INDIANAPOLIS (AP) -- Duke Energy has agreed to retire five coal-fired power plants in western Indiana by June 2018 under a settlement announced Friday with environmental and citizens groups that also calls for the company to increase its investments in renewable energy.
A state administrative law judge oversaw the settlement, which was signed Wednesday by Duke Energy, the Sierra Club, Citizens Action Coalition, Valley Watch and Save the Valley.
The settlement ends the activist groups' challenge of Duke Energy's state air permit for its new $3.5 billion, coal-gasification plant that went online this summer. That southwestern Indiana plant was the subject of an ethical flap after Duke officials and regulators were found to be discussing the project's rising costs.
The 618-megawatt plant's original 2007 cost estimate was $1.9 billion, but that eventually ballooned to about $3.5 billion. Duke Energy has said ratepayers can expect to see a 14 percent to 16 percent increase in their monthly bills by early 2014 as a result of the higher costs of the plant near Edwardsport, about 60 miles north of Evansville.
Jodi Perras, who oversees the Sierra Club's Beyond Coal campaign in Indiana, said the settlement will help reduce Indiana's air pollution from power plants that worsens respiratory ailments.
Indiana currently gets more than 90 percent of its electricity from coal-fueled power plants.
"While today's settlement is a step in the right direction, more must be done to ensure that Hoosier families are protected from rising energy bills and the enormous health threats posed by Indiana's reliance on coal-fired power plants," Perras said in a statement.
Under the settlement, Duke Energy has agreed to retire by June 1, 2018, four coal-fired power stations at its Wabash River Station in West Terre Haute that date to the 1950s and generate a combined 350 megawatts of power.
The Charlotte, N.C.-based company had previously announced that it planned to shutter those plants by a 2015 deadline to comply with new federal restrictions on mercury emissions. But the agreement specifies Duke must complete moth-balling those plants by the 2015 deadline or — if the mercury rule is vacated or delayed — by June 1, 2018, whichever occurs first.
Duke has also agreed to stop burning coal at a fifth station at the Wabash River Station by June 1, 2018. The company is exploring possibly refitting that 318-megawatt plant to burn natural gas and the settlement does not prevent it from making such a conversion before the deadline.
"We're glad to resolve these issues. Our new, cleaner Edwardsport plant modernizes our fleet and enables us to retire older, coal-fired generation," Duke Energy Indiana President Doug Esamann said in a statement.
The company's settlement includes a renewable energy commitment calling for Duke to either implement a 30-megawatt "feed-in tariff" for solar power or build or otherwise contract for 15 megawatts of wind and/or solar generation. Feed-in tariffs offer a set, long-term price for green energy based on such factors as a project's type and size.
Under the settlement, if Duke opts to pursue the 15-megawatt option, it must also retire by June 1, 2018, two decades-old oil-fired peaking stations called the Miami Wabash and Connersville units, which generate about 166 megawatts. Those small power units are used only during times of high power demand.
The agreement also states that if Duke Energy seeks the 15-megawatt renewable energy option, the four power plants it will be mothballing must be retired by the mercury rule compliance deadline or by June 1, 2017, whichever comes first.
Although the settlement ends the activist groups' challenge to the Edwardsport plant's air permit, it does not affect their case now before the Indiana Court of Appeals seeking to overturn Indiana Utility Regulatory Commission rulings related to the plant's cost overruns totaling more than $1.6 million.
"We and our allies will remain diligent in continuing our fight against the scandal-ridden Edwardsport IGCC power plant. Ratepayers should not be forced to pay one more penny for that fiasco," said Kerwin Olson, executive director of Citizens Action Coalition.