Duke Energy Settles with Groups Over Edwardsport Operating Costs

Duke Energy Indiana reached a settlement agreement with some of the state’s key consumer groups related to operating costs at its Edwardsport integrated gasification combined cycle (IGCC) coal power plant.

The deal was submitted to state regulators on Sept. 18 and is subject to Indiana Utility Regulatory Commission (IURC) approval. If approved, it would resolve all Edwardsport-related proceedings pending at the commission.

Melody Birmingham-Byrd, president of Duke Energy Indiana, said that the agreement would put some outstanding regulatory issues behind the company, while limiting what customers would be forced to pay for plant operations since Edwardsport was declared commercial.

Edwardsport IGCC is a 618-MW facility located in Knox County, Ind. The station uses state-of-the-art technology to gasify coal, strip out pollutants, and then burns the cleaner gas to produce electricity. Due to delays and cost overruns during construction of the plant, it was a controversial choice when POWER selected it for a Top Plant award in 2013. However, its development marked a major step forward for next-generation coal combustion technology.

According to Duke Energy, the plant has performed well this summer. Edwardsport’s gasification availability factor averaged 72% for July and August, and July’s power generation was the largest since operations began.

Last week’s settlement concerns proceedings before the IURC focused on the date that the Edwardsport IGCC plant went into service. Duke Energy has considered the plant “in service” since June 7, 2013, but consumer groups—the Indiana Office of Utility Consumer Counselor, Duke Energy Indiana Industrial Group (including five large-volume customers), and Nucor Steel-Indiana—contested that date, arguing that the plant remained in the startup and testing phases before and after the date. According to a 2012 settlement agreement, Duke Energy shareholders are required to bear all startup and testing costs.

Under the newly reached deal, the parties agreed to designate June 7, 2013, as the startup date for accounting and ratemaking purposes. In exchange, Duke Energy agreed not to bill customers $85 million 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.

The agreement also designates $5 million—out of shareholder funds—for attorney fees, litigation expenses, and funding commitments, including a $1 million customer bill credit, $500,000 for battery storage research, $100,000 for low-income energy assistance, and $500,000 for the Indiana Utility Ratepayer Trust. The company will also cap annual plant operating, maintenance, and capital costs billed to customers during 2016 and 2017, with future regulatory filings to update plant operating costs and customer rates made annually rather than twice a year.

There will be regulatory hearings on the settlement. The IURC may approve, modify, or reject any agreement filed before it. A decision is possible in the first half of 2016.

—Aaron Larson, associate editor (@AaronL_Power, @POWERmagazine)