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Indiana University

Duke Energy plans increase to help pay for $2.88B coal plant

September 9, 2010
Kokomo, Indiana -- As it appeared in the Kokomo Tribune September 9, 2010

19% rate hike coming
Duke Energy plans increase to help pay for $2.88B coal plant

By Daniel Human
Tribune business writer

An almost $3 billion coal-to-gas power plant that Kokomo’s main electricity provider is building in southern Indiana will result in a more efficient approach to energy, the company’s president said Wednesday.

But customers will also see the effect of the high price tag in their bills, said Mike Reed, president of Duke Energy.

The company says its 780,000 Indiana residential customers will see an increase in their electricity bills, pending state approval, of about 19 percent by the time the $2.88 billion plant in Edwardsport is online in 2012. Cost of service for industrial customers will increase a little more than 20 percent on average, Reed said.

The company has a hearing in October with the Indiana Utility Regulatory Commission, the state agency that monitors billing rates and other utility matters. The hearing will, in part, address Duke’s request to increase its rates statewide to compensate for the Edwardsport project.

If the IURC approves the rate increases, Duke will implement them in six-month intervals to avoid a “rate shock” by having a large, sudden increase.

The plant, an Integrated Gasification Combined Cycle operation, will be the largest of its kind when it opens. It will also be a “clean coal” plant with 40 percent less carbon dioxide emissions than most other plants of its size, Reed said.

The construction project, and the accompanying rate increases that consumers will pay to fund it, has drawn heat from consumer and environmental groups, such as the Citizens Action Coalition.

Kerwin Olson, the coalition’s program director, said the increasing cost of the project, which started in 2006 at $1.2 billion, is too large of an investment that consumers are paying for.

“First and foremost, we don’t need the plant,” he said. “We simply don’t need the power. The grids are at excess capacity. ... It’s far too expensive. It’s a science project, an experiment. And they’re gouging the public to pad their pockets.”

The coalition is one of four groups that is formally intervening on Duke’s filing with the IURC.

The Edwardsport plant is about 65 percent complete. The project so far has created about 2,500 construction jobs, with another 200 expected to come in over the next few weeks.

About 120 people will work at the plant once it is operational. The approximately 2 million tons of coal it will consume every year will also support about 170 mining jobs, Reed said.

Keeping Coal

Duke Energy is investing 10 figures in a coal plant because, although wind and other forms of green energy are gaining momentum, coal is the dominant and most efficient resource available in Indiana, Reed said.

The company has begun diversifying its energy portfolio by investing in wind, hydro and biomass energy, with experimentation with solar. But the resources account for a few percent of Duke’s total energy sales because the output can’t keep up with the costs as well as coal, Reed said.

“As I look at them, I think it will continue to grow,” he said, “but I think it will be at a more moderate pace.”

The new plant will also allow the company to tap more into Indiana’s coal supply, Reed said, which is high in sulfur. The operation will strip the sulfur from the coal, then heat it into a synthetic gas.

The process should also reduce carbon dioxide emissions by about 40 percent compared to other coal plants of its size, he said.

Duke expects the Edwardsport plant to last about 50 years, he said.

“I don’t foresee for many, many years us getting out of the coal business,” he said.

Investing further in coal holds as a sound business investment for Indiana energy companies, said Sanya Carley, an asst. professor at Indiana University’s School of Public and Environmental Affairs.

But long-term factors, such as new public policies, could change that climate by driving up coal's costs, she said.

“There’s no way of knowing, honestly, what our future will be 50 years from now,” she said. “... Some part of coal is going to be a part of that mixture.”

Daniel Human is the Kokomo Tribune business reporter. He can be reached at 765-454-8570 or at daniel.human@kokomotribune.com.