An Indiana state agency representing utility ratepayer interests in cases before regulatory commissions said it has “serious concerns” regarding cost overruns at Duke Energy’s 618-MW integrated gasification combined cycle (IGCC) facility at Edwardsport.

In testimony recently filed with the Indiana Utility Regulatory Commission (IURC), the Indiana Office of Utility Consumer Counselor (OUCC) said it continues to support the utility’s plan for the proposed facility but that it was concerned about “inaccurate, unreliable cost estimates” for the project.

The OUCC said its initial support for Duke Energy’s request to build the facility at the existing 1940s-built 160-MW Edwardsport Station in Knox County, Ind., was based on a number of factors, including “the state’s need for additional generation, the possibility of federal carbon legislation, and the opportunity to utilize coal in a new, environmentally responsible manner.” However, the agency said that several other factors on which it based its support had changed dramatically in the past three years.

“While the OUCC’s initial support was based on Duke Energy’s commitment to pursue carbon capture and sequestration at the Edwardsport site, subsequent studies have shown that the project site is not conducive to carbon storage,” it said in a statement on Monday.

Support was also based on the utility’s assurances regarding its initial cost estimate of $1.985 billion. In January 2009, “despite those assurances, the IURC approved Duke Energy’s request to raise the cost estimate to $2.35 billion,” the OUCC said, adding that Duke Energy was requesting in a new docket pending before the IURC to increase its projected cost estimate again, to $2.88 billion—a 45% increase over the utility’s original estimate.

“The utility also expresses an ‘85 percent’ certainty that no additional cost increases will be needed beyond the current request to complete the project,” the OUCC noted.

"My staff has closely examined Duke Energy’s most recent request including current data on the Edwardsport project," stated Indiana Utility Consumer Counselor David Stippler. "While the OUCC recognizes the importance of this project and the state’s need for the additional generating capacity, it is deeply concerned about the dramatic rise in the project’s costs in this short period of time. The OUCC is equally concerned with Duke Energy’s apparent inability to constrain its budget for this project, whose costs are being borne by the utility’s ratepayers."

"Utilities have a responsibility to demonstrate that rate-recovered costs, including increases to approved costs, are reasonable, necessary and prudent," continued Stippler. "Unfortunately, Duke Energy has not met this burden of proof in its pending request to increase the project’s cost estimate by more than a half-billion dollars."

The OUCC’s testimony to the IURC recommended that the commission cap the project’s overall costs at “an amount significantly lower than the $2.88 billion Duke Energy is currently requesting.” If the cap is exceeded, the utility would be required to seek any additional cost recovery through a base rate case filing rather than through the semi-annual cost tracking mechanism currently in use, the agency said.

The 630-MW baseload facility now under construction at Edwardsport is expected to begin commercial operation in 2012. Duke Energy said in a recent filing at the IURC that as of the end of April 2010, the engineering work for the project was about 94% complete, procurement progress (including delivery of equipment and materials) is approximately 79% complete, and construction work is about 34% complete. In a statement to POWERnews, the utility said that as of the end of July, the total project was 68% complete.

An IURC technical evidentiary hearing in this case is scheduled to begin on September 16, 2010, in Indianapolis.

Sources: Indiana Office of Utility Consumer Counselor, Duke Energy, POWERnews