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Energy column misled

November 29, 2014

A [Nov. 17] column [by Christina Hale and Sharon Negele] urging legislation on competitive procurement fell well short of the mark on several fronts.

First, it failed to mention that the General Assembly overwhelmingly passed such a law earlier this year. The new law requires utilities to use competitively bid engineering, procurement, or construction contracts for large new power plants. It also requires utilities to solicit competitive bids for the purchase of power.

This new law bolsters the state’s long-standing and stringent “certificate of public convenience and necessity” provisions, which allows any interested parties—including independent power producers (IPPs) and alternative power interests—to participate in Indiana Utility Regulatory Commission proceedings that scrutinize new plant proposals and impose cost limits.

The column also wrongly suggests that Duke Energy’s coal gasification plant in Edwardsport was not subject to thorough evaluation. The certificate of need process required Duke to evaluate many alternatives. While the plant employs sophisticated and environmentally-friendly processes, it has been under constant regulatory scrutiny.

Next, the column claims the current process unfairly requires IPPs to bid on a “fixed-cost” basis. More commonly, IPPs bid on a “cost plus” basis. When they do submit a fixed-cost bid, they include a hefty premium to absorb the added risk—a premium that would be passed on to customers in the form of higher electric bills. Even in those cases, major costs, such as fuel, are excluded from the bid price.

Finally, the column used outdated data about Indiana electric rates. More recent data from the U.S. Energy Information Administration show that Indiana has improved its position by seven spots, ranking 20th lowest in industrial retail electric prices—not the 27th place referenced in the column.

The Obama administration’s “war on coal” has hit Indiana especially hard. Our utilities are constantly looking for ways to mitigate federally-mandated cost increases. The procurement law that passed this year and the authority it provides the IURC is part of that effort. Let’s give it a chance to work.
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Mark T. Maassel, president, Indiana Energy Association
 

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