Report highlights Duke's cost overruns 

Duke Energy's coal gasification plant under construction in Edwardsport, posted on the company's Flickr page in October, 2011. - COURTESY OF DUKE ENERGY
  • Duke Energy's coal gasification plant under construction in Edwardsport, posted on the company's Flickr page in October, 2011.
  • Courtesy of Duke Energy

Duke Energy released this photo of construction of the Edwardsport plant in October 2011. The plant is expected to be in service next year. Photo provided by Duke Energy via Flickr.

Tim Grimes

Four environmental groups joined forces Thursday to say that Duke Energy customers shouldn't have to pay 14 percent rate hikes to cover the cost of plant under construction in Edwardsport.

The Sierra Club, Citizens Action Coalition, Save the Valley and Valley Watch released a report that says a settlement between Duke and the Indiana Office of Consumer Counselor—a state agency that represents customers—is a bad deal for ratepayers.

The environmental groups are parties to the Duke case but not the settlement, which would raise consumer's rates an additional 9 percent – on top of the 5 percent increase that state regulators already have approved.

"The settlement that the Indiana Utility Regulatory Commission is considering really is a sweetheart deal for Duke. It sweeps under the rug all those scandals and ethical clouds," said NachyKanfer, the Sierra Club's deputy director of the Beyond Coal campaign.

The settlement involves the controversial Edwardsport coal gasification plant, where costs have been skyrocketing. The proposal would establish a cap on ratepayers' costs for the construction of the plant at $2.6 billion, plus finance charges.

Construction of the plant is now projected to cost about $3.5 billion – twice the original estimate.

Lou Middleton, spokesman for Duke Energy, said the company favors the settlement because rate hikes for consumers would likely reach 22 percent without the cap.

"We believe the settlement protects our customers from increases," Middleton said.

The case is pending with the IURC, which is not bound by a timetable or the decision. But Middleton said he hopes the case is resolved by the end of the year.

The environmental groups, though, are hoping for changes first.

Grant Smith, former executive director of Citizens Action Coalition, said that Duke has already received federal, state and local tax credits for the project and therefore shouldn't need so much money from rate hikes. The groups said the IURC—which oversees utility rates—should reject the settlement or modify it to their demands, which include taking into account that Duke failed to justify cost overruns.

And the report questioned whether the proposed cap would even serve its purpose.

"Though the settling parties called $2.595 billion a 'hard cap,' it is really more of a firm floor under costs that Duke wants to recover from customers," the report said. "According to the proposed settlement, that amount is operative only until the plant is put into service; after that, any additional costs incurred for repairs, for instance, would be eligible to be put into customers' electric rates the next time Duke files for a rate increase."

The Indiana Office of Consumer Counselor, which represents ratepayers with energy companies, said it is satisfied with the settlement, despite a warning that the Duke plant would cost more than estimated.

And Timothy Stewart, counsel for the Duke Energy Industrial Group, which includes six of the utility's large industrial customers and is also a party to the settlement, said it will be good for all customers.

"Approximately 88 percent of the construction costs above the amount the IURC approved in 2009 will be borne by Duke's shareholders," said Timothy Stewart, counsel for the Duke Energy Indiana Industrial Group. "This is a significant benefit to all ratepayers."

Tim Grimes is a reporter for TheStatehouseFile.com, a news service powered by Franklin College journalism students and faculty.

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