Indiana Utility Regulatory Commission and Regulation and Coal and Duke Energy and Electric and Utilities

Need for Duke coal-gas plant on regulators' agenda

November 2, 2010

Duke Energy Corp. says it needs a new coal-gasification power plant it's building in southwest Indiana to meet growing demand as it retires older plants, but consumer advocates don't believe it.

The Indiana Utility Regulatory Commission will take up the issue Wednesday, in the shadow of an ethics scandal over decisions involving the plant that led to the firing of the commission chairman. As IBJ reported Oct. 15, Duke CEO James E. Rogers is expected to appear before the panel.

According to regulatory filings, more than 1,500 workers are building the plant at Edwardsport, which is about 70-percent complete. The price tag that's been factored into the utility's rates has grown to nearly $3 billion — or about twice the project's original 2007 estimate.

Charlotte, N.C.-based Duke argues it's money well spent.

Duke said its Indiana coal-fired power plants are 47 years old on average, and it hasn't built a major new plant here in three decades. Duke projects it will need up to 438 megawatts by 2013 as it retires those older plants.

"The need is clearly there, based on the age of our overall fleet and from the electric energy needs of our customers," said Doug Esamann, interim president of Duke's Indiana operations.

But the State Utility Forecasting Group at Purdue University said in January that the recession and more efficient appliances were expected to lower overall demand.

Citizens Action Coalition of Indiana said the nation has an adequate supply of electrical power, due in part to increases in energy efficiency and supplies of alternative energy.

"Our ultimate goal is to stop this thing and get ratepayers a full refund," said Kerwin Olson, the group's project manager.

Critics also claim that the plant's technology, which converts coal into a synthetic gas, is unproven and not as clean as Duke portrays.

The utility commission is focusing attention on the plant while both Duke and regulators are under intense scrutiny.

The state inspector general's office filed a complaint last month alleging former regulatory commission general counsel Scott Storms broke state ethics law by having a financial interest in the outcome of cases involving Duke while he pursued a job with the company. Storms in July approved Duke's request to have its customers pay for cost overruns on the $2.9 billion plant.

The ethics panel in September cleared Storms to join Duke despite a state law requiring a one-year cooling off period before state employees work for companies they've regulated.

Gov. Mitch Daniels fired regulatory commission Chairman David Lott Hardy for not removing Storms, and Duke suspended Storms and its Indiana president, Mike Reed, pending the completion of its review by outside counsel.

The utility commission said last month it would audit Duke cases Storms was involved in this year and all cases since 2006 on the Edwardsport coal-gasification plant.

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