Duke offers to end coal use in 2022 at last two Gallagher coal units in Indiana

Duke Energy (NYSE: DUK) said in its Feb. 25 annual Form 10-K report that a deal it did last September to settle issues over its costly Edwardsport integrated gasification combined cycle (IGCC) project calls for the end of coal use at Unit 2 and 4 of its Gallagher power plant by the end of 2022.

Said the Form 10-K: “In September 2015, Duke Energy Indiana entered into a settlement agreement with multiple parties that will resolve all disputes, claims and issues from the [Indiana Utility Regulatory Commission] proceedings regarding the Edwardsport IGCC generating facility. In January 2016, additional parties joined a revised settlement.

“Pursuant to the terms of the agreement, Duke Energy Indiana recognized an impairment and related charges of $93 million. Additionally, the settlement agreement stipulates the recovery of the remaining regulatory asset over an eight-year period and confirms the conclusion that the in-service date for accounting and ratemaking purposes will remain June 7, 2013. “The settlement agreement will also impose a cost cap for recoverable operations and maintenance retail costs of $73 million in 2016 and $77 million in 2017 as well as a cost cap for ongoing capital expenditures through 2017.

“As part of the settlement, Duke Energy Indiana committed to cease burning coal at Gallagher Station Unit 2 and 4 by the end of 2022.

“The settlement is subject to IURC approval and, if approved, would resolve and close a number of outstanding issues pending before the IURC related to post commercial operating performance and recovery of ongoing operating and capital costs at Edwardsport. If the settlement is not approved, outstanding issues before the IURC related to Edwardsport would resume, the ultimate resolution of which could have an adverse impact on Duke Energy Indiana’s financial position, results of operations and cash flows.”

Said the Duke Energy website about Gallagher: “Gallagher Station is a two-unit coal-fired generating facility located in Floyd County, Indiana. Unit 2 began operating in 1958; unit 1 in 1959; unit 3 in 1960 and unit 4 in 1961. In early 2012, units 1 and 3, 280 megawatts combined, were retired. Units 2 and 4 have been equipped with baghouses and dry sorbent pollution-control equipment and continue to operate, burning low-sulfur coal to further reduce emissions.” Units 2 and 4 have a combined capacity of about 280 MW.

Brett Phipps, employed as Managing Director, Fuel Procurement at Duke Energy Progress, outlined Duke Energy Indiana’s coal situation in a Jan. 28 fuel cost filing at the IURC. He noted that the Gibson, Wabash River, Cayuga and Edwardsport IGCC stations are supplied by long-term coal agreements. The Gallagher Station will continue to be supplied by spot coal purchases depending on how much the Gallagher units actually operate, he wrote. That indicates these units already don’t run much.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.