Courier-Press: Official with Rockport coal-to-gas plant says contract changes would kill the deal January 22, 2013Posted by Laura Arnold in 2013 Indiana General Assembly, Indiana Utility Regulatory Commission (IURC), Vectren.
Tags: Indiana Gasification LLC, Indiana Rep. Eric Koch (R-Bedford), Indiana Rep. Suzanne Crouch (R-Evansville), Indiana Sen. Doug Eckerty (R-Yorktown), Indiana Sen. Jim Merritt Jr. (R-Indianapolis), Leucadia National Corp., Rockport-Leucadia coal gasification plant.
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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
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.
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.
Tags: Indiana Gasification LLC, Indiana Governor Mitch Daniels, Mark Lubbers, Rockport-Leucadia coal gasification plant.
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Original article: http://www.indystar.com/apps/pbcs.dll/article?AID=2011111270324
4:13 PM, Nov. 25, 2011
Written by Dan Carpenter
The distinguished columnist George Will, a gushing admirer of our own Gov. Mitch Daniels, recently joined the conservative chorus denouncing the Obama administration’s financial backing of the ill-fated Solyndra green-energy project.
“Crony capitalism,” he called it, noting that it involved a former Obama campaign operative ensconced in the Department of Energy, whose wife is with Solyndra’s law firm.
Progressives like this sort of government meddling in the market, Will sniffed, when in fact it “is not just susceptible to corruption, it is corruption. It is political favoritism with a clean (even green) conscience.”
Indeed. Those lascivious liberals, lavishing taxpayer money on high-risk gambles from which their friends can richly gain and cannot lose.
If the man Will wishes had run for president were not responsible for it, he might have included among his exhibits Indiana Gasification LLC.
I’m not the first to dub this venture Daniels’ Solyndra, and I’m certainly not smart enough to predict disaster for it. But examine the markings.
At Daniels’ behest, and with the blessing of the credibility-challenged Indiana Utility Regulatory Commission, the state has promised to shell out $7 billion over 30 years to buy the output of a yet-to-be-built $2.65 billion plant that would make synthetic gas out of coal. The hope is that coal prices fall in the future and natural gas prices rise, making this greenish fuel a bargain. Meanwhile, “hundreds” of jobs — not thousands, for all those billions — will result, Daniels proclaims.
The state is wagering on this little-tested technology because private money — utilities and banks — ran the other way.
The New York company the state is bankrolling has, as its chief Indiana executive, Mark Lubbers, the governor’s former chief of staff and longtime political teammate.
Whether these men have been scrupulous stewards of the public purse will not be known for sure in my lifetime; but I can guarantee they’re not libertarians.
Billions to Lubbers’ Leucadia Corp., billions to the horrendously destructive make-work extension of I-69, billions that would have been foisted on Duke Energy ratepayers if consumer activists and the news media had not exposed that company’s orgy of crony capitalism with the IURC — talk about your big government bedfellowship.
Before he wrote a book condemning President Barack Obama’s Washington for sending our grandchildren down a red river to socialism, Daniels was busy writing the book on grand gestures with the people’s money. To be sure, he has a lot of co-authors, in both political parties; not the least of them the Obama folks, whose stimulus funds have enabled Indiana to skate through the post-meltdown years with its fiscal responsibility image intact and George Will-praiseworthy.
Like Energy Secretary Steven Chu, Daniels will defend the state’s friends as honorable experts and the state’s gambles as necessities of the market. Unlike some pundits, I won’t play favorites with the label “crony capitalism.” Since I’m not going to be at the table, I just hope they get some lucky rolls with my chips.
Carpenter is Star op-ed columnist. Contact him at (317) 444-6172 or at firstname.lastname@example.org.
Tags: Rockport-Leucadia coal gasification plant.
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Utility watchdog oks short debate period for Rockport project
1:02 AM, Jan. 28, 2011 |
Written by Ted Evanoff
Only months after an ethics scandal rocked the state’s top utility watchdog, the IURC has set off a new controversy.
Lawyers say the Indiana Utility Regulatory Commission could sharply cut the time available for public debate on a massive energy project proposed at Rockport.
Private investors want to build a coal gasification plant that would be paid for largely by about 1 million Indiana households burning natural gas into mid century.
The IURC has the final say on whether the project goes forward, but a timetable accepted by the agency Thursday wraps up hearings in early May.
“It’s not clear to us why there’s such a rush. The parties have proposed a rather expedited procedural schedule,” said Clayton Miller, an Indianapolis lawyer representing an array of smaller gas utilities, including Ohio Valley Corp.
Now, the IURC’s handling of the case is likely to be watched carefully for signs of favoring industry over consumers as in the recent Duke Energy case.
“Indiana’s citizens will want to be sure that the questions asked in the Duke case are never asked in relation to this new project,” said Robert Schmuhl, a political analyst at the University of Notre Dame.
Those questions were central to an ethics scandal that was uncovered recently at the IURC. Cozy ties between Duke Energy and the state agency raised questions about whether the IURC was protecting the interests of citizens. Duke’s coal-fired power plant going up at Edwardsport has been hit by cost overruns routinely approved by the IURC.
After the close ties were revealed by The Indianapolis Star, three key officials departed Duke. And Gov. Mitch Daniels fired the top IURC commissioner, David Lott Hardy, a Fort Wayne utility lawyer he had earlier appointed to the agency.
In spite of the firing, Daniels has sided closely with the proposed Rockport plant, saving it in 2008 when investors were ready to scuttle plans. He said the plant represents an economic gain for the poor coal region of southwest Indiana.
That kind of support from the governor, Schmuhl said, most likely will bring intense scrutiny of the IURC from the public.
“It’s certainly not a small undertaking for the state that the governor” is backing, Schmuhl said.
Under the plan, the Indiana Finance Authority, a state agency, would buy almost all the natural gas produced from coal at Rockport for 30 years and resell the gas on the open market. Profits would be used to lower gas bills of households in the state. But losses would raise their bills.
Many gas utilities in the state were reluctant to sign on for the project two years ago and remain hesitant about the plant proposed east of Evansville on the Ohio River.
That unease fed concerns at the first preliminary hearing on the case Thursday.
During the hearing, the IURC accepted a timetable that means it could rule on Rockport about four months earlier than it usually takes to decide complicated cases. The timetable sets the final hearing May 3 and has the IURC rule sometime after July 11.
Lawyers expect a final decision by Labor Day, which means the process could last about eight months from the time the original paperwork was filed with the IURC.
Other cases that take lots of testimony and require careful attention to details in technical reports can often run on for a year, said Jennifer Terry, an Indianapolis lawyer who represents factories that buy natural gas.
“There’s going to be a lot of technical details for folks to digest,” Terry said. “This is a unique project (at Rockport) that has never been tried anyplace else, certainly not on this scale.”
The timetable was assembled in large part by Randolph Seger, an Indianapolis lawyer representing the Indiana Finance Authority.
“It’s a good thing for Indiana,” Seger said. “We simply want all the benefits from this to be realized as quickly as possible.”
During the preliminary hearing Thursday, Miller and other attorneys sat quietly while Seger assembled the timetable in talks with other lawyers. IURC commissioners accepted it with little comment. After the hearing, several lawyers expressed dismay.
“The faster it moves, the less scrutiny it gets,” said Jerry Polk, an Indianapolis lawyer representing the Citizens Action Coalition, Sierra Club and Valley Watch, an environmental group in southwest Indiana.
IURC spokeswoman Danielle McGrath defended the commission, saying none of the lawyers objected to the timetable during the hearing. She noted the timetable is tentative and can be adjusted by the agency at another preliminary hearing in coming weeks.
Utilities in the state in 2008 backed away from the Rockport gas project. It would convert 3.2 million tons of coal into gas amounting to 17 percent of the gas burned annually by Indiana households. Big factories also declined to sign on for the gas.
Daniels intervened and saved the project in 2008 when he opened the way for the finance agency to step in as the buyer and pass the costs to households. Indiana’s General Assembly sanctioned the deal.
Under the plan, a subsidiary of investor Leucadia National Corp. of New York would build a plant equipped with gasifiers able to convert Indiana coal mined nearby into natural gas like the commodity coming out of gas wells.
Once it sells the gas in the open market, the state finance agency would alert utilities to adjust the bills of their household customers.
Call Star reporter Ted Evanoff at (317) 444-6019
Chris Striebeck says Governor abandons his trust in free markets January 4, 2011Posted by Laura Arnold in Feed-in Tariffs (FiT), Uncategorized.
Tags: Chris Striebeck, Governor Mitch Daniels, Rockport-Leucadia coal gasification plant.
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Editor’s Note: Please find below a Letter to the Editor in the Tuesday, January 4, 2011, Indianapolis Star by Chris Striebeck with Integrated Development Services (IDS). Striebeck with IDS is a founding member of Indiana Distributed Energy Advocates (IDEA). The original article from the Indianapolis Star follows so that you can understand the full context of Striebeck’s remarks.
Our friend Paul Gipe has commented, “My take is that if a fixed price contract works for the Governor on gas, then it should work on FITs for renewable energy too.”
What are your thoughts?
Laura Ann Arnold
Just when it appeared that Gov. Mitch Daniels was a politician who understands the power of free markets, he apparently forgot that “The Road to Serfdom,” a blisteringly rational criticism of governmental planned economies by 1974 Nobel laureate F.A. von Hayek, was among his top five favorite books.
His justification for supporting a 30-year ratepayer guarantee to buy synthetic natural gas produced from the proposed Rockport-Leucadia coal gasification plant is ultimately based upon his “care about the poor people of southwest Indiana.” That is, he’ll risk the financial obligation of hundreds of thousands of ratepayers for decades to pay higher than fair-market pricing for natural gas in return for the creation of 200 jobs and the potential for lower future natural gas prices.
Despite the good bet that long-term natural gas prices will indeed increase, it is not a decision for the governor to make on behalf of natural gas customers.
As has been seen with a host of other utility-engendered plans, there is nothing “rock solid” about the cost of producing energy, except that the ratepayers bear the losses.
If the governor is really looking to produce jobs in the energy sector and elsewhere, then look at ways to decentralize and de-subsidize the energy markets. At a minimum, investigate energy policies such as a legislated feed-in tariff, which is low in transactional cost, fairly and transparently allows all energy producers a small return on investment and was shown to produce over 250,000 permanent jobs in Germany in recent years.
Such programs truly tap the endless creativity and local capital of individuals to produce the most basic requirement of everything in life and society: energy.
Chris Striebeck Indianapolis
Daniels takes natural gas bet that others refused
Critics say his plan committing state to 30-year natural gas deal is risky for Indiana homeowners
Jan 2, 2011
Written by Ted Evanoff
The proposed $2.6 billion Rockport coal gasification plant that Gov. Mitch Daniels touts as a “rock-solid” winner for Indiana was rejected two years ago by the state’s natural gas utilities as unneeded.
Gas companies backed away. Bankers declined loans.
The deal collapsed — until Daniels stepped in and put it back on track.
Now, every household in Indiana that burns natural gas is being pulled into a venture that consumer activists call risky.
If the plant to be built at Rockport can’t make gas from coal cheaply enough, household bills will increase for every home in Indiana that uses the fuel.
The reason is that the bold plan the governor announced Dec. 16 makes Indiana households the safety net for the proposed plant, which would use heat, steam, pressure and oxygen to turn coal into natural gas.
Under the plan, officials say, the plant would put 200 miners to work, open a new market for the state’s coal mines, moderate spikes in natural gas prices and make Indiana a leader in gasification, a time-tested process never commercialized on a mass scale.
But it is a complex wager — a bet, really — that natural gas prices will rise.
Indiana would rely on the Rockport investors, a company in New York called Leucadia National Corp. It is betting that gas made from Midwestern coal will be cheaper than the natural gas flowing from the ground.
When the investors raised that very idea two years ago, utility executives balked.
In Indianapolis, Citizens Gas had just secured low-priced gas. On the open market, the utility locked in a 15-year contract at a guaranteed savings of $24 million for its 266,000 households. So the gas executives weren’t excited about Rockport gas.
“We weren’t in position to make another commitment for a long-term purchase of natural gas,” said Citizens spokesman Dan Considine. “We simply didn’t have enough volume to make the purchase offered by the synthetic gas project.”
Others feared the risk. No coal mine would offer investors 30-year coal contracts. So the long-term price of Rockport gas was unknown.
Yet bankers wouldn’t touch the project unless Leucadia could secure 30-year contracts on the gas it sells. Big factories turned away, knowing they could get saddled with high gas prices from Rockport.
“The clients I represent were not interested in a portion of their gas coming from” the Rockport plant, said Indianapolis lawyer John Wickes, executive director of Indiana Industrial Energy Consumers Inc., a group of manufacturers. “Their thought was the private marketplace has an ample number of sellers.”
Without a buyer for the Rockport gas, banks refused construction loans. The deal languished.
“Nobody was willing to bankroll it,” said Rep. Ryan Dvorak, D-South Bend, a member of the House Utilities and Energy Committee. “They were concerned it would cost more to make gas than if they just bought it on the open market. Then the governor’s folks came up with this idea.”
The broad elements of Daniels’ plan were approved by lawmakers in 2009. The measure unanimously passed the Senate, 48-0, and the House voted 90-8 to approve it. Early this year, the Indiana Utility Regulatory Commission will rule on the plan. Approval would commit the Indiana Finance Authority to buy and resell Rockport’s gas for 30 years.
That would satisfy lenders and — just as importantly — qualify the project for federal loan guarantees. The guarantees mean U.S. taxpayers will repay up to 80 percent of the construction loans if the investors fail to repay the money.
Once the Rockport plant is running — the target date is 2015 — the state would buy the gas and quickly resell it on the open market to energy traders and wholesalers. Any profits would be passed on to households in the form of lower gas bills. Losses would raise the bills.
How likely are losses? No one knows. The economics turn on the price of fuel. Experts say if natural gas prices shoot up higher than Rockport’s costs, Indiana would win. If coal prices climb, and natural gas prices fall or stay flat, the state’s households would lose.
State officials estimate Rockport will make gas at a cost of about $7 per million British thermal units, the standard measurement for combustible materials. That includes fixed costs of $5 per million Btu for operating the plant and repaying the construction loans. An additional $2 covers coal at current market rates.
The risk is in the $7 figure. Gas has reached $11 per million Btu in recent years, but on wholesale markets today, traders pay about $4 per million Btu.
If the plant were operating now, the state would be obligated to buy the gas at $7 but would have to sell it at the $4 level, because that’s the market price for the commodity set by thousands of trades across the country. Under the deal, Indiana households — instead of the investors, as in a more conventional deal — would pay the $3 difference.
That’s the kind of math that has critics howling.
“All of the gas utilities refused to sign these contracts after two years of negotiations because it is simply too risky,” contends Kerwin Olson, executive director of Citizens Action Coalition, a consumer group based in Indianapolis. “The only way this thing can get built is if taxpayers and ratepayers are put on the hook.”
Daniels bristles at the critics. He said they overlook the new jobs the plant and mines would bring to the area’s distressed economy.
“You either care about the poor people of southwest Indiana or you don’t,” he said. “My goal from the beginning has been to bring some jobs and hope to the poorest part of the state.”
He notes there is a risk for households in the event gas prices fall nationwide, or coal prices surge, but he calls it slight, saying many energy forecasts call for rising natural gas prices as the recession fades.
“As a matter of good economic and public policy, this is a rock-solid program,” Daniels said. “We can turn our own coal into very clean and affordable energy that we need.”
Once gas prices climb, he said, Rockport would serve as a hedge and trim the bill for Indiana consumers. Homeowners now pay about $800 per year on average for the fuel. If that price shoots to $2,000, a household would save $100 a year.
Some years, the investors note, fuel on the open market will be cheaper. In case that happens, they’ve pledged $150 million to cushion Indiana households. That’s enough cash to cover about two years.
When it’s depleted, households would get stung with rising gas rates.
Household rates would not necessarily shoot up dramatically because Rockport will account for only about 17 percent of the gas burned in households statewide. But an extra $2 or $5 per month is not out of the question.
Rockport’s investors, however, downplay that risk. They say more years than not, Rockport will make gas cheaper than market, and that will save Indiana money. The investors’ contract with the state guarantees $100 million in savings over 30 years for Indiana households.
“If at the end of the 30-year contract, the state hasn’t gotten $100 million in savings, we have to sell the plant and use the money to make good on their savings,” said William Rosenberg of E3 Gasification in Cary, N.C., a partner with the project’s investors.
Despite the assurances, utilities are wary of similar projects the Leucadia investors proposed in Illinois and Louisiana.
In 2008, the company pledged $400 million in savings for consumers in Louisiana.
Even so, Entergy, a major gas utility in Louisiana, declined to enter a long-term purchase agreement with the investors at a proposed gas plant there.
Issuing a statement, the utility called the $400 million in proposed savings “not an accurate projection” and asserted in 2009 alone that the deal would have raised the tab for Louisiana customers by $13 million.
“We were unable to reach an agreement with them on terms that were beneficial to our customers,” said Entergy spokeswoman Kerry Zimmerman.
Since then, Leucadia has recast its venture in Louisiana, called Lake Charles Cogeneration LLC, to supply methane for industrial plants.
In Illinois, lawmakers are considering a measure that would have the state’s gas utilities buy the output from a project proposed near Chicago. It would render petroleum coke, a waste produced in oil refineries, into gas.
“We aren’t opposed to the facility, but we think this is going to be expensive gas,” said Richard Dobson, gas supply manager at Illinois’ Citizens Gas, which serves 800,000 customers.
Leucadia has urged long-term purchase contracts, but Citizens executives in Illinois are concerned that gas prices could plunge and they would be locked in to a higher price from Leucadia.
“This is an entity we barely know that is asking us to enter into a 30-year contract,” Dobson said. “No one in this business does 30-year contracts.”
Call Star reporter Ted Evanoff at (317) 444-6019.