Duke Energy Indiana files cost update for clean coal gasification power plant

Duke Energy Indiana on April 16 filed testimony and exhibits with the Indiana Utility Regulatory Commission increasing the cost estimate for its Edwardsport coal gasification plant under construction in southwest Indiana.

The project's scale and complexity has added approximately $530 million to the previously approved $2.35 billion cost.

Indiana state utility regulators must review and approve Duke Energy Indiana's filing before any new costs can be phased into customer electric rates.

Last November, Duke Energy Indiana alerted the commission that it was seeing significant upward pressure on costs as the project's engineering progressed. The company asked the IURC to schedule a proceeding to review a revised cost estimate.

The April 16 filing estimates the total cost of the Edwardsport IGCC project to be $2.88 billion, including project financing costs. The total project, factoring in aspects such as engineering, construction and purchasing, is 57 percent complete. It is scheduled to be operating in 2012.

"This is the first time a plant this size using this advanced clean coal technology has been built anywhere in the world," said James Turner, president and chief operating officer of Duke Energy's Franchised Electric & Gas businesses. "We worked with GE, Bechtel and other design firms to perform an engineering study early on; however, as engineering progressed, the project's design and complexity expanded significantly. Unfortunately, this evolution in scope and complexity makes an increase in the cost estimate impossible to avoid," Turner added.

If approved, the increase in costs will add about 3 percent to the project's customer rate impact. Based on a customer's bill today, the project will result in an overall average 19 percent rate increase phased into rates by 2013.

Regulators granted the company permission in 2007 to construct the technologically advanced clean coal power plant in Edwardsport, Ind. Regulators also approved the phase in of rate increases associated with the project. The ability to phase in costs over time reduces the customer bill impact because it spreads out the increase and lowers financing costs. State utility regulators review and approve all plant costs before they are added to customer electric rates.

The approximately 618-megawatt plant will use advanced integrated gasification combined cycle technology. It will:

• Produce 10 times as much power as the existing plant at Edwardsport, yet with significantly less environmental impact than the much smaller plant it replaces.
• Be the first major new power plant built in Indiana in more than 20 years. The plant is key to modernizing the state's aging electric system.
• Generate marketable by-products. This plant produces sulfur and slag for agricultural and construction materials.
• Use dramatically less water. The IGCC plant will need less than one-tenth the amount of water per day compared to the current plant when it's operating.

"We are demonstrating that we can generate electricity using coal in a more environmentally sustainable way," Turner said. "Some would like to turn away from coal completely. That's not realistic given that it powers most of Indiana's -- and half of our nation's -- energy needs. Indiana has more than 110 years of recoverable coal reserves. We simply cannot turn our back on this abundant, relatively low-cost fuel resource."

The company will retire the existing 160-megawatt plant - with coal and oil units more than 60 years old - in conjunction with the completion of the new facility.

About 1,400 construction workers and other professionals are working on site. That number is expected to grow to about 2,000 this summer. The plant will employ approximately 110 to 120 full-time workers. In addition, the 1.7 million to 1.9 million tons of coal the plant will use each year will support an estimated 170 mining jobs.

"The plant is one of the largest construction projects that has ever been undertaken in Indiana," Turner said. "So far, the construction has generated more than $400 million in contracts with Indiana businesses. The investment and jobs are a welcome boost in a down economy."

The IGCC plant will use state-of-the-art technology to gasify coal, strip out pollutants, and then burn that cleaner gas to produce electricity. The plant's efficiency reduces the plant's carbon emissions per megawatt-hour by nearly half.

Duke Energy Indiana's operations provide approximately 6,800 megawatts of electricity capacity to approximately 780,000 customers, making it the state's largest electric supplier.

Duke Energy is one of the largest electric power holding companies in the United States. Its regulated utility operations serve approximately 4 million customers located in five states in the Southeast and Midwest, representing a population of approximately 11 million people. Its commercial power and international business segments own and operate diverse power generation assets in North America and Latin America, including a growing portfolio of renewable energy assets in the United States.