Indiana Utility Regulatory Commission and Regulation and Duke Energy and Electric and Energy & Environment and Utilities

No 'inappropriate communications,' Duke Energy CEO says

November 3, 2010
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Duke Energy Corp.'s top executive told the Indiana Utility Regulatory Commission Wednesday morning that he’s confident the IURC's former top attorney had no influence on decisions regarding the utility’s Edwardsport plant, even though he sought a job with Duke while working for the regulatory body.

The IURC summoned Jim Rogers, CEO of North Carolina-based Duke, to a public hearing to justify the need for the expensive Edwardsport coal-gasification plant, amid a growing ethics controversy involving the company and state regulators.

Following Rogers’ presentation, IURC Chairman Jim Atterholt addressed what he referred to as the “elephant in the room,” questioning Rogers on whether former commission attorney Scott Storms influenced any decisions regarding Duke and its Edwardsport plant.

“In my judgment, I do not believe there have been any inappropriate communications in respect to this plant,” Rogers responded.

He said Duke is “very concerned” about the ethics issues and has launched both internal and external investigations.

The State Ethics Commission in October filed formal charges against Storms for negotiating a job with Duke even as he participated in decisions involving the plant.

The Ethics Commission had initially approved Storm’s September switchover to work at Duke.

Storms’ contact with Duke officials emerged in e-mails discovered in a probe by Gov. Mitch Daniels’ office, according to Duke. Daniels fired former IURC Commissioner David Hardy on Oct. 5 over the matter and Duke placed its Indiana CEO on administrative leave.

The IURC has opened its own investigation into the ethics controversy and said it will review four years of cases regarding the plant in Southwest Indiana.

Watchdog group Citizens Action Coalition of Indiana has called for the cancellation of the project. Costs for building the plant have climbed to $2.9 billion from initial estimates near $1.5 billion. In July, Storms signed off on Duke’s request to pass those costs on to customers.

The Edwardsport plant is about 70-percent complete, and Duke recently reached a settlement with consumer groups to cap the plant’s costs at $2.975 billion. Those costs, when passed on to Duke customers—likely at least not for another year—initially would raise their bills by about 16 percent.

Still, Rogers defended the project to IURC members.

“Completion of the [integrated gasification combined cycle] plant is still the best option for our customers,” he argued. “In no case does the stoppage of this plant look best.”

Duke considered stopping work on the plant or converting it to natural gas, but ruled out both options, Rogers said.

He cited the volatility of natural gas prices and the fact that 22 percent of Duke’s overall electricity capacity is generated by natural gas.

Further, the average age of Duke’s fleet of coal-fired power plants is 47 years old. Increasing environmental regulations could force the retirement of some of those plants, which would drive electricity demand up even further, Rogers said.

“Bottom line,” he said, “Edwardsport is needed to meet our customers’ energy needs over the long run.”
 

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