Hearings began this week in a case that will determine whether utility customers or shareholders should pay for additional costs related to Duke Energy’s Edwardsport coal gasification plant.
When first proposed in 2006, the project was expected to cost nearly $2 billion. Final costs totaled $3.5 billion, not including ongoing operational costs.
The Indiana Utility Regulatory Commission has previously approved requests from Duke Energy to recover a large portion of that money through customer rate increases.
Duke Energy is now asking the IURC to let it recover hundreds of millions of dollars in additional costs that were incurred from April 2013 to March 2014.
At issue is whether the plant was already operational at that time.
A 2012 settlement put a cap on the construction costs Duke Energy could pass on to ratepayers, but it allows the company to recover operational expenses.
Consumer advocacy groups, including the Citizens Action Coalition and the state Office of Utility Consumer Counselor, argue Duke Energy should absorb much of those costs because the plant was not fully functional.
“We’re saying that there are costs here that should not be recovered because the plant wasn’t ready for primetime,” OUCC spokesman Anthony Swinger says.
In particular, the OUCC is recommending the IURC require Duke Energy to absorb $114 million. That would include $63 million Duke Energy is requesting it be allowed to recover and another $51 million Duke Energy is already charging customers, which the OUCC argues should be refunded.
The Citizens Action Coalition wants the amount Duke Energy shareholders take on to be closer to $400 million.
The Citizens Action Coalition and the Sierra Club are also asking the IURC to open an investigation into the operation and performance of the Edwardsport plant, which was touted as a cleaner source of energy production.
“It was really sold on a whim and lie, from my perspective,” Citizens Action Coalition Executive Director Kerwin Olson says. “This is nothing but a dirty coal plant that is emitting more carbon dioxide and putting our state at a greater risk and liability for any future costs associated with carbon.”
In a report released before the hearing, the Citizens Action Coalition argues the Edwardsport plant has a higher rate of carbon dioxide emission than nearly all of Duke Energy’s other power plants in Indiana and has been producing less energy than expected.
During the hearing, Jack Stultz, the manager of the Edwardsport plant, testified that while the plant did have problems when it first went online, including an outage in Februrary 2014, the plant has been running more effectively.
Duke Energy spokeswoman Angeline Protogere says consumers need to look at the “big picture” when it comes to how the plant, which is the largest U.S. coal gasification facility, is operating.
“We have always said before the plant was built that when you build something on this scale, using this technology, it’s going to take time to work out issues. What’s important though is that the plant’s operations have been improving,” Protogere says. “We believe that it will be one of the lowest-cost plants, if not the lowest cost plants on our system.”
Protogere says the Edwardsport plant emits about 40 percent less carbon dioxide than the plant it replaced and significantly fewer other greenhouse gases such as sulfur dioxide.
A decision on the rate increase is not expected for several months.
In September, an appeals court asked the Indiana Utility Regulatory Commission for more information regarding why it approved an earlier rate hike to recover $61 million from consumers for Edwardsport plant costs. That case is still pending.
Duke Energy estimates the total remaining costs associated with the Edwardsport plant would increase utility costs by 2-percent or $2.40 on the average customers’ monthly bill.
Rates have already increased about 14 percent in relation to the Edwardsport plant.
Duke officials say they have other plans in the work to offset some of those rate hikes.