The coal-fired, 825-MW Cliffside Unit 6 is due for commercial operation this fall, said Duke Energy (NYSE: DUK) in its Aug. 8 Form 10-Q filing.
In March 2007, the North Carolina Utilities Commission (NCUC) issued an order allowing Duke Energy Carolinas to build an 800 MW coal-fired unit. Following final equipment selection and the completion of detailed engineering, Cliffside Unit 6 is expected to have a net output of 825 MW.
In January 2008, Duke Energy Carolinas filed its updated cost estimate of $1.8bn (excluding AFUDC of $600m) for Cliffside Unit 6. In March 2010, Duke Energy Carolinas filed an update to the cost estimate of $1.8bn (excluding AFUDC) with the NCUC where it reduced the estimated AFUDC financing costs to $400m as a result of a December 2009 rate case settlement with the NCUC that allowed the inclusion of construction work in progress in rate base prospectively. Duke Energy Carolinas believes that the overall cost of Cliffside Unit 6 will be reduced by $125m in federal advanced clean coal tax credits.
Duke also updated the status of its other new power projects.
Duke Energy Carolinas Dan River Combined Cycle Facility – In June 2008, the NCUC approved the Certificate of Public Convenience and Necessity (CPCN) applications to construct a 620-MW combined-cycle natural gas-fired facility at the existing Dan River plant. The Dan River project is expected to begin operation by the end of 2012. Based on the most updated cost estimates, total costs (including AFUDC) for the Dan River project are $710m.
Duke Energy Indiana Edwardsport IGCC Plant – This 618-MW integrated gasification combined-cycle power plant is nearing completion but still going through contentious cost reviews at the Indiana Utility Regulatory Commission. The facility was initially estimated to cost about $1.985bn (including $120m of AFUDC). In May 2008, Duke Energy Indiana requested approval of a new cost estimate of $2.35bn (including $125m of AFUDC). In January 2009, the IURC approved the utility’s request, including the new cost estimate of $2.35bn. In April 2010, Duke Energy Indiana requested approval of a revised estimate of $2.88bn (including $160m of AFUDC). A major driver of the cost increase included quantity increases and design changes, which impacted the scope, productivity and schedule of the IGCC project, Duke noted. In September 2010, an agreement was reached with various parties to increase the authorized cost estimate of $2.35bn to $2.76bn, and to cap the project’s costs that could be passed on to customers at $2.975bn. Due to the settlement, Duke Energy Indiana recorded a pre-tax charge to earnings of about $44m in the third quarter of 2010.
Various filings and legal arguments later, on April 30, Duke Energy Indiana settled with the Office of Utility Consumer Counselor, the Duke Energy Indiana Industrial Group and Nucor Steel-Indiana on a cost increase. Pursuant to the agreement, there would be a cap on costs to be reflected in customer rates of $2.595bn, including estimated financing costs through June 30. Under this deal, Duke would be able to recover additional financing costs until customer rates are revised. Duke Energy Indiana also agreed not to request a retail electric base rate increase prior to March 2013, with rates in effect no earlier than April 1, 2014.
“The agreement is subject to approval by the IURC, and the settling parties have requested that schedule be set to hear evidence in support of the settlement agreement, which could allow for an IURC order as early as the summer of 2012,” said the Form 10-Q. “As a result of the agreement, Duke Energy Indiana recorded pre-tax impairment and other charges of approximately $420 million in the first quarter of 2012. … These charges are in addition to pre-tax impairment charges of approximately $222 million in the third quarter of 2011 and $44 million recorded in the third quarter of 2010.”
Construction of the Edwardsport IGCC plant is ongoing and the expected in-service date for the plant has been delayed from the fourth quarter of 2012 to the first quarter of 2013. The impact of this delay on the cost of the plant is currently being analyzed but cannot be determined at this time, Duke said.
Duke Energy Carolinas William States Lee III Nuclear Station – In December 2007, Duke Energy Carolinas filed an application with the Nuclear Regulatory Commission for a combined Construction and Operating License (COL) for two Westinghouse AP1000 (advanced passive) reactors for the proposed William States Lee III Nuclear Station at a site in Cherokee County, S.C. Each reactor is capable of producing 1,117 MW. Submitting the COL application does not commit Duke to build nuclear units. Through several separate orders, the NCUC and Public Service Commission of South Carolina have concurred with the prudency of Duke incurring project development and pre-construction costs.
Duke Energy Carolinas V.C. Summer Nuclear Station Letter of Intent – In July 2011, Duke Energy Carolinas signed a letter of intent with Santee Cooper related to the potential acquisition by Duke Energy Carolinas of a 5%-10% ownership interest in the V.C. Summer Nuclear Station being developed by Santee Cooper and South Carolina Electric & Gas near Jenkinsville, S.C. The letter of intent provides a path for Duke Energy Carolinas to conduct due diligence to determine if future participation in this project is beneficial for its customers, Duke said.
Duke has 2,773 MW of coal retirements in the works
Duke noted that its subsidiaries also have in the works coal plant retirements by 2015 that are due to the advancing age of those units and encroaching U.S. Environmental Protection Agency regulations. For Duke as a whole, those retirements come to 2,773 MW. The retirements by subsidiary are:
- Duke Energy Carolinas, 1,080 MW, which includes Riverbend Units 4-7, Lee Units 1-3 and Buck Units 5-6. Duke Energy Carolinas has committed to retire 1,667 MW in conjunction with a Cliffside Unit 6 air permit settlement, of which 587 MW have already been retired as of June 30.
- Duke Energy Ohio, 1,025 MW, which includes the Beckjord plant and Miami Fort Unit 6.
- Duke Energy Indiana, 668 MW, which includes Wabash River Units 2-6.
“Duke Energy continues to evaluate the potential need to retire these coal-fired generating facilities earlier than the current estimated useful lives, and plans to seek regulatory recovery for amounts that would not be otherwise recovered when any of these assets are retired,” the Form 10-Q said.