Duke Energy's chairman James Rogers defends US$2.9B coal-gasification plant Duke is building in southern Indiana, says he believes it will generate cleaner electricity; company wants to pass over US$300M in cost overruns on to customers

Graziela Medina Shepnick

INDIANAPOLIS , October 27, 2011 (Associated Press) – Duke Energy's chairman has defended the $2.9 billion coal-gasification plant it is building in southern Indiana, saying that while he's troubled by its rising costs he believes it will generate cleaner electricity for years to come.

Duke chairman James Rogers testified for more than three hours Wednesday before the Indiana Utility Regulatory Commission, which is considering whether to allow the company to pass more than $300 million in cost overruns on to customers.

Rogers faced a barrage of questions from an Indiana Office of Utility Consumer Counselor attorney about the plant's problems, including its wildly wrong estimates on the amount of steel, piping and concrete needed to build it, its labor productivity issues and its costly water-disposal system, The Indianapolis Star reported Wednesday (http://indy.st/upV3bj ).

Rogers acknowledged that the plant's per kilowatt cost has climbed to $5,593, up from $3,364 when the regulators first approved the project in 2007. Many of Duke's other plants were built at a fraction of the cost per kilowatt generated by those facilities.

"How is this low-cost energy?" asked Randall Helmen, chief deputy of the utility consumer counselor's office.

"Yes, it's expensive," Rogers said. "But it will be the cleanest plant in Indiana."

Rogers said the plant being built near Edwardsport is 96 percent complete and should be operating a year from now, adding generating capacity as Duke begins to retire some aging plants.

Rogers repeatedly deferred questions about the project's engineering setbacks to other executives, who are expected to testify in coming days.

Rogers told the utility commission he has worked hard to get the plant finished and urged the major contractors to "stop pointing fingers" and get the job done.

"I said, let's finish with the least cost possible and then we'll sort out who owes what," Rogers said. "My first priority was to finish the project."

But a group of large industrial customers wants the IURC to hold Duke responsible for the cost over runs.

Duke's position is "it's someone else's fault," said Jack Wickes, a lawyer representing the industrial customers.

"Duke's assumptions were too rosy," Wickes said.

The 630-megawatt Edwardsport plant, one of the largest coal-gasification plants in the world, will convert coal into a synthetic gas that will be burned in a traditional turbine power plant to generate electricity.

The plant's cost has climbed about $1 billion from its original estimate of $1.9 billion in 2007. Charlotte, N.C.-based Duke is Indiana's largest electric utility, with about 780,000 customers across much of the state.

Duke maintains it relied on its outside contractors and engineers for expert guidance.

"With the benefit of hindsight, of course, different choices might have been made as the project unfolded, but that does not equal imprudence under the law," company attorney Kelley Karn told the IURC in her opening statement.

She added: "The company is not required to make perfect decisions or even optimal decisions. Rather, as long as the decision falls within the range of reasonable choices at the time it is made, it is a prudent decision."

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Information from: The Indianapolis Star, http://www.indystar.com

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