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Controversial utility bill heads to governor

May 2, 2011

A bill that opponents described as a “Christmas tree wish list” for electric utilities is on its way to Indiana Gov. Mitch Daniels for signing.

Senate Bill 251 allows utilities to quickly pass to ratepayers the cost of so-called clean-energy projects, including nuclear power plants and solar and wind power, during the construction phase rather than after the facility is operating. The bill passed the Indiana House 62-34 and the Senate 31-19.

Such a move shifts risks of design, construction and operating away from utility shareholders and on to utility ratepayers “while monopoly utility companies walk away with all the profit,” said Kerwin Olson, program director of utility watchdog group Citizens Action Coalition.

The Indiana Energy Association, which represents electric utilities, has noted that utilities face additional federal pollution-control regulations and need the flexibility to quickly make expensive capital investments to comply with them.

Currently, only so-called clean-coal projects, such as Duke Energy Corp.’s coal-gasification plant in Edwardsport, can tap ratepayers during construction.

The Duke plant has experienced numerous cost-overruns and is now expected to cost at least $3 billion, up from an initial estimate of $1.6 billion. The plant will convert coal to a cleaner-burning gaseous state.

The voluminous bill also includes a crucial provision for Leucadia Nation Corp.’s proposed Indiana Gasification plant in Rockport, by giving private corporations eminent domain power to take land for pipeline right-of-way.

Officials of New York City-based Leucadia have said the $2.7 billion project to make natural gas from coal likely would not proceed without such authority. That project, supported by Gov. Mitch Daniels, also depends on finalizing a deal with the Indiana Finance Authority, which would spend an estimated $6.9 billion over 30 years to buy synthetic natural gas produced at the plant.

Leucadia and the authority estimate the project could save Indiana gas customers more than $100 million by providing a hedge against swings in natural gas prices.

Opponents say the plan is risky because ratepayers and not Leucadia will bear the cost if natural gas prices don’t rise as high as expected. Leucadia will set aside $150 million to offset potential losses for ratepayers.

The Senate bill also includes a so-called renewable energy standard of producing 10 percent of the state’s electricity from renewable energy sources by 2025.
But compliance is voluntary, rather than mandatory as is the case in most states with such a provision. The Hoosier Environmental Coalition this month said a voluntary standard will hurt the state’s chances to attract renewable power investment because lenders tend to invest in states with mandatory standards.

Bill co-author Sen. Beverly Gard, R-Greenfield, has countered that Indiana has already attracted renewable power investment even without an RES standard.  
For example, more than 1,000 megawatts of power are generated from wind farms, mostly in northern Indiana.


 

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