Regulators OK final settlement over controversial Edwardsport plant

A bitter, costly fight over who will pay for Duke Energy’s $3.5 billion coal-gasification plant, one of the most expensive projects in Indiana history, is finally over.

State utility regulators on Wednesday approved a settlement that will result in customers paying about 2 percent more a month, or $1.83 for the average customer, effective in September, and Duke Energy agreeing to swallow $87.5 million of plant operating costs that have been deferred since the plant went into service in 2013.

Duke Energy said that without the settlement agreement, the increase in monthly utility bills would have been even higher, about 3.6 percent.

The agreement also includes about $1 million in additional funds for low-income energy assistance and solar grants for communities.

The move ends more than five years of quarreling over the 618-megawatt plant in southwest Indiana that has been mired in one controversy after another, including secret meetings between the utility and regulators and an improper job offer from Duke to a top lawyer at the state commission who was involved in the review.

The actions resulted in an FBI investigation, four high-level firings and resignations, and a public reprimand by the Indiana Supreme Court and the state ethics board against the state lawyer.

Duke Energy had originally described the Edwardsport project as a producer of low-cost electricity. The state approved the plant at a cost of $1.9 billion but construction costs quickly soared beyond that, due to utility underestimations in the amount of pipe, concrete and other materials needed. A shortage of skilled labor also pushed up costs, and several major accidents shut down work areas for days.

The plant is the largest of its kind that generates electricity by converting coal into a combustible synthetic gas to drive turbines. Several consumer environmental groups, including Citizens Action Coalition and the Sierra Club, called the project a boondoggle and tried to stop it in court, but lost.

In January, those groups dropped their objections and joined a settlement that was reached last fall between the utility and the Office of Utility Consumer Counselor and large industrial buyers of electricity.

The consumer groups were able to get Duke to agree to provide $500,000 for low-income energy assistance for needy customers and allocate $500,000 for small-scale solar projects to be installed at churches, schools and other community sites, along with other benefits.

“This settlement is a huge win for Duke's ratepayers and we are grateful that Duke and the other parties opened the settlement up and invited CAC and our allies to the discussions, where we were able to secure additional benefits for customers,” said Kerwin Olson, executive director of Citizens Action Coalition.”

The agreement is the second major one in four years over the plant’s costs. In 2012, many of the parties agreed to cap the amount of money Duke Energy could recover from ratepayers at about $2.595 billion, plus millions of dollars in financing costs. The company agreed to pay about $900 million in construction costs.

The Office of Utility Consumer Counselor hailed the state’s order, saying it will ensure that nearly $1 billion in the plant’s construction and operating costs will not be passed through to customers in rates.

The utility also agreed to stop burning coal by 2022 at its Gallagher Generating Station in New Albany, in southern Indiana near Louisville. It agreed to pay $2.5 million in attorneys’ fees to an industrial group that was also involved in fighting who would pay for the project.

“This settlement has broad support of Indiana’s consumer groups,” said Melody Birmingham-Byrd, president of Duke Energy Indiana in a written statement. “We joined with them in an agreement that limits what customers will pay for Edwardsport’s operations while also dedicating funds to help low-income customers with their energy bills and communities interested in solar power.”