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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.
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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   |

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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

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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.

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Watchdog Group Citizens Action Coalition Says State agency heads colluded on gas deal May 3, 2011

Posted by Laura Arnold in Indiana Utility Regulatory Commission (IURC).
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by Chris O’Malley, Indianapolis Business Journal (IBJ)

May 2, 2011
 
Former Indiana Utility Regulatory Commission chief David Hardy and the state’s then-finance director, Jennifer Alvey, improperly discussed the merits of a $6.9 billion contract the Indiana Finance Authority ultimately struck with operators of the Indiana Gasification plant proposed for Rockport, plant opponents alleged Monday.

Former Indiana Utility Regulatory Commission chief David Hardy and the state’s then-finance director, Jennifer Alvey, in 2009 and 2010 secretly and improperly discussed the merits of a $6.9 billion contract the Indiana Finance Authority ultimately struck with operators of a proposed gasification plant, plant opponents allege.

Citizens Action Coalition, the Sierra Club and other environmental groups on Monday presented copies of the e-mail to the commission, which is reviewing whether to approve the project agreement. The environmental groups are on record as opposing the plant.

Such direct, behind-the-scenes communication in such regulatory matters is generally prohibited under state law.

The e-mails show the agency heads discussing the plant as far back as 2009.

“The materials raise due-process concerns and provide evidence of communications that would, to a reasonable person, raise serious questions regarding whether the commission’s impartiality has been compromised in this matter by the advisory role to (the Indiana Finance Authority) in the negotiations,” according to the filing CAC attorney Jerome Polk made Monday with the IURC.

However, IURC administrative law judge Angela Webber denied a request to delay the hearing for 30 days, despite the e-mails.  She ruled that the e-mails were sent more than 30 days prior to the December 2010 filing of the gasification plant case, and they were “procedural and general in nature” rather than substantive.

“That’s nonsense from my perspective,” CAC Program Director Kerwin Olson after the hearing. “The commission is a biased body at this moment in time.”

CAC has until May 13 to offer rebuttal in the case, Olson said.

The IFA plans to purchase synthetic natural gas from the plant over 30 years, which proponents—including would-be plant operator Leucadia National Corp. of New York—have said will save Indiana gas customers more than $100 million by locking in low rates.

But the e-mails obtained by CAC raise serious questions about improprieties, as well as whether the contact had the blessings of Indiana Gov. Mitch Daniels’ staff. Daniels has been a supporter of the $2.7 billion gasification plant as part of his “homegrown energy” policy.

Under one of the e-mails obtained by CAC, Alvey appeared to confirm that Daniels adviser David Pippen provided then-IURC chair Hardy with “the run down” on negotiations the state was having with Leucadia.

“I’m preparing for maternity leave but wanted to give you a quick update. Pippen said he gave you the run down that we are holding unless we get some more movement on the guaranteed savings,” read a copy of an e-mail Alvey sent Hardy on Oct. 30, 2009, referring to the negotiations between IFA and Leucadia.

In an Aug. 14, 2009, message, Alvey tells Hardy she would “like to pick your brain confidentially” but adds: “I can’t provide you with much documentation without opening them up to public access.”

In another e-mail, Alvey tells Hardy about efforts to get favorable legislation for the deal involving IFA’s agreement with Leucadia.

Hardy responds: “If you need to meet with my troops, they can in my absence.”

CAC told the commission that “at a minimum, the e-mails provided to date give the appearance of impropriety.”

The group cited state law governing ex parte communications,  which says “administrative adjudications may not be made upon evidence secretly obtained by an administrative agency at a time and place other than that appointed for a hearing.”

Polk said such adjudications may not be made upon information received.

Olson told the commission Monday that he met with Alvey in late September 2010, and she indicated then that she had not talked to commission officials about the IFA’s proposed synthetic natural gas contracts with Leucadia’s Indiana Gasification.

But she said she “was anxious to go across the street and start the process,” Olson said.

“This was not a competitive and public process,” he said.

Alvey left her position early this year for a job in the private sector.

Gov. Mitch Daniels fired Hardy last year in a separate ethics matter after learning that the IURC’s chief attorney, Scott Storms, was presiding over Duke Energy cases even as he was talking to the utility about a job, which he later accepted. He and the head of Duke’s Indiana operations were later fired by Duke when the scandal came to light.

Incriminating e-mails showed that Hardy was aware of Storms’ job-seeking and that he made light of a state ethics commission review of whether Storms had a conflict of interest.

Clean-coal gas deal could charge up NIPSCO bills for NW Indiana customers, Hearings start today May 2, 2011

Posted by Laura Arnold in 2011 Indiana General Assembly, Indiana Utility Regulatory Commission (IURC), Uncategorized.
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Original article: http://www.nwitimes.com/news/local/lake/article_a53283bd-984a-5e4a-a820-6103c3ac8bd3.html

By Keith Benman keith.benman@nwi.com, (219) 933-3326 

nwitimes.com |Posted: Sunday, May 1, 2011 12:00 am | (31) Comments

The state’s plan to have more than 1.7 million Hoosier utility customers subsidize a proposed clean-coal gasification plant is splitting the state’s utilities and pushing some into alliances with consumer groups.

Downstate natural gas utility Vectren is vigorously opposing the plan “on behalf of its customers,” claiming it could cost Hoosier utility customers more than $1 billion.

NIPSCO is not taking a position for or against the state’s plan. However, Frank Shambo, a NIPSCO vice president, has submitted testimony supporting the state’s claim the project could help protect utility customers from volatile natural gas prices.

The split among utilities is being driven by a proposed 30-year sales contract between the Indiana Finance Authority and Indiana Gasification LLC, the plant’s developer. The two are asking state regulators to approve the contract.

That contract has the Indiana Finance Authority, a state agency, buying almost all synthetic natural gas produced by the $2.65 billion clean-coal plant to be built in downstate Rockport by Indiana Gasification LLC, a subsidiary of publicly traded New York investment group Leucadia National Corp.

The IFA has submitted testimony diametrically opposed to Vectren’s and that of six other natural gas utilities, stating the sales deal will save the state’s utility customers $500 million over the 30-year term of the contract.

Gov. Mitch Daniels continues to be an enthusiastic supporter of the plan, maintaining the arrangement between Indiana Gasification and the IFA will help “hedge” or buffer volatile natural gas prices for utility customers across the state.

“There is all kind of evidence to believe this will be a huge winner for ratepayers,” Daniels said in an interview with The Times two weeks ago. “But we’ve always been cautious to say let’s just view it as a good hedge. And that’s a smart thing to do.”

The Indiana Utility Regulatory Commission has held three public hearings on the contract between the IFA and Indiana Gasification in the past two weeks. Evidentiary hearings before the IURC start Monday in Indianapolis.

A number of utilities, consumer advocates and environmental groups have been just as passionate as Daniels about the deal, only they are denouncing it.

“This is nothing other than a group of crony capitalists getting together and using the legislative process to make themselves rich,” said Kerwin Olson, project director for the Citizens Action Coalition. “Ratepayers are receiving nothing in this deal other than a charge tacked onto their bills to benefit Leucadia investors.”

Olson also points out the state’s utility customers never actually get to use the synthetic natural gas, because it is sold to a third-party energy shipper.

The arrangement

No one denies the arrangement is complex. Basically, IFA will buy almost all of the synthetic natural gas produced at the Indiana Gasification plant based on a formula in which the price of coal is the largest variable. The IFA then will sell that gas to an energy shipper at the market price for natural gas – which changes daily in response to supply and demand.

If the price of natural gas is above the price the IFA paid for the synthetic gas, the IFA realizes a profit. If natural gas is cheaper than the synthetic natural gas, the IFA racks up a loss.

Half of any profit would be passed to the state’s more than 1.7 million utility customers through credits on their bills. Indiana Gasification gets the other half. Customers also could share in profits from the sale of byproducts such as exotic gases produced by the plant.

Any loss IFA suffers would be passed to utility customers in the form of a bill surcharge, effectively reimbursing IFA for its loss. How much in surcharges versus how much in credits utility customers will rack up over 30 years is the chief point of contention.

Vectren has submitted testimony contending the IFA’s deal with Indiana Gasification could increase individual residential utility customers’ bills $34.56 per year on average. Commercial customers could see a bill increase of $144 per year on average and industrial customers could see an increase of up to $16,819 per year, according to Vectren’s testimony.

The largest users of natural gas, such as large steel mills, are exempt from the plan under legislation passed by the General Assembly.

Chief IFA witness Jennifer Alvey, a former finance director at the agency, stated the average customer would save $8.48 per year on their gas bill over the life of the contract in testimony filed in the case.

The price of natural gas on wholesale markets is currently hovering around $4.20 per million British thermal units. Estimates of the price of the synthetic natural gas Indiana Gasification will produce vary between $6 and $7 per million Btus.

The Indiana Gasification plant will convert coal into substitute natural gas by applying heat and pressure to the coal while limiting its actual combustion. The gas produced can be used just like natural gas to power electric turbines or make synthetic fuels.

Points of contention

Much of the testimony in the case revolves around different forecasts of natural gas prices. An expert witness for Indiana Gasification describes official U.S. Energy Information Agency forecasts of stable natural gas prices for years to come as “essentially worthless.”

“All of this is based on the fact we believe that the history of (natural) gas prices will continue to be one of the most volatile commodity prices that there is,” said Mark Lubbers, Indiana Gasification project manager for Leucadia. 

But Vectren, six smaller utilities, and consumer and environmental groups argue new means of extracting natural gas from shale deposits have led to the most plentiful supplies and lowest prices in decades.

Those against the project also point out the IFA contract could leave utility customers on the hook for increases in taxes as well as the cost of future government regulations placed on the plant.

On its side of the deal, Indiana Gasification is required to build a reserve fund of $150 million to reduce the size of any surcharges utility customers may find on their bills.

The contract also contains what IFA terms a guarantee of savings. If utility customers do not realize $100 million in net savings over the 30 years, IFA can extend the Indiana Gasification contract and buy the gas at a discounted price. Any profit IFA makes it could pass on to utility customers until they realize $100 million in savings. Or IFA can take possession of the plant and sell it, passing on proceeds to customers.

The contract’s opponents all say Alvey’s claims of a guaranteed return to customers is smoke and mirrors. They say a “guarantee” that doesn’t require any savings for a period of 30 years, and perhaps longer, guarantees nothing.

The states largest gas utilities

Here are the largest natural gas utilities that would be subject to the state’s plan for providing subsidies for Indiana Gasification’s clean coal plant:

NIPSCO: 721,000 customers

Vectren: 675,000 customers

Citizens: 261,000 customers

Source: Indiana Utility Regulatory Commission

State of Indiana reaches deal on coal gasification plant – CNBC December 17, 2010

Posted by Laura Arnold in Indiana Utility Regulatory Commission (IURC), Uncategorized.
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Source for article reprinted below. State reaches deal on coal gasification plant – CNBC.

Editor’s Note: There are several different versions of this story floating around. I have decided to re-print the AP version of this story published by CNBC, however, I thought readers might want to read and compare the other versions including from the front page banner story in today’s Indianapolis Star. Tell me what you think? Laura Ann Arnold

http://www.indystar.com/article/201012170245/LOCAL/12170340

http://www.nwitimes.com/business/local/article_919495b7-488e-5ae9-96c3-03c1b5a45181.html
 
http://www.courierpress.com/news/2010/dec/16/state-developers-reach-agreement-rockport-ind-gasi/?partner=RSS

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Published: Thursday, 16 Dec 2010 | 4:59 PM ET

INDIANAPOLIS – The state’s finance authority said Thursday that it reached a 30-year deal to buy synthetic natural gas from a coal-gasification plant planned for southern Indiana, marking the first time the state has entered into such a venture.

Opponents called the deal an entitlement program and “socialism for corporations,” but Republican Gov. Mitch Daniels said the deal will save Indiana’s natural gas users money by locking in low rates and ensuring a steady supply of synthetic natural gas made from Indiana coal.

“We’re out to pay Hoosiers instead of people elsewhere for the energy we need,” Daniels said. “We’re out to protect ratepayers against the likelihood of higher long-term gas prices. We’re out to put people to work in rural Indiana. And we’re out to become a leader in the high-tech field of cleaner energy. This project does all that.”

Under the deal, the Indiana Finance Authority will spend an estimated $6.9 billion over 30 years to buy synthetic natural gas from Indiana Gasification LLC, a subsidiary of Leucadia National Corporation. The IFA will buy the gas once production begins — as early as 2015 — and will then sell the synthetic gas to the market, where it will be delivered to consumers through existing utilities. If contract prices are lower than market prices, the savings will be split between the company and ratepayers. If contract prices are higher than market prices, ratepayers would be protected by $150 million set aside by the company to cover higher prices.

The company will be responsible for building the $2.65 billion plant planned for the Ohio River town of Rockport in Spencer County. The state would share in profits from byproducts of the coal-gasification process such as sulfuric acid and rare gasses, and the company would give Indiana vitreous slag for free, a byproduct that can be used to build roads.

Officials said Indiana Gasification assumes all the risk for construction of the plant and its operations — so if the plant is not built or does not end up producing synthetic natural gas as planned, the state is not out anything.

“There’s no risk to us,” said Jennifer Alvey, the state’s public finance director.

But Kerwin Olson, the program director for the Citizens Action Coalition of Indiana, questioned why the state needed to get involved at all.

“Our position from the get go has been if Leucadia wants to build this plant and sell their gas into the market, go for it,” he wrote in an e-mail to The Associated Press. “But the bottom line is they can’t because it is too risky and Wall St. won’t finance it based on its own merits.”

“The state is delivering Leucadia a market to which they are not entitled,” he wrote.

Alvey said the finance authority’s involvement would mean all natural gas users in Indiana would benefit, not just those from one utility company who might choose to buy the synthetic natural gas. Daniels pointed out that the contract allows the state to direct the gas for use wherever it deems necessary in a state of emergency, meaning the state could still get natural gas even if supplies were interrupted elsewhere because of a hurricane, act of terrorism or other event.

The governor’s office estimates that the plant — first talked about in 2006 — would create 1,000 construction jobs, 200 full-time jobs at the plan and 300 mining jobs.

The roundabout method of using the finance authority as an intermediary partner between the state’s gas utilities and the coal-gasification plant was created after utilities dropped out of negotiations for the synthetic gas contracts in 2008 amid concerns the long contracts would harm their credit.

In 2009, the Indiana General Assembly passed a law that allowed the finance authority to negotiate long-term contracts with the plant, which would turn coal into synthetic natural gas, stripping it of pollutants and carbon dioxide to create a gas similar to real natural gas.

Now that the finance authority has completed negotiations, it will file a petition with the Indiana Utility Regulatory Commission for approval of the project agreements. Indiana Gasification is negotiating a loan guarantee with the U.S. Department of Energy, and an environmental impact study must be done. Depending on the timing of those elements, construction of the plant could begin in early 2012.

Copyright 2010 The Associated Press.