Consumer and environmental groups recently filed testimony at the Indiana Utility Regulatory Commission (IURC) opposing the proposed settlement between Duke Energy (NYSE: DUK), the Indiana Office of Utility Consumer Counselor, Nucor Steel and the Duke Energy Indiana Industrial Group regarding the Edwardsport integrated gasification combined-cycle (IGCC) power plant.
The proposed settlement claims to protect the captive ratepayers of Duke by placing a $2.595bn “hard cap” on the construction costs that could be passed onto ratepayers, said the groups in a July 2 public statement. However, the expert testimony of both David Schlissel, President of Schlissel Technical Consulting, and Ralph Smith, Senior Regulatory Consultant at Larkin & Associates PLLC, provides evidence that the $2.595bn “cap” is nothing more than a “firm floor” that offers consumers little protection, they added.
Also, the proposed settlement ensures that captive ratepayers will in fact pay a minimum total of $3.25bn for the coal-fueled, in-construction IGCC project whether or not it in fact ever comes online. “The settlement also rewards Duke Energy for its gross mismanagement and ordinary mismanagement of the project by giving the Company significantly more than the original $1.985 billion estimate,” the groups said.
“The proposed Settlement Agreement offers no protection for ratepayers” against the likelihood that the Edwardsport project will not operate at or near the annual 84% availability, and approximate annual 82-83% capacity factors, which Duke has claimed since 2007 that it would achieve, Schlissel stated in pre-filed testimony.
Smith’s testimony discusses the fact that the $2.595bn is not all that customers will pay to complete the construction of the project should the terms in the proposed settlement be accepted by the IURC, given that Construction Work in Progress (CWIP) finance related costs that Duke already collected from ratepayers is not included in the settlement, nor are future CWIP finance related charges.
Additional testimony was also filed at the IURC by Nachy Kanfer, Deputy Director for the Central Region of the Sierra Club Beyond Coal to Clean Energy Campaign. Kanfer points out the claimed failure of Duke Energy to propose any plan to mitigate carbon emissions.
Hearings on the proposed settlement are scheduled to begin on July 16.
In a May 30 filing at the commission, Duke said that within a subdocket, the settling parties are asking the commission to:
- approve a new cost estimate for the IGCC project, equivalent to the hard cost cap of $2.595bn (plus additional allowance for funds used during construction);
- find that there has been no imprudence and/or fraud, concealment or gross mismanagement which exceeds the value of the impairment Duke Energy Indiana has agreed to in the settlement (almost $700 million) (plus the value of other settlement provisions); and
- approve other provisions of the settlement agreement, like the agreed-upon proposed changes in depreciation rates and a partially corresponding change in retail electric rates, and the agreed-upon proposed change in calculation of CWIP return based on the treatment of deferred taxes.