Once again, the record needs to be set straight and the facts disclosed after the annual Duke Energy media tour regarding their now $2.88 billion boondoggle known as the Edwardsport integrated gasification combined cycle (IGCC) power plant. This year, the propaganda was spread by the newly appointed president of Duke Michael W. Reed, fresh off his stint on the cabinet of Governor Daniels and before that at the Indiana Utility Regulatory Commission (IURC).
I'm surprised that Mr. Reed admits to the $2.88 billion and still growing price tag. What he fails to disclose is rampant cost increases and mistakes in engineering and planning. The plant was originally promised at $1.2 billion in 2006. Then in November 2007, Duke sought approval at the IURC at a cost of $1.985 billion.
"Mr. Reed fails to acknowledge that the project is now 140 percent over the original estimate." - Kerwin Olson, CAC
CAC objected, provided evidence that Duke grossly underestimated both the cost and the need for the plant. Six short months later in May 2008, CAC was proven correct when the cost had mysteriously risen to $2.35 billion and increased demand was not materializing.
Then about one year later, in early 2009, Duke indicated it was feeling "price pressures" with the revised $2.35 billion price and later stated costs had risen to $2.5 billion; however, when they eventually filed their testimony in April 2010, the cost estimate had actually grown to $2.88 billion, and their demand for electricity was still below projections.
What makes it worse is that much of the cost increase is due to mistakes. For example, Duke grossly underestimated the amount of pipe and wire it needed, chose the wrong kind of steel in some cases and made miscalculations regarding the foundation for key components. In addition, Duke's CEO, Jim Rogers, was quoted as stating Duke's electricity demand is low and may not return to pre-2008 levels until 2014 or 2015. The plant has become even more expensive and less needed than ever.
"Duke and the OUCC have been complicit in misleading the public since this project was first proposed." - John Blair, Valley Watch
Mr. Reed fails to acknowledge that the project is now 140 percent over the original estimate. He also neglects to point out that Duke customers are paying nearly $5 a month today for a power plant that does not and may never produce a single kilowatt hour of electricity. Even more telling is Mr. Reed's failure to disclose Duke's own witness admitting the cheapest option for ratepayers is to cancel the plant!
The facts are this: as long as Duke Energy has a blank check on ratepayers and the IURC fails to do itsd job, Duke Energy has no reason to control costs, as this power plant has little to do with their legal obligation of providing electricity and everything to do with padding the pockets of investors.
Were this funded by tax dollars, the public and the General Assembly would be in an uproar. But since the increasing costs are forced on the utility ratepayer by a monopoly and the Governor's appointed Commission, who cares? It's high time our elected officials and our State regulators recognized that the taxpayer and the ratepayer are the same person and that taxpayers/ratepayers should not be paying for Duke's mistakes.
Kerwin Olson is Program Director at the Citizens Action Coalition. He can be reached at firstname.lastname@example.org.
September 17, 2010
Settlement on Edwardsport IGCC BAD for Indiana
Today, a coalition of consumer and environmental watchdog groups announced their opposition to the recently filed settlement agreement pertaining to the Edwardsport integrated coal gasification cycle (IGCC) power plant currently under construction in Knox County, Ind.
The settlement, which still requires approval from the Indiana Utility Regulatory Commission, is unacceptable to the intervening parties for the following reasons.
1) It allows Duke to continue construction of the problem plagued project, even though Duke's own witnesses state that cancelling the plant today is the least cost option for consumers.
"Since the increasing costs are forced on the utility ratepayer by a monopoly and the Governor's appointed Commission, who cares?" - Kerwin Olson, CAC
2) It does not provide a "hard-cap" on the cost of the project as the settlement claims but still allows Duke to increase capital costs above their latest estimates.
3) The so-called "hard-cap" fails to include future environmental compliance costs, costs associated with governmental action, or "acts of God". Again, this allows Duke to raise costs above the so called "cap". Carbon compliance costs alone could cost additional billions of dollars.
4) Limits prudency review of costs to only those above $2.75 billion, which is even higher than the estimate previously approved by the Commission.
5) Duke's acceptance of a "reduced" return is limited to only costs above the already approved $2.35B costs estimate.
6) The self-imposed rate case moratorium until 2012 does nothing to protect consumers from the plant which will come online in 2012, which is when Duke would have filed a rate case anyway.
7) Proposed changes to depreciation and capital are short lived as they can be lost in the next rate case in 2012.
"This settlement does nothing to change the fact that this plant first and foremost is not needed by Duke to fulfill their legal obligation of providing reliable electricity to their customers and is far too expensive," stated Kerwin Olson, Program Director for the Citizens Action Coalition.
Mr. Olson continued: "The Commission should reject this settlement in its entirety, immediately halt construction, and initiate an investigation on whether or not the project is necessary to meet demand and is in the public interest."
John Blair, President of Valley Watch, asserts, "Duke and the OUCC have been complicit in misleading the public since this project was first proposed. We outlined these exact pitfalls in our testimony before the IURC in August 2007. Unfortunately, the IURC and the OUCC failed to listen and now Indiana ratepayers in 69 counties will suffer needlessly for their complicity."
For more information
Grant Smith, Executive Director for Citizens Action Coalition: 1-317-442-8802
Richard Hill, President of Save the Valley: 1-812-273-6015
John Blair, President of Valley Watch: 1-812-464-5663