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5/2/2012 5:00:00 PM
Plant upgrades might cost IPL nearly $1 billion to upgrade coal-fired plants
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Chris O'Malley, Indianapolis Business Journal

New federal mercury-reduction regulations may force Indianapolis Power & Light to spend nearly $1 billion to upgrade its coal-fired electric plants scattered around Indiana. Duke Energy, another big utility in the state that expects to be affected, is mulling everything from plant upgrades to shutting down older units.

The new regulations will hit Indiana harder than any other state because of its heavy reliance on pollution-belching, coal-fired plants. That dependence on low-cost coal has long allowed Indiana to have among the lowest electric rates in the nation. However, the investments needed to cut emissions could narrow the gap.

The fallout from the regulations hit IPL on April 18 when Fitch Ratings downgraded the utility’s credit, noting that IPL may need to spend up to $900 million between now and 2016 to comply with the new Environmental Protection Agency mandates.

IPL is still working on its plan, although it likely will include installing new devices at its Harding Street and Petersburg coal-powered generating stations.

The pollution-control measures could mean annual rate increases of 2 percent to 3 percent for residential customers over the next several years, IPL spokeswoman Crystal Livers-Powers said.

It’s unclear at this point to what degree large industrial ratepayers will get hit by price increases. Their rates are hammered out before the Indiana Utility Regulatory Commission.

IPL is not alone. Duke Energy is looking at everything from plant upgrades to shutting down older units to buying a portion of its electricity from other providers. Around the state, Indiana’s coal-fired electric utilities will spend billions of dollars not only to comply with the new mercury measures but to contend with a parade of proposed rules that include further cuts in sulfur and nitrogen emissions.

Recently finalized and proposed EPA regulations prompted the State Utility Forecasting Group at Purdue University earlier this year to raise its projected increase in the price of electricity in Indiana over the next decade another 14 percent. That’s on top of the 20-percent jump it forecast last year.

Ahead of the tougher federal regulations, the state’s electric utilities in the last few years have succeeded at the Indiana General Assembly in getting new laws to help them more easily pass on environmental costs to ratepayers.

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