Citizens Energy Group and Gas and Job Creation and Energy & Environment and Utilities and Economic Development

New steam plant could propel Speedway revival

December 31, 2007

A unit of Citizens Gas proposes building a natural-gas-fueled steam plant in Speedway to serve large employers in the town of 12,800.

The utility's second "district energy" plant outside the downtown area could be a sign of things to come as Citizens seeks to construct similar energy plants to serve institutional and corporate campuses farther out in central Indiana.

Speedway Utility, as it would be called, could provide steam for heating Allison Transmission and potentially other major employers in the Racing Capital of the World.

The plant would include a facility to pretreat industrial wastewater before it is sent to the town's existing sewage plant.

"It's very important for the retention of existing businesses and, at the same time, this positions us for the recruitment of new businesses to the area," said Scott Harris, president of the Speedway Redevelopment Commission.

The redevelopment commission approached Citizens about the potential to build such a plant, primarily to retain existing employers, as a little-known part of Speedway's 2-year-old plan to revitalize 350 acres in the western suburb.

Citizens' Speedway Utility, in a filing with the Indiana Utility Regulatory Commission, said the project is particularly important if Speedway is to retain three key employers. Although they're not identified, one is listed as employing 3,400 people. Allison is the only employer that fits that description.

That potential steam customer's in-house steam plant is described as "very old, inefficient and expensive to operate and maintain."

Last August, General Motors sold Allison for $5.6 billion to Toronto-based Onex Corp. and Washington, D.C.-based Carlyle Group. Allison makes heavy-duty transmissions for large trucks and construction vehicles and makes hybrid power systems for buses.

The three big employers the Speedway commission has previously identified as dominating its redevelopment plan are Allison, Indianapolis Motor Speedway and Praxair Surface Technology.

Praxair employs more than 450 people at its Speedway metal coatings plant, which last year announced a $25 million expansion.

"The loss of any of these three major companies would be economically devastating for the town of Speedway and to the city of Indianapolis, due to their size," states the commission's redevelopment plan.

Harris, in his filing with the IURC, said: "As president of the Redevelopment Commission and a resident of the town of Speedway, I cannot overstate the importance of this [steam utility] project to ... Speedway and its citizens."

Incentives to help with "plant efficiencies" are a little-talked-about part of the redevelopment effort, which has drawn more headlines for its call to realign 16th Street and to draw tourism-related businesses and possibly a hotel and conference center to Speedway.

Plant footprint

Under the proposal, Citizens' Speedway Utility would build the steam plant that initially could employ about 10 people. The utility declined to elaborate on cost, saying it is a "competitive issue."

Speedway's redevelopment commission would buy the three to four acres of land Citizens needs and lease it to the Citizens unit.

A private company owns the land under consideration, according to the IURC filing.

"Potential plant sites are being considered between 10th Street and 16th Street south of Indianapolis Motor Speedway," Citizens said in a statement to IBJ.

Citizens is on a fast track to build the plant, saying it needs to begin construction by March 1 to be able to supply steam service for the following winter.

Citizens already has put together a design and construction team that includes Bowen Engineering, Applied Engineering, Fink Roberts & Petrie, American Structurepoint and Siemens, according to IURC records.

The utility is seeking permission to operate outside traditional IURC regulation, saying it would negotiate rates with its handful of customers.

Citizens' Speedway Utility "will not invest significant capital in the project until the [IURC] has issued sufficient guidance regarding the regulatory treatment of the proposed utility system."

Speedway Utility would be a non-regulated affiliate of Citizens Gas, much like Citizens Thermal Energy, which provides steam and chilled water to more than 200 buildings downtown. Thermal's "anchor tenant" is the campus of IUPUI.

As a non-regulated utility, the 268,000 Marion County customers of Citizens Gas could not subsidize Speedway Utility.

The Speedway plant would have the capacity to produce 100,000 pounds of steam per hour. That's a pittance compared to Citizens' hulking Perry K steam plant downtown, just west of the RCA Dome, with a 2-million-pound-per-hour capacity.

Wastewater treatment capacity also would be relatively modest, at 110,000 gallons per day.

'District energy' lucrative

Speedway Utility also would be capable of offering other services, such as compressed air and chilled water.

Chilled water has been the fastest-growing part of Citizens' $50 million annual Thermal Energy unit. It provides chilled water to about 60 customers that have chosen not to operate their own water chillers. Among properties recently added or about to tap into the system are Lucas Oil Stadium, Simon Property Group Inc.'s new downtown headquarters, IU Cancer Center Expansion and Riley Hospital for Children's 10-story expansion set for completion in 2009.

Citizens' thermal division is looking well beyond downtown. Its first venture outside the city's center is a partnership with locally based BHMM Energy Services. The partnership was hired by the Indianapolis Airport Authority to expand the steam plant at the former United Airlines aircraft repair base to also heat and cool the $1 billion midfield terminal at Indianapolis International Airport.

The $30 million airport project included boring a 2,000-foot, 9-foot-diameter tunnel under runways.

"We're also looking outside Marion County for similar partnerships," said Dan Considine, spokesman for Citizens Gas. That includes potentially large office and industrial parks, along with individual large corporate and institutional campuses.

"That is a business we're looking to as a growth business."

According to the Washington, D.C.-based International District Energy Association, at least 38 new downtown district cooling systems have been built in North America since 1990.

Helping drive growth are rising electricity costs, the phase-out of chlorofluorocarbons, aging chillers, and higher cooling loads because of computers.

Citizens operates the second-largest district steam system in the nation--behind only New York City in annual steam flow.

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