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Ind. regulators approve modified deal with Duke

Charles Wilson and Rick Callahan, Associated Press

INDIANAPOLIS (AP) -- State regulators on Thursday approved a deal that caps the amount of construction costs Duke Energy Corp. can pass along to consumers for its troubled coal-gasification plant in southwestern Indiana.

The deal approved by the Indiana Utility Regulatory Commission caps the amount at $2.6 billion, requiring the utility to absorb nearly $900 million in cost overruns.

The increase, which will be imposed in steps, is expected to raise ratepayers' bills a total of 14 to 16 percent by early 2014, Duke spokeswoman Angeline Protogere said. About 5 percent of that increase has already reached customers' bills, she said.

Protogere said Duke is still reviewing the Indiana Utility Regulatory Commission order. The proposed deal was announced in April by Duke and the agency representing utility ratepayers. The commission said it modified the bargain to provide another $28 million in various credits to ratepayers.

The Duke plant at Edwardsport, about 15 miles northeast of Vincennes, has drawn strong criticism as its price tag vaulted from its original 2007 cost estimate of $1.9 billion to its current projected cost of $3.5 billion. It has also been the focus of an ethical flap for Duke Energy after company officials and regulators were found to be discussing the cost overruns in secret meetings, prompting several firings and resignations.

The utility commission's former chairman, David Lott Hardy, was fired and is now awaiting trial on four felony counts of misusing his office.

The Citizens Action Coalition, which had asked the commission to reject the settlement "in its entirety," intends to appeal Thursday's order, said Kerwin Olson, executive director of the Indianapolis-based group.

Olson called the settlement a "rubber-stamped Duke bailout package" that fails to protect the utility's customers from the plant's cost overruns.

"We feel that not only should these cost overruns not be approved, the previous cost overruns should also be revoked and Duke Energy should have to go back to square one and prove the prudency of the entire project," he said.

Olson said that while the settlement's "alleged hard cap" specifies that ratepayers will pay no more than $2.6 billion, the actual amount will be about $3.3 billion because ratepayers will also have to foot at least $650 million in financing costs for the plant.

But Anthony Swinger, spokesman for the Office of Utility Consumer Counselor, said the $2.6 billion includes construction-related finance charges except for about $54 million that has accrued since June 30. Protogere confirmed Swinger's analysis.

When completed, the 630-megawatt plant will be one of the world's largest coal-gasification plants. It will convert coal into a synthetic gas that will be burned in a traditional turbine power plant to generate electricity.

Protogere said Thursday that construction work on the plant is nearly complete and that the complex successfully produced its first electricity from gasified coal during startup and testing. The plant is expected to be in commercial operation by the middle of next year.

"Today's decision resolves key regulatory issues and allows us to focus on bringing into service a plant that will help us meet increasingly strict federal environmental regulations while still using an abundant local resource, Indiana coal," Duke Energy Indiana President Doug Esamann said in a statement. "Edwardsport will serve the electric energy needs of our Indiana customers for decades to come."

Duke is Indiana's largest electric utility, with 780,000 customers in 69 of the state's 92 counties. The Charlotte, N.C.-based company has 4 million electric customers in North Carolina, South Carolina, Ohio, Kentucky and Indiana, along with 500,000 natural gas customers in Ohio and Kentucky.