Photograph by John Blair
Indiana's governmental citizen advocate on energy issues has changed his position on the Edwardsport coal-gasification power plant. Office of the Utility Consumer Counselor David Stippler now says part of the risk for the plant should be shifted to Duke Energy investors and away from ratepayers.
In a shocking reversal of position, the Indiana Office of Utility Consumer Counselor (OUCC) has altered its support for the Duke Energy Edwardsport power plant fiasco.
Just last Nov. 3, OUCC head David Stippler gave the plant and ratepayer support for it a glowing endorsement during a "technical hearing" before the Indiana Utility Regulatory Commission (IURC). On July 1, his office modified that endorsement and said ratepayers should no longer be on the hook for the massive cost overruns in the construction of the beleaguered plant, which is now said by Duke to cost more than $3 billion.
Since the plant's inception in 2005, the OUCC has been a leading promoter of the plant, following the lead of Indiana Gov. Mitch Daniels, who has made the plant the centerpiece of what he calls "home grown energy" since it will presumably use Indiana coal to fuel its electrical generation. At that time Duke claimed the plant would cost $1.2 billion and would incorporate carbon capture and storage technology within that cost.
In fact, last September, the OUCC entered into a "settlement" regarding the plant along with Duke and a group of Duke's industrial customers that would have placed a cap on the costs that ratepayers would have been required to fund at nearly $2.9 billion, a figure that does not include carbon capture and sequestration.
At that time, it was only the coalition of health, consumer and environmental advocates including Valley Watch, Save The Valley, Citizens Action Coalition and the Sierra Club that stood in opposition to the plant.
But shortly after the settlement was announced it began to fall apart as a major scandal developed surrounding Duke's hiring of the IURC's Chief Administrative Law Judge Scott Storms. Storms had presided over numerous proceedings regarding Edwardsport. His employment by Duke set off a storm of protests and inquiries by private and public agencies, including the FBI, that led to the release of hundreds of e-mails that showed a cozy relationship between Duke and the IURC, especially its chairman, David Lott Hardy.
The e-mails showed Hardy, a former lawyer for Duke's predecessors Cinergy and Public Service Indiana, enjoyed taking advantage of Duke executive's largess, including breakfasts at exclusive Indianapolis eateries with Duke CEO Jim Rogers, and repeated social engagements with other Duke execs on their private yachts in Lake Michigan.
After the relationships become public knowledge, Gov. Daniels fired Hardy in an attempt at damage control, since it is clear that Daniels and Hardy were in lockstep concerning the Duke plant since it was first envisioned. In fact, the day after the public hearing on Edwardsport in late August 2007, Hardy and Daniels appeared at an "Energy Summit" in Evansville, giving their enthusiastic endorsement of the Edwardsport facility, well before the IURC had vetted the evidence presented during the hearing or during the formal IURC proceeding.
It was not until November 2007 that IURC gave Duke the go-ahead to force its Indiana customers to assume the risk of building the plant, which opponents had warned would cost far more than the $1.9 billion the IURC approved.
All during this time, Stippler's OUCC was also in lockstep with Daniels and Hardy on their promotion of the plant and remained so until last week, when they issued their explosive testimony telling IURC it should no longer require Duke's customers to pick up the cost of the overruns. In fact, in that testimony they left open the possibility that Duke's mismanagement and concealment might lead them to ask for ratepayer exposure to be even less than the $2.35 billion already approved by the IURC in March 2009.
OUCC's position today is close to the position of the Joint Intervenors, the collection of consumer, health and environmental organizations that have warned since the beginning of the exact scenario that has occurred with overruns and mismanagement. The main difference between the two positions is that the interveners believe the plant is not needed now or in the future and that the 618 megawatts of power the plant would produce could be achieved less expensively and with less pollution through strong demand-side management techniques and efficiency measures instead of building new power plants.
In the past, the IURC has shown great deference to the OUCC's position. Time will tell if they decide to protect the interests of consumers over the interests of Duke Energy.
Among the testimony filed by the OUCC on the case on July 1 are the following quotes from Barbara Smith, OUCC Director of the Resource Planning and Communications Division.
- "First, the OUCC supported withdrawal of the Agreement (settlement) because it learned that DEI had improper ex parte communications with the then-chairman of the Commission during the negotiations. This fact raised the possibility that DEI had not negotiated the settlement in good faith."
"OUCC's position today is close to the position of the Joint Intervenors ... that have warned since the beginning of the exact scenario that has occurred with overruns and mismanagement."
- "Duke has not demonstrated any budgetary constraints on this project. There appears to be a lack of responsibility or accountability on the part of those causing these multi-million dollar cost overruns. ... The escalating costs have been borne solely by ratepayers, with the benefits going to the shareholders."
- "There is little incentive for Petitioner to be cost conscious since the risk of cost overruns is borne solely by the ratepayers. ... Consumers should not be required to support additional economic burdens due to unjustifiable project changes."
- "Rejection of Petitioner's request IS warranted because Duke has failed to demonstrate that the requested project cost increase from $2.35B to $2.88B is prudent. Duke should no longer have a direct and endless line of project funds supplied solely by the ratepayers. Duke shareholders should bear some of the risks."
- "Our recommendation that Duke be denied any cost recovery over $2.35B should not be interpreted to mean that the OUCC believes Duke is entitled to recover all costs up to $2.35B. Our testimony in this Phase only addressed cost recovery between $2.35B and $2.88B. The OUCC reserves the right to argue in Phase II, which addresses Duke's conduct since the inception of this project, that Duke is entitled to considerably less than $2.35B."
John Blair is president of ValleyWatch. He can be reached at .