jump to navigation

Courier-Press: Official with Rockport coal-to-gas plant says contract changes would kill the deal January 22, 2013

Posted by Laura Arnold in 2013 Indiana General Assembly, Indiana Utility Regulatory Commission (IURC), Vectren.
Tags: , , , , , ,
add a comment

Dear IndianaDG Readers:

The Leucadia Indiana Gasification plant proposed for Rockport, IN is likely to be a “hot potato” this session of the Indiana General Assembly. Sen. Eckerty has introduced SB 510. The digest for SB 510 is as follows:

Substitute natural gas contracts. Defines “guarantee of savings” with respect to retail end use customers of substitute natural gas (SNG). Amends the definition of “purchase contract”. Defines “savings shortfall”. Requires the Indiana finance authority (IFA) to submit a final purchase contract, including amendments, and any other agreements with a producer of SNG to the utility regulatory commission (IURC). Requires the IFA to determine on a three year cycle if retail end use customers are provided a guarantee of savings or a savings shortfall under a purchase contract. Requires the IFA to electronically submit its findings to the IURC. Requires the IURC to verify and approve the findings and, if there is a savings shortfall, order a producer of SNG to provide a refund.

There appears to be a delay still in House Bills appearing in the system, therefore, Rep. Crouch’s bill is still not available from the Indiana General Assembly website. Eventually, you should be able to find the bill she has introduced HERE.

Also be sure to read the second article from the IBJ for more background on this issue.

When there is more information about this issue you will be able to read it here.

Laura Ann Arnold

Lawmakers questioning wisdom of 30-year deal to buy plant’s gas at fixed price

By Eric Bradner, Evansville Courier & Press, Posted January 18, 2013 at 5:57 p.m., updated January 18, 2013 at 10:06 p.m.

INDIANAPOLIS —State lawmakers’ attempts to rework the deal Indiana struck with developers of the proposed Rockport coal-to-gas plant would kill the nearly $3 billion project, one of its top officials said Friday.

As a shale gas boom drives down natural gas prices, two Republican lawmakers say they question the wisdom of the Indiana Finance Authority’s 30-year contract to buy and then resell the plant’s synthetic gas at a fixed rate.

Both have filed bills that would drastically alter its terms. The bills would trigger the ratepayer protection mechanisms included in the contract every three years, rather than waiting until the end of the deal.

That would stop the plant in its tracks, said Mark Lubbers, a former

Gov. Mitch Daniels aide who is helming the Rockport effort for Leucadia National Corp.

“Any ‘true-up’ of savings before the end of the contract term makes the project unfinanceable,” he said.

The House and Senate utility committees could consider the two measures at a rare joint meeting, the chairmen of those committees told the Courier & Press on Friday.

“We can tell you that we have had many conversations regarding the Rockport coal gasification plant with our Senate and House colleagues. We’re currently considering holding a joint hearing on the issue, although no final plans have been set,” Sen. Jim Merritt, R-Indianapolis, and Rep. Eric Koch, R-Bedford, said in a joint statement.

Lubbers meanwhile doubled down on what he said is a rock-solid deal for Hoosier gas customers over the long term, saying Indiana needs a second plant — this one in Lake County — that would convert petroleum coke, rather than coal.

“Two plants would provide better consumer protection and keep even more Hoosier energy spending in Indiana,” Lubbers said.

His stance sets the stage for what could emerge as a critical battle in the opening weeks of the first term of new Gov. Mike Pence, who has not taken a stance on the project.

In 2009 lawmakers gave the Indiana Finance Authority the green light to hammer out a 30-year contract with Leucadia’s Indiana Gasification LLC to buy its synthetic natural gas and then resell it through the state’s utilities.

That deal, signed by Gov. Mitch Daniels, set a rate of between $6 and $7 per MMBtu for the life of the contract. It would have utilities tie 17 percent of ratepayers’ bills to that Rockport price, rather than their open market rate.

It appeared to be a steal when natural gas prices topped $13 per unit as recently as 2008. Since then, though, a nationwide shale gas boom has sent prices plummeting to near $3 per unit now.

And now that Daniels is gone, some lawmakers are looking for ways out of the deal.

“The market has changed, conditions have changed, and so we need to take a fresh look at this situation and there needs to be some changes that will protect the ratepayer,” said Rep. Suzanne Crouch, R-Evansville.

Crouch and Sen. Doug Eckerty, R-Yorktown, filed the bills that the utility committee chairmen are considering granting a joint hearing.

The Indiana Finance Authority’s deal required Leucadia’s Indiana Gasification LLC to set $150 million aside in an escrow account to reimburse ratepayers for any losses at the end of the 30-year deal.

The measures Crouch and Eckerty are pushing would shorten that window, requiring Indiana Gasification to pay ratepayers back for any losses every three years — a move that would harm Indiana Gasification’s bid for a federal loan guarantee.

Opponents of the Rockport plant include Evansville-based

Vectren Corp., which estimates the deal could cost Indiana ratepayers $1 billion in extra gas prices over its first eight years, and a host of environmental groups.

“When this thing was conceived, it was a good idea. Natural gas was volatile, there was an unknown long-term supply, and we were just coming off three or four years of the most volatile natural gas prices we’d seen in 25 years,” said Mike Roeder, Vectren’s vice president of government affairs and communications.

“The concept made a ton of sense, and so no legislator should feel any guilt about a vote from back then because it was a reasonable idea. But what has changed is shale gas.”

Lubbers, who has argued that recent years’ volatility in natural gas prices make the case for a project with fixed rates, said he will continue defending the project if state lawmakers consider the two bills this year.

“On the one hand, we are always grateful for a platform to talk about the plant and the contract. It is extraordinary public policy — the first time consumers have ever been guaranteed savings for any energy product; the first time consumers have ever had a lien on energy utility assets; a huge step forward in clean coal technology. It is a big idea and makes Indiana a real leader,” he said.

“On the other hand, after an 18-month negotiation that produced more consumer protection than the legislature or we ever envisioned, and an 11-month (Indiana Utility Regulatory Commission) consideration resulting in unanimous approval of the contract, to have it politically challenged by a self-interested utility is disappointing.”

The state’s contract with Indiana Gasification is also the subject of a court battle.

The Indiana Court of Appeals reversed the state’s utility regulatory commission’s approval of the deal last year, pointing to a problem that the Indiana Finance Authority and Indiana Gasification said would be easily fixed.

But Vectren has sought to use that opening to force the deal back onto the starting blocks, requiring it to be vetted and approved by the Indiana Utility Regulatory Commission all over again.

Bill could be hurdle for proposed $2.8B synthetic gas plant

Chris O’Malley, January 15, 2013, Indianapolis Business Journal

The company that plans to build a $2.8 billion synthetic gas plant in Indiana could face another hurdle if a bill introduced by a state senator is successful at the Statehouse.
Under the legislation, state utility regulators could order Indiana Gasification LLC to make refunds to gas customers every three years if the price of synthetic gas it produces from coal is greater than the market price of natural gas over the period.

Senate Bill 510, by Sen. Doug Eckerty, R-Yorktown, is aimed at alleviating concerns raised by consumer groups and some lawmakers about legislation passed in 2010 that helped enable the plant proposed for Rockport, near the Ohio River.

That legislation allowed the Indiana Finance Authority to act as a purchasing intermediary for synthetic gas produced at the plant. The authority would sell the gas on the open market. Whether gas customers would receive discounts, or see their bills increase, would depend on whether the authority made or lost money on its sales.

It’s estimated that Indiana Gasification could produce gas between at a cost of $6 and $7 per MMBtu, a common measurement used by the energy industry.

When the Rockport plant was proposed, natural gas was selling for around $13 per MMBtu, Eckerty said in a prepared statement Tuesday. Butwith an abundant supply of natural gas now available, the fuel recently was selling at $3.10.

“With these changes in mind, many state officials – including myself – believe it is not in Hoosiers’ best interests for the state to put taxpayers at risk by subsidizing substitute natural gas,” Eckerty said.

Natural gas prices have plummeted in recent years, with mass extraction of natural gas from shale deposits. Evansville-based gas and electric utility Vectren projects the synthetic gas made at the proposed plant would cost customers $1 billion in the first eight years, or up to $375 for an average retail customer.

Critics say under the current contract with the state, natural gas customers may not see Indiana Gasification’s promised $100 million in savings until the end of the 30-year contract.

Legislators who passed the original measure did not intend for such savings to be realized so late, said Kerwin Olson, executive director of Citizens Action Coalition.

“This is a good proposal. It clarifies the Legislature’s original intent,” Olson said of the new bill. “It helps to erase the generational discrimination.”

Indiana Gasification has found fault with opponents’ insistence that natural gas prices will remain low over the long-haul, noting that natural gas prices historically have been volatile.

That volatility is a certainty was citied by the Indiana Utility Regulatory Commission in its approval of the deal.

Indiana Gasification also insists that the proposed plant will diversify the state’s supply of gas and help lessen volatility.

Currently, the gas supply contract between Indiana Gasification and the Indiana Finance Authority is mired in litigation.

Last October, the Indiana Court of Appeals reversed regulator approval of the gas-purchasing contract deal, but on narrow grounds. It found the legislation authorizing the purchases never was intended to result in certain industrial customers’ sharing in the costs or benefits of the purchases, as would residential customers.

Indiana Gasification said a simple, 37-word deletion of language in the contract would satisfy the court. But Vectren has filed an objection, arguing that the contract was essentially made null and void by the court last October and that the regulatory process should start over again.

The proposed plant operator counters that Vectren already lost on many of its arguments and that the tactic is meant to cause delays that could jeopardize financing of the project.

Eckerty’s bill could potentially void the disputed contract between Indiana Gasification and the state finance authority “because it makes retroactive changes to current statute that would modify the terms of that contract,” said a bill analysis by Indiana Legislative Services Agency.

Indiana Gasification officials did not immediately offer comment on the bill.

Court overturns regulators’ ruling on payments for Rockport (IN) coal-gas plant October 30, 2012

Posted by Laura Arnold in Indiana Utility Regulatory Commission (IURC), Uncategorized, Vectren.
Tags: , , , ,
add a comment

UPDATE:  Link to Indiana Court of Appeals decision issued this morning– http://www.in.gov/judiciary/opinions/pdf/10301201par.pdf

 

Original article: http://www.indystar.com/article/20121030/BUSINESS/121030048/Court-overturns-regulators-ruling-payments-Rockport-coal-gas-plant?odyssey=mod|breaking|text|IndyStar.com

2:51 PM, Oct 30, 2012   |

Comments

This coal gasification plant is being built in Edwardsport, while ground has yet to be broken on a similar plant in Rockport.

This coal gasification plant is being built in Edwardsport, while ground has yet to be broken on a similar plant in Rockport.  /  Courtesy Duke Energy

Written by Tony Cook

Related Links

An Indiana appeals court today reversed the Indiana Utility Regulatory Commission’s approval of a controversial deal under which Indiana natural gas customers would be required to pay for energy from a planned coal-gas plant in Rockport.

In a 2-1 decision, the Indiana Court of Appeals ruled that the Indiana Finance Authority’s contract with the plant’s developer, Indiana Gasification, went beyond what state lawmakers had authorized.

Specifically, the court ruled that the contract’s inclusion of industrial transportation customers in the definition of “retail end use customer” violated the authorizing legislation passed by the General Assembly in 2009.

The case stems from a challenge by opponents of the project, including Vectren Energy, several industrial companies, two smaller natural gas utilities, and three citizen’s groups. Those opponents argued that the Indiana Utility Regulatory Commission erred in approving the contract, under which the state must buy gas from the plant and sell it on the open market for a profit. If it can’t, natural gas ratepayers must cover the loss on their monthly bills.

Officials with the Indiana Finance Authority, Indiana Gasification and Vectren were not immediately available for comment.

Call Star reporter Tony Cook at (317) 444-6081 and follow him at twitter.com/indystartony.

Midwest Energy News: Indiana coal controversy prompts push for more transparency in utility planning; Impact on IRP Rule? October 14, 2012

Posted 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: , , , , , , , ,
add a comment
See this blog post for details on the upcoming IRP Contemprary Issues Technical Conference. http://wp.me/pMRZi-Td
Original article: http://www.midwestenergynews.com/2012/10/12/indiana-coal-controversy-prompts-push-for-more-transparency-in-utility-planning/Posted on 10/12/2012 by 

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.”

Resolution of Rockport issue should allow HB 1072 Conference Committee with solar pv property tax exemption to move forward; “Knock on wood” March 9, 2012

Posted by Laura Arnold in 2012 Indiana General Assembly, Indiana Utility Regulatory Commission (IURC), Uncategorized, Vectren.
Tags: , , , ,
1 comment so far

Dear Blog Readers:

There has been no action on the HB 1072 Conference Committee since its initial meeting on 3/6/2012 while state legislators and the Daniels Administration discussed the tax credit for the Indiana Gasification, LLC SNG plant at Rockport, Indiana. Now with the alternative course of action outlined in the newspaper article below, state lawmakers are expected to take action on a Conference Committee Report for HB 1072.

HB 1072 as it passed the Senate contained the extention of the property tax exemption for solar pv. I am hopeful that this language will remain in the Conference Committee Report (CCR) which needs to be signed today. After the four conferees sign the CCR then it returns to both the House and the Senate for final roll call votes. Please note that another Conference Committee meeting is not required for the conferees to merely sign the CCR. Before the CCR on HB 1072 can be voted on the floor though it must go both to the House Rules Committee and the Senate Rules Committee. Hopefully, the time clock will not run out but this issue may not be resolved until the final hours or hour of the 2012 session. “Knock on wood.”

Laura Ann Arnold

Lawmakers dropping Rockport issue as session nears its end

  • By Eric Bradner
  • Evansville Courier & Press
  • Posted March 8, 2012 at 2:23 p.m., updated March 8, 2012 at 3:45 p.m.

INDIANAPOLIS —Developers of the Rockport, Ind. coal-to-gas plant do not need state lawmakers’ help to get a 20-year, $120 million tax credit, after all.

Instead, the Indiana Department of Revenue – an agency under the watch of Gov. Mitch Daniels, a champion of the $2.6 billion plant – will rule on whether the tax credit applies. The agency’s likely answer: Yes.

It’s a work-around to avoid asking reticent legislators to once again change the law to help push forward a plant that Daniels calls a great deal, but Vectren Corp. and other Indiana utilities say will drive ratepayers’ bills upward.

Key Republican fiscal leaders said the Daniels administration had opted to try for that “administrative fix” to forestall potential lawsuits over the tax credit, instead of pressing lawmakers on the issue as the 2012 legislative session reaches its end.

Senate Appropriations Committee Chairman Luke Kenley, R-Noblesville, said legislation related to the tax credit won’t make its way into a bill.

“Everybody likes to let the legislature solve all their problems for them rather than figure out if they’ve got another way to do it sometimes, and I think maybe that’s what happened in this case,” Kenley said.

The Rockport plant’s proponents said working through the Indiana Department of Revenue is fine with them.

“There was never any doubt in our minds that we qualified under the existing law,” said Mark Lubbers, an Indiana consultant for Leucadia National Corp., the Rockport plant’s developer, and a former top Daniels aide.

“Given the fact that Vectren is spending every dime of ratepayer money they can to slow us down, we wanted to clarify the language in a way to mitigate their next nuisance lawsuit.”

Opponents took another view.

“I thought we overthrew the monarchy back in 1776,” said Kerwin Olson, the head of the Citizens Action Coalition, an environmental advocacy group that has opposed the Rockport project.

After negotiations with utilities such as Vectren broke down, Daniels had the Indiana Finance Authority negotiate a 30-year contract to purchase 38 million dekatherms of synthetic natural gas annually from the Rockport plant, and then resell that to Hoosier ratepayers.

The contract, approved by the Indiana Utility Regulatory Commission in November, was a huge boost for Rockport’s developers because it guaranteed their product would have a buyer.

However, during this year’s session, Vectren has used the question of whether the tax credit, which would give the Rockport plant an approximately $6 million per year incentive to purchase Indiana coal, is applicable as a chance to lobby lawmakers to reconsider the whole project.

Their argument: A recent shale-gas boom has driven natural gas prices on the open market down to $2.50 per dekatherm – much lower than the $6.64 per dekatherm average rate over the life of the contract that the Indiana Finance Authority expects to pay the Rockport plant.

Indiana utilities wouldn’t have a financial stake, but 17 percent of all Hoosier ratepayers’ bills would be tied to the Rockport plant’s prices, and utilities would be required to act as an intermediary and bill for that 17 percent.

Thus, Vectren officials have complained, they expect to be blamed by ratepayers if the cost of Rockport’s synthetic natural gas proves higher than the other natural gas the utility is delivering.

Still, Daniels said he expects natural gas prices to fluctuate over time, as they have in recent years. He said Hoosiers are guaranteed savings over the life of the contract, and that it would also help create jobs in Southwestern Indiana.

By dodging the step of having the Indiana General Assembly approve language related to the tax credit before Friday’s adjournment, the Daniels administration keeps lawmakers from stepping into a court battle, as Vectren and others are challenging the IURC’s approval of the Rockport plant.

“I’m pleased that there seems to be a recognition among many legislators that there are questions about this project,” said Mike Roeder, Vectren’s vice president of government affairs and corporate communications.

He said the utility will have to regroup before determining how next to try to prevent the Rockport plant’s construction.

“We’ve been laser-focused on this legislative language because frankly, that’s what the other side believed they needed. They’ve changed strategy, and so we’ll have to evaluate that,” Roeder said.

“This has been as much about the project as it is about the credit. It’s just caused us to say to legislators for several weeks, ‘We don’t think you should give them the tax credit, and by the way, you might just want to take a whole new look at the project.’”

Lubbers said the tax credit is important to another step toward the project’s completion: Securing a federal loan guarantee from the U.S. Department of Energy.

“We have to go through the process, but our case is extremely strong and we feel very comfortable. This kind of ruling has the force of law and will keep the next nuisance lawsuit from Vectren from slowing us down,” Lubbers said in an email.

“Additionally, our financing team feels that this ruling will provide all the assurance we need for the Department of Energy loan guarantee commitment. So, all good.”

Tax breaks for Rockport gas plant stripped; Indiana lawmakers say too many questions unanswered February 23, 2012

Posted by Laura Arnold in Vectren.
Tags: , , , , ,
add a comment

Original article: http://www.courierpress.com/news/2012/feb/22/tax-breaks-rockport-gas-plant-stripped-bill-indian/

By Lesley Weidenbener / Special to the Evansville Courier & Press; Posted February 22, 2012 at 11:33 p.m.

INDIANAPOLIS —Questions about a synthetic natural gas plant proposed for Southern Indiana led a House committee Wednesday to strip tax breaks for the $2.6 billion project from a bill that already has passed the Senate.

The Ways and Means Committee also eliminated language from Senate Bill 344 that would have taken industrial customers — those who use so much natural gas they strike their own purchasing contracts — out of the customer deal that led the General Assembly to OK the plant in 2007.

“I am still for the project,” said Rep. Suzanne Crouch, R-Evansville, who voted for the Indiana Gasification plant in 2007 and authored Wednesday’s amendments.

“But I believe the General Assembly has provided enough tools for the project,” Crouch said. “When is enough enough? When do we move from a public-private partnership to a publicly subsidized project?”

Others, though, expressed concern about whether the project should move forward at all. Rep. Win Moses, D-Ft. Wayne, said he initially supported the idea because it would convert Indiana coal to a cleaner fuel and because it seemed like it would save Hoosiers money.

Now, he said, the plant will not be required to use Indiana coal and the savings are unclear.

“I really hoped the governor would pull the plug,” Moses said.

The Ways and Means Committee voted 22-2 to remove the Indiana Gasification language from SB 344.

Officials from Evansville-based Vectren Energy appear to be largely responsible for the Ways and Means Committee’s action. The company has been lobbying against the tax breaks for the project and has appealed a decision by the Indiana Utility Regulatory Commission to OK the 30-year contract between Indiana Gasification and the Indiana Finance Authority.

“We were pleased to see nearly every member of the committee acknowledge that the natural gas world has changed, and that there are serious questions about building a plant that will burden Hoosiers with 30 years of expensive substitute natural gas,” said Mike Roeder,Vectren’s vice president of government affairs and communications.

That contract calls for the state to buy most of the plant’s synthetic natural gas. The price would be determined by a formula that takes into account a fixed rate plus fluctuations for the cost of coal and other factors. The state would then sell the gas in the market.

Customers of the state’s natural gas companies — including Vectren but also Citizens Gas, NiSource and other utilities — will then share in half of the profits the state earns or pay more to make up for most of the losses.

But there’s a question about whether industrial customers were originally meant to be part of the deal. Vectren and some lawmakers say yes. Indiana Gasification and other lawmakers say no, which is why those customers were seeking legislation to clarify. That provision exempting industrial customers was stripped from the bill.

Mark Lubbers, who is spearheading the Indiana Gasification project for parent company Leucadia National Corp., has said the project will be a great deal for Hoosiers. SNG produced at the Rockport plant will cost about $6.60 per dekatherm, which he said will be cheaper than natural gas over the 30 year period.

But Vectren officials — and now some lawmakers — are arguing that the recent emergence of shale gas — which is recovered through a process called hydraulic fracturing — has driven prices lower and making the SNG deal questionable.

Currently, natural gas prices are below $3 per dekatherm and futures prices remain below the $6.60 estimate for the Rockport contract.

“Shale gas deposits around the country have increased supply at a historically low price,” Roeder said. “We will continue working with legislators on this topic for the remainder of the session.”

Rep. Matt Ubelhor, R-Bloomfield, was one of two lawmakers who voted against the amendments to take the Indiana Gasification language out of the bill. Ubelhor, a manager at a coal mine, said he’s confident the project is still a good one and will create jobs and a market for Indiana coal.

“My fear is that this is the first step toward elimination” of the project, Ubelhor said.

But Rep. Terry Goodin, D-Crothersville, said there is no legislation to eliminate the project. “This will just be a bigger magnifying glass” on it, he said.

Because SB 344 passed the Senate with the Indiana Gasification language in the bill, it remains alive for this session. That means it could still be amended into other legislation.

Ways and Means Chairman Jeff Espich, R-Uniondale, said the issue might not be dead but said it “needs to continue to be reviewed.”

Vectren: Rockport a ‘Loser’ For Indiana Natural Gas Customers February 16, 2012

Posted by Laura Arnold in 2012 Indiana General Assembly, Indiana Utility Regulatory Commission (IURC), Uncategorized, Vectren.
Tags: , , , , ,
add a comment

Dear Readers,

Kerwin Olson, Executive Director of the Citizens Action Coalition of Indiana (CAC) also testified at the House Ways and Means Committee hearing and essentially supported the testimony given by Vectren. The fact that CAC was supporting a position of an Indiana utility brought more than a few smiles and laughes from the Committee.

Laura Ann Arnold

Utility executive: Shale-gas boom means proposed coal-gasification plant’s ‘time has passed’

from Associated Press, Feb. 14, 2012

INDIANAPOLIS — A utility executive told a legislative committee Tuesday that a drop in natural gas prices as a result of the nation’s shale-gas boom have made a proposed southern Indiana coal-gasification plant a project “whose time has passed.”

Jerry Ulrey, Vectren Corp.’s vice president for regulatory affairs, also told the House Ways and Means Committee that the utility estimates the proposed plant would lose more than $800 million over its first eight years in operation given current natural gas price projections.

He testified as the panel considered a bill exempting large industrial customers from rate hikes resulting from a state-negotiated gas supply deal for the plant proposed near the Ohio River town of Rockport. The Senate passed the bill earlier this month.

Ulrey told the committee that excluding large industrial customers from sharing in the plant’s production costs could end up doubling the rate increases for some of Vectren’s 760,000 residential and small business customers in Indiana.

Mike Roeder, Vectren’s vice president of government affairs and corporate communications, told the Evansville Courier & Press (http://bit.ly/Asw57l) before the hearing that such an exemption would “pick customer classes that win and lose.”

In November, the Indiana Utility Regulatory Commission approved a 30-year contract under which Indiana would become the primary buyer of the synthetic natural gas developer Leucadia Corp.’s Rockport plant would produce.

Indiana’s natural gas-supply deal calls for the plant’s gas to be bought for a fixed price and the Indiana Finance Authority to resell it to consumers through utilities, guaranteeing the plant’s developers a customer.

Vectren contends that under that 30-year contract, the gas price has some room to increase over time, but would start at about $6 per million BTU. Right now, that much natural gas sells for $3. Estimates are wide-ranging, but Vectren officials believe the price will stay low because natural gas is being extracted from shale deposits by a booming industry.

Vectren said its customers could end up paying more for their gas because the state would buy the Rockport plant’s synthetic gas no matter whether it’s cheaper or more expensive than the market rate for natural gas.

Gov. Mitch Daniels says the deal would lock in low rates for  Indiana ‘s natural gas users.

“All we’re saying is, the world’s changed because of shale,” Roeder said.

Gov. Mitch Daniels has said the deal would lock in low rates for Indiana’s natural gas users and would help economically depressed southwestern Indiana.

Mark Lubbers, a former Daniels aide who is an Indiana consultant for Leucadia, said large industrial customers are able to buy from diverse sources, which enables them to hedge against price changes.

He told the Ways and Means committee Tuesday that the Rockport project would do the same for other natural gas customers since the coal that will be bought for the plant historically has had more stable prices.

“It is still the smart play to diversify your supply portfolio,” Lubbers said. “Today you are 100 percent at risk to market prices.”

Rockport developer William Rosenberg said the facts Vectren laid out were all in front of the IURC when it unanimously approved the Rockport plant in November.

He said the plant owned by New York-based Leucadia would have a strong incentive to beat the market rate. The contract guarantees that over the 30-year life of the deal, and it will save consumers $100 million, Rosenberg said.

“The one thing that’s certain is that gas prices are uncertain. Gas prices over the last five, 10 years have ranged from $3 to $13,” he said. “It’s in the interest of the ratepayer to have a diversification of supply.”

___

Information from: Evansville Courier & Press, http://www.courierpress.com

———————————————————————————————————-

Andy Ober, InsideINdianaBusiness.com

 Roeder says the company will continue to make its case to lawmakers up until a final vote.

Evansville-based Vectren Corp. (NYSE: VVC) says an expected Statehouse vote next week could be key in determining whether a proposed coal gasification plant moves forward. The company argues the plant slated for southwest Indiana would cost the state’s natural gas customers $800 million in its first eight years of operation. Vice President of Corporate Communications Mike Roeder says an increase in shale-based natural gas makes the 30-year deal with Indiana Gasification LLC risky.

The Indiana Utility Regulatory Commission approved the 30-year contract with Indiana Gasification late last year. Roeder says at the time the project was initially proposed, it may have made sense because of the high cost of natural gas. He says the boost in supply has driven prices down.

Developers say the more than $2 billion project could create at least 200 jobs.

Source: Vectren Corp., Inside INdiana Business