Environment and Utilities

Power plant opponents claim Duke, governor interfered: IURC head received letter, press release referring to Edwardsport project

October 22, 2007

Groups opposing Duke Energy's coal gasification plant proposed for Edwardsport allege the utility and Gov. Mitch Daniels tried to sway regulators with improper contact and political pressure to get the $2 billion plant approved.

They "are clearly trying to back-door the public decision-making process," said Jerry Polk, an attorney representing a group led by Citizens Action Coalition.

Polk this month filed a complaint with the Indiana Utility Regulatory Commission, citing a Sept. 25 letter an executive from Duke's Charlotte, N.C., headquarters sent to Indiana Utility Regulatory Commission Chairman David Hardy.

With it were 15 copies of an article titled "Rising Utility Construction Costs: Sources and Impacts" and the pamphlet "An Upward Climb," written for the Edison Foundation.

"I thought these might be of interest to the commission and its staff," wrote Keith Trent, group executive and chief strategy, policy and regulatory officer for Duke.

Trent said the information "is offered as general information and not specific to any proceeding." But in the letter Trent cites the cause numbers of Duke's formal case with IURC regarding Edwardsport.

Polk argues the documents were "sent to advocate Duke's position that the commission approve its request for the recovery of construction costs for the Edwardsport plant. Each document discusses the rising costs of new infrastructure construction and favorable rate treatment for utilities engaging in new construction."

Trent closed his letter by telling commissioner Hardy that, "out of an abundance of caution, I am also providing copies to all parties in the proceeding."

Citizens Action argues that such off-therecord contact amid a pending case amounts to ex parte communications forbidden under state administrative code.

In a utility case, a party "may not communicate, directly or indirectly, regarding any issue in a proceeding" pending with members of the commission or administrative law judges "without notice and opportunity for all parties to participate in the communication," according to state code.

But Angeline Protogere, Duke's Indiana spokeswoman, said Trent had sent the information to utility commissions in all states where it operates. She said the pamphlet also was sent to CAC, which is a perennial participant in debates about Indiana utility matters.

"It's general information about electric infrastructure needs. It's not even specific to this case," Protogere said.

Political pressure?

CAC's complaint also includes a copy of a press release sent by a member of the governor's staff to all state agency directors, including IURC. It expresses his support for two coal gasification projects that are planned, including the one at Edwardsport.

It states that a "630-megawatt integrated gasification combined cycle electric plant in Edwardsport will be the first new base load plant to be built in Indiana for 20 years."

Daniels was quoted as saying, "We'll use Indiana coal, a home-grown resource."

CAC last month complained that Daniels has openly endorsed the Edwardsport plant, saying it "demonstrates a disregard for the commission review process now under way."

Jane Jankowski, press secretary for Daniels, could not be reached for comment.

Duke's Protogere noted that Daniels' release was not specific to coal gasification but rather was an update on the state's strategic energy plan.

Protogere also said the governor is not a party to Duke's coal gasification case; therefore, ex parte communication is not an issue.

Timothy Stewart, a Lewis & Kappes attorney representing some of Duke's largest industrial customers, said he was aware of the allegations.

"We think the rules are there for a reason and the system works best when the rules have been followed," Stewart said.

Plant issues

Joining CAC in the complaint was Save the Valley, Sierra Club and Valley Watch.

The groups warn of environmental harm and rising electric rates if the Duke plant, now estimated to cost $2 billion, is built.

While not opposing the plant per se, Duke industrial customers have asked the commission to cap future cost overruns. Costs have already risen by tens of millions of dollars over projections, they contend.

"If there are any more costs left, Duke's shareholders pay," Stewart said.

Opponents say the Edwardsport project could sock Duke customers with a 15-percent to 20-percent rate increase-and that doesn't include the costs of complying with expected regulations to limit carbon emissions.

The plant would convert coal into synthetic gas.
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