EDWARDSPORT — Duke Energy Indiana has revised its estimated cost to $2.98 billion on its coal-gasification power plant under construction here.
That’s $260 million higher than the estimate the company filed with the Indiana Utility Regulatory Commission in March and $1 billion higher than the original projected cost of the plant announced four years ago.
In a filing with the federal Securities and Exchange Commission this week Duke officials said the reasons for the increase in the projected cost of plant were “unfavorable labor productivity trends and incremental material quantity and scope changes.”
According to Doug Esamann, president of Duke Energy Indiana, customers of the utility company will not be asked to make up the additional cost.
“While this facility costs more than we anticipated, customers will not be asked to pay for this cost increase needed to complete the project,” he said.
In a proposal put before the IURC in March, Duke agreed to cap the amount customers would be required to pay for the new plant at $2.72 million if the state regulatory agency would approve the requested rate increases for the company.
Duke, itself, would pay additional costs above the $2.72 billion.
The state’s Office of Utility Consumer Counselor is accusing Duke of grossly mismanaging the plant’s construction, saying the company has displayed “arrogance or incompetence” in handling the project. It also said the company concealed vital information from regulators about the plant.
The consumer agency recommended in July that the IURC force Duke to foot all of the cost overruns and said ratepayers should reimburse the company only for the plant’s original price tag of $1.98 billion.
Next week the IURC will hear arguments on whether the cost overruns can be passed on to Duke's customers.
Duke has dealt with criticism from its hiring last year of IURC chief counsel Scott Storms, criticism that led the company to fire its Indiana president and Gov. Mitch Daniels to oust the IURC's chairman for not removing Storms from Duke cases after he started job discussions.
Late last year Jim Turner, Duke’s chief operating officer, resigned after The Indianapolis Star published excerpts from dozens of e-mails between him and IURC chairman David Hardy that raised questions about the appropriateness of the relationship between the regulator and the executive.
Turner was also involved in Duke’s decision to hire Storms.
The 630-megawatt plant, one of the largest coal-gasification plants in the world and will convert coal into a synthetic gas that will be burned in a traditional turbine power plant to produce electricity, is expected to become fully operational in the fall of 2012.
Duke officials consider the plant to be the “centerpiece of our fleet modernization strategy in Indiana, allowing us to close older, less efficient coal-powered generation and to comply with more stringent (federal Environmental Protection Agency) regulations.”
“It’s been 30 years since we last built a coal-fired power plant in Indiana, and constructing a plant today that meets environmental requirements and produces reliable power is expensive,” Esamann said. “We’re in the home stretch of finishing a plant that positions us for ever-tightening environmental rules while still using a local and abundant energy source, coal.”
The plant is more than 90 percent complete and Duke has spent about $2.9 billion so far.
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