Indianapolis Power & Light Co. says it might have to pay as much as $22 million in extra costs because of contract issues with a power grid operator.
The electric utility filed a complaint with the Federal Energy Regulatory Commission late last month against the Midwest Independent System Operator, the Carmel-based organization that manages the power grid for much of the Midwest and part of the South.
The dispute stems from IPL’s plans to shut down its aging Eagle Valley coal plant near Martinsville by April 16, 2016, in order to meet a deadline for federal environmental regulations. IPL expects Eagle Valley’s replacement, a natural-gas plant, will start operating in 2017.
IPL takes issue with rules MISO set saying it needs Eagle Valley to stay online until May 31, 2016, when the grid operator’s planning year ends.
That leaves a 6.5-week gap after the planned shutdown in which IPL has two options: pay “potentially sizable” penalties to MISO or buy credits from other utilities that would allow it to avoid penalties.
Both options would be “economically irrational,” IPL says in its filing.
MISO requires utilities in its network to guarantee in advance they can produce certain levels of electricity throughout the year so the power grid has enough energy to meet customers’ demand.
IPL officials declined to comment on the case beyond what they said in the regulatory filing.
MISO hasn’t filed a response to IPL’s complaint, but said in a prepared statement it “understands the issues” the utility addresses.
Although IPL can avoid penalties by buying electrical-generation credits from another utility, that route is still not economically viable, IPL says in its complaint.
Utilities buy the credits in year-long blocks, which means IPL would have to pay for 52 weeks to cover 6.5 weeks.
IPL estimates that type of agreement would cost about $22 million.
IPL wants federal regulators to allow it to go with one of five alternatives:
— schedule a planned outage, which IPL says is the best option;
— receive a federal waiver to bypass MISO’s requirements or the need to buy credits from another utility;
— let IPL buy credits for 6.5 weeks, not a full year;
— cap MISO’s fines;
— amend the MISO agreement because IPL is unable to meet its requirements as a result of changing government regulations.
MISO has until July 10 to respond to IPL’s complaint, at which point the case can move forward. The grid operator said it expects to meet the deadline.