Duke Energy settles with Indiana groups over operating cost of Edwardsport IGCC

A Duke Energy (NYSE:DUK) subsidiary has reached a settlement agreement with consumer groups in Indiana over certain operating costs at Duke’s 618-MW Edwardsport integrated gasification combined-cycle (IGCC) power plant.

The proposed settlement still requires final approval from the Indiana Utility Regulatory Commission (IURC), Duke Energy Indiana said in a Sept. 18 news release. Participants in the settlement are the Indiana Office of Utility Consumer Counselor, the Duke Energy Indiana Industrial Group and Nucor Steel-Indiana.

If approved, the settlement would resolve all Edwardsport-related proceedings pending at the commission.

Key provisions of the proposed settlement include:

**The company has agreed not to bill customers $85m of operating costs deferred since the plant’s in-service date. If approved by state regulators, the remaining operating costs charged to customers will result in an approximately 2% customer bill increase. There will be regulatory hearings on the settlement, and a commission decision is possible in the first half of 2016.

**The settling parties agree that the plant’s commercial operation in-service date will remain June 7, 2013, for accounting and ratemaking purposes.

**During 2016 and 2017, the company will cap annual plant operating, maintenance and capital costs billed to customers. Future regulatory filings to update plant operating costs and customer rates will be made annually rather than twice a year.

**The agreement also designates $5m, out of shareholder funds, for attorney fees, litigation expenses, and funding commitments, including a customer bill credit and additional resources for battery storage research, low-income energy assistance and the Indiana Utility Ratepayer Trust.

As a result of the settlement provisions, Duke Energy expects to take a pretax charge of approximately $90m in the third quarter of 2015. This charge will be reflected as a “special item” and, therefore, excluded from the company’s adjusted diluted earnings per share.

“If approved, this agreement limits what customers will pay for plant operations since Edwardsport was declared commercial,” said Duke Energy Indiana President Melody Birmingham-Byrd. “With this settlement, we’re on track toward putting some outstanding regulatory issues behind us. Importantly, Edwardsport’s performance has continued to improve, and the plant performed well this summer when power was needed most.”

Edwardsport’s gasification availability factor averaged 72 percent for July and August, and July’s power generation was the largest since operations began, Duke said.

Edwardsport is a critical part of Duke Energy Indiana’s efforts to modernize its generation fleet and an initial step toward replacing older, coal-fired generation expected to be retired due to pending EPA regulations. The Edwardsport plant is the first major new coal-fired power plant built in Indiana in more than two decades.

Construction costs for the IGCC  amounted to about $3.5bn while costs for customers are capped at $2.6n, a Duke spokesperson said. 

It marks the second major legal settlement involving a Duke Energy company in the past two weeks. Duke announced a settlement with the federal government on Sept. 10 regarding Clean Air Act violations alleged by the U.S. Environmental Protection Agency (EPA) coal plant emissions in North Carolina.

About Wayne Barber 4201 Articles
Wayne Barber, Chief Analyst for the GenerationHub, has been covering power generation, energy and natural resources issues at national publications for more than 20 years. Prior to joining PennWell he was editor of Generation Markets Week at SNL Financial for nine years. He has also worked as a business journalist at both McGraw-Hill and Financial Times Energy. Wayne also worked as a newspaper reporter for several years. During his career has visited nuclear reactors and coal mines as well as coal and natural gas power plants. Wayne can be reached at wayneb@pennwell.com.