy group Citizens Action Coalition before the IURC.
In that case, the commission issued Duke Energy the certificate of public necessity and convenience, but later, Duke asked for almost $1 billion more than the $1.985 billion they’d originally been approved for, spawning legal action and additional IURC hearings.
“This update is in many respects a response to Edwardsport,” Mullett said.
In particular, the commission sought to push utilities to better estimate financial risk and uncertainty on projects like Edwardsport that embrace new technology. The Edwardsport plant is designed to produce coal gas, and it’s one of two coal gasification plants in the United States that are currently under construction.
The proposed IRP rule raises the bar for utilities in several ways, Mullett said.
The first is increased transparency. At least two public meetings would be required any time an investor-owned utility develops an integrated resource plan (IRP), and more if the public expresses a strong interest. And a new provision called a compliance determination allows the commission to force utilities to redo the planning process if those meetings didn’t happen.
Utilities also “have to have a demand forecast that meets certain best practices,” Mullett said. That plan needs to include a variety of scenarios, including energy efficiency programs, Mullett said. And in a significant departure from the old rule, the IURC must determine whether utilities are actually in compliance with the rule, then issue a ruling saying that they are.
Utilities have objections
The state’s utilities have no problem with more transparency, said Ed Simcox, president of the Indiana Energy Association. “For the company to unveil in an IRP process what their long-range plans are is not objectionable,” he said.
But Indiana’s five investor-owned utilities do object to provisions allowing the state’s regulators to verify whether they’re complying with the new rule. In proposed edits of the rule submitted to the utility regulatory commission the trade group representing the state’s five investor-owned utilities, the Indiana Energy Association, struck that provision entirely. The IEA represents Duke Energy, Vectren, Indiana Power & Light, Indiana Michigan Power, and Nipsco.
They also have problems with another part of the rule that requires them to meet with environmental and ratepayer groups as the plan is being developed, rather than being presented with it after the fact. That gives those groups more input and perhaps influence on utilities’ long-term planning decisions, said Jesse Kharbanda, executive director of the Hoosier Environmental Council.
Such input matters, Kharbanda said, because it will allow advocates to “make sure utilities are properly modeling for prospective carbon rules, changes in renewable energy, capacity and operating costs, and things like combined heat and power.”
But the utilities are “very uneasy because it’s not them having unfettered discretion,” Mullett said. The current director of IURC’s electricity division, who reviews the utility filings, is someone who “asks hard questions and cares about the answers,” he explained.It’s possible that hard questions from the IURC about whether the utilities are complying with the rule could delay approval of an IRP, which could delay approval of a power plant a utility wants to build. “That could delay a power plant, which could delay them from getting access to the money machine” that electricity ratepayers provide, Mullett maintained.
Simcox says the utilities are not necessarily opposed to more public input while they’re developing IRPs. But, he said, “the devil’s in the details.”
“To advise the public what companies are doing in terms of long-range planning is not an objection. The fine line is this: The companies are the entities that are responsible for producing and delivering power. The buck stops with them. You can’t have outside parties dictate to them what they’re going to do and how and when they’re going to do it.”
Mother Jones: Are Green Power Programs a Scam? Why does NIPSCO want a new Green Power Pilot Program? October 9, 2012Posted by Laura Arnold in Duke Energy, Feed-in Tariffs (FiT), Indiana Utility Regulatory Commission (IURC), Indianapolis Power and Light (IPL), Northern Indiana Public Service Company (NIPSCO), Uncategorized.
Tags: Duke Energy GOGREEN, Indiana green power programs, Renewable energy credits (RECs)
Dear IndianaDG Readers:
Why does NIPSCO really want to create a new green power pilot program? Part of the answer can be found in the petition and testimony NIPSCO filed earlier this year to create a voluntary green power rider pilot program as follows:
This case is now completed and is awaiting a final order from the Indiana Utility Regulatory Commission (IURC). I fully expect that it will be approved by the IURC.
Both Indianapolis Power and Light (IPL) and Duke Energy Indiana have programs like the one proposed by NIPSCO.
To read the most recent IPL 2012 Green Power Tariff Rider Annual Report click HERE > 43251 IPL Green Power Tariff Rider Annual Report_2012-09-28
Unlike most utility reports filed with the IURC, this is a short and sweet 12-page report with lots of bar charts and graphs. Apparently as far as green power tariffs go IPL’s is a good one–meaning that the cost to IPL customers to essentially purchase Renewable Energy Credits (RECs) from large out-of-state wind farms is very low.
The real question in my mind is what does purchasing these wind energy REC’s via IPL’s green power tariff do for IPL customers except make them feel good.
Does it improve the air quality in Indianapolis? NO
Does it create green jobs in Indianapolis? NO
Does it help to demonstrate the viability of urban friendly renewable energy technologies such as solar PV or CHP? NO
To get the details of the IPL Green Power Option program click HERE > Rider 21 Green Power 7-31-12
To see Duke Energy Indiana’s GOGREEN tariff click HERE >DE–IN_Rider_56_07_23_09_GOGREEN
The GOGREEN Tariff is only two-pages and shows that it became effective July 22, 2009.
I would note that not everyone shares my view (or the one expressed in the Mother Jones article below) on the subject. A recent article By Mary Ellen Gadski on June 27, 2012 in Indiana Living Green extols the virtues of these programs. See http://www.indianalivinggreen.com/squandered-indiana-ipls-green-power-option/ The author does ask:
“Are these programs effective at encouraging the markets in alternative power? Or are they merely a voluntary tax on environmentally aware do-gooders? Signing up for the Green Power Option is an easy way to express public demand for green power and demonstrate to our state legislators that we want an alternative to burning coal.”
I don’t intend to answer all the questions raised by these Indiana electric utility green power programs, I just merely want us to start asking the right questions. Are the green power options for Indiana electric ratepayers good or what would be better? I suppose it would not be much of a surprise to learn that I support feed-in tariffs (FITs) as a far better way to bring renewable energy into the grid to serve Indiana ratepayers. FITs have many other side benefits as well including green jobs creation and improving environmental quality. Creating renewable energy right here in our own backyard through distributed generation also does not require costly new transmission lines. You make it here and use it here.
I think what we really need is a good honest debate or educational forum on the subject of green power riders. Are you interested?
Laura Ann Arnold, Laura.Arnold@indianadg.net
Are you paying for renewable energy, or just a bunch of hot air?
—By Laura McCandlish
THE TWISTING TURBINES on the Columbia River Gorge ridges were one of the first things my husband and I noticed en route from Baltimore to our new house in Oregon. So a few weeks later, when a hawker at the farmers market urged me—with a $5 token for free veggies and a postcard with pictures of children lounging in front of local windmills—to sign up for a renewable energy program called Blue Sky, I didn’t hesitate. For less than an extra $10 a month, my utility, Pacific Power, would supply our home with electricity from wind turbines instead of coal.
But it turns out ditching dirty energy is more complicated than that hawker would have me believe. From the windmill postcard, you’d think my premium would go straight to local projects. Not quite: True, Pacific Power operates one wind farm in Oregon, but that’s largely because the state mandates that utilities get 25 percent of their power from renewables by 2025. My well-meaning purchase has little to do with those windmills. Instead, Pacific Power hands my Blue Sky money over to companies that buy renewable energy certificates (RECs) from wind farms, mostly in other states, and other renewable projects like methane-burning landfills. Consumers need to understand that the electricity “is not going from the windmill on the ridge to your toaster,” says Pacific Power spokesman Tom Gauntt. Michael Gillenwater, a Princeton researcher who codeveloped the EPA’s carbon emissions tracking system, says it’s more like donating to a cause. “What you are doing is subsidizing the market for renewable energy.”
Watch the Indiana hearings on the Duke Energy Edwardsport IGCC plant hearings on-line; Consumer and environmental groups are opposing Settlement Agreement filed by OUCC et al. July 16, 2012Posted by Laura Arnold in Duke Energy, Edwardsport IGCC Plant, Indiana Utility Regulatory Commission (IURC), Office of Utility Consumer Counselor (OUCC).
Tags: Duke Energy Edwardsport IGCC Plant
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The Indiana Utility Regulatory Commission (IURC) is conducting public hearings in the Duke Energy case pertaining to the Settlement Agreement reached on their Edwardsport IGCC plant located in southern Indiana.
July 16th to July 20th @ 9:30 a.m. Duke Energy Cause No. 43114 IGCC 4 S1
Click HERE to watch the Duke Energy hearings this week at the IURC.
Click HERE for a copy of the Office of the Utility Consumer Counselor’s (OUCCs) news release supporting the Settlement Agreement dated April 30, 2012.
Click HERE to see the News Release from Citizens Action Coalition, the Sierra Club Hoosier Chapter, Valley Watch and Save the Valley dated July 2, 2012. These groups are opposing the Settlement Agreement filed by the OUCC et al.
I urge you to read these News Release, watch the hearings and decide for yourself if the IURC should accept the proposed Settlement Agreement. Don’t be surprised if portions of the hearings go off-line or “in camera” and you see the following message:
The IURC’s hearing will resume shortly due to a scheduled break or an in camera session. An in camera session is where parties to the case discuss matters required to be kept confidential in accordance with IC 5-14-3-4. These sessions are limited to certain witnesses and parties authorized to view the confidential information. Once the break is over or the in camera session concludes, the online video streaming will resume.
PLEASE BE PATIENT.
WSJ: Duke Takes Big Charge for Edwardsport IGCC Plant in Indiana; CAC Urges IURC to Reject Settlement May 1, 2012Posted by Laura Arnold in Edwardsport IGCC Plant, Indiana Utility Regulatory Commission (IURC), Office of Utility Consumer Counselor (OUCC), Uncategorized.
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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 firstname.lastname@example.org
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.