Costs cited for coal-to-gas plant

The Indiana Utility Regulatory Commission this week is hearing a joint proposal from Duke Energy and Vectren to build a new coal gasification plant to generate electricity in Edwardsport, Ind., replacing Duke's existing power plant there. Representatives of environmental and consumer groups who oppose the proposed plant testified later.

There is no timetable for the IURC ruling on the utilities' request to allow them to build the plant and pass on its costs to ratepayers, but the decision won't be soon, said IURC spokeswoman Mary Beth Fisher.

Ultimately the commission must decide whether the plant is necessary and whether the utilities can recover their construction costs from customers through charging higher rates.

If approved and built, the new Edwardsport plant would use a process called integrated gasification combined cycle, or IGCC, to turn Indiana coal into synthetic natural gas — and then burn the gas to produce electricity. Proponents say the IGCC process is less polluting and more efficient than traditional coal-fired power plants.

During testimony, a Duke Energy official said Duke's estimated rate increase would be 13 percent to 16 percent, if cost estimates for construction of the 630-megawatt plant are correct, assuming a 4 percent inflation rate.

"Doing nothing is not an option; we need to do some things to meet our customers' needs in the future," Duke's vice president for regulatory affairs Kay Pashos said. "There is inflation with respect to energy costs; we've seen that in recent years and expect that to continue in the foreseeable future. That's not easy for customers, clearly."

Questioned by a panel of attorneys in a courtroom-like setting, Pashos testified that the new-plant proposal calls for ratepayers to pay $1.985 billion. "We all know there are things outside our control, like market forces that we can't control," Pashos said, such as price spikes in steel or concrete that would affect construction costs. Any rate increases to customers to fund the Edwardsport plant's construction first would need the utility regulatory commission's approval.

Some environmental groups, including Evansville-based Valley Watch, oppose the coal-gasification plant, warning it could prevent Southwest Indiana from meeting federal air-quality standards. A consumer group, Citizens Action Coalition of Indiana, also questions the need for the plant or its rate increase, and suggests there are more efficient power-generation alternatives.

Two conservation groups, the Indiana Wildlife Federation and nonprofit Clean Air Task Force, in April filed documents asking regulators to require the plant to have technology to reduce carbon-dioxide and mercury emissions.