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State sends IPL $10 million 'message' for subpar work

Dan Human
August 15, 2013
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Indiana utility regulators Wednesday approved $511 million in upgrades to two Indianapolis Power and Light Co. power plants, but they weren't entirely happy about it.

Displeased with the quality of work IPL put into its request for state approval, the Indiana Utility Regulatory Commission opted to send IPL a "message" in the form of a $10 million penalty.

Specifically, the state agency tacked on an extra $10 million to a credit that IPL must give its customers as part of its project. In all, IPL must credit $39 million—up from an originally expected $29 million—for what is known as an environmental cost recovery rate base credit.

The credits are a way to keep customer rates down while power companies pay for capital projects.

"IPL’s presentation of its case in this proceeding fell below our expectations given the size of the proposed capital investment, the timeframe in which this Commission was provided to make a decision, and the contested nature of the proceeding that should have been anticipated prior to filing this Cause,” commissioners wrote in Wednesday's order approving the plant upgrades.

In particular, the company did not provide cost production models, Wednesday’s order notes.

Commissioners referred to $10 million increase as a “direct message to IPL management concerning how this proceeding should have been conducted.”

“Merely chastising IPL in this Order would not, in our opinion, have a lasting impact on insuring [sic] the quality of the support in the regulatory process,” the order said. “Instead, this Commission should provide feedback to a utility in a manner that provides an incentive for improving quality, while moving the regulatory process forward.”

An IPL spokeswoman declined to comment Thursday morning on the commission’s statements.

Despite its criticisms, the IURC said the project was “in the best interest” of IPL customers.

IPL now can proceed with upgrades to coal-fired power plants on Harding Street and at an operation in the southern Indiana town of Petersburg. The utility company intends to use the work to meet federal mercury regulations that go into full swing in 2016.

Environmentalists, including the Sierra Club’s Beyond Coal Campaign, had challenged IPL’s plans, saying they weren’t sufficient.

It would be better, opponents said, to shut down the plants altogether and replace them with more modern technology, like IPL is doing with a $631 million natural gas plant that will replace coal-fired units in Martinsville.

Opponents argued in the case that IPL's research was too slipshod and did not back its claims that upgrading coal units would be better.

IPL says the work is supposed to reduce the two operations’ mercury pollution 80 percent.

“IPL is focused on continuing to provide safe, reliable and affordable energy by retiring older, less efficient units and investing in cleaner generation,” IPL President Kelly Huntington said in a prepared statement Thursday morning.

“As we prepare to meet the future needs of our customers, we are reducing emissions dramatically in our coal-fired units and working towards a balanced electricity generation portfolio that also includes natural gas, solar and wind," Huntington said.

Due to the cost of the work, the power company expects to raise rates, starting next year, by an average 2 percent to 3 percent a year through 2017.

IURC spokeswoman Danielle McGrath said IPL will have to seek the state’s approval each time the company plans to hike rates to pay for the project.

A prepared statement from the Sierra Club described its opposition against the Harding Street and Petersburg upgrades as “far from over.”

"Instead of locking families into a future of higher bills and more toxic pollution from coal-fired power plants, IPL should heed the calls of thousands of Indy residents by retiring the dirty, outdated Harding Street coal-fired power plant and moving Indy toward a renewable energy future,” said Jodi Perras, Indiana’s representative for the Beyond Coal campaign.

IPL expects the construction work in Petersburg to begin this fall, with Harding Street starting next spring.

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  • Rates
    All day long Coal fired generation Today is much cleaner than it was in the 1906s... If we change from our most plentiful Midwest power source, to other means the cost per Kwh will skyrocket. Be prepared !!! Global warming is a hoax, there earth has had cooler years since 1998. Get the true facts. IPL has the Best rates in the state, I know we were paying much more from where I came from... Retired Accountant
  • Clean air is a need
    Our right to clean air and water supercedes any any utilities' right to make piles of money at the expense of public health. Having grown up in Indiana I am grateful to the Sierra Club for organizing local residents to persuade IPL to shut down that toxic coal plant.
  • Really??
    Mike said - "Why isn't IPL using the water turbine power generation units they installed at Harding in the mid to late '90's instead of the coal fired units? " Really - I thought you had to have a dam and reservoir for water turbines..
  • Spencer
    Talk about a slap on the wrist. Our regulators have never denied a power plant or any upgrades to are ancient coal fleet. We're now locked into another 20 years of spraying mercury across Indianapolis neighborhoods and relying on an antiquated utility model
  • Harding Street
    Why isn't IPL using the water turbine power generation units they installed at Harding in the mid to late '90's instead of the coal fired units?
  • IPL
    Thank goodness for the Sierra club. IPL ought to pay the fine willingly AND rescind the raise of their director. These exorbitant ceo packages are a a disgrace.
  • That's just great
    Power utilities pass fines on to the customer. Thanks Indiana. You bunch of greedy fools run by lawyers and accountants. Somebody shut down the law and finance schools the world is over populated with these nerds.
  • Environmentalists need to butt out.
    Someone needs to tell the Sierra Club to go back to California and stop trying to export their failing revolution.

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