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Indiana’s “NowGen” 630 MW IGCC Plant On-line the Summer 2012 Chairman David Lott Hardy.

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Presentation on theme: "Indiana’s “NowGen” 630 MW IGCC Plant On-line the Summer 2012 Chairman David Lott Hardy."— Presentation transcript:

1 Indiana’s “NowGen” 630 MW IGCC Plant On-line the Summer 2012 Chairman David Lott Hardy

2 Indiana Perspective  A traditionally regulated electric franchise state  A state with significant coal reserves and infrastructure  Indiana’s average retail electric rates were 12 th lowest in the country for 2008

3 IURC Perspective  The Commission’s mission is to assure that utilities and others use adequate planning and resources for the provision of safe and reliable utility services at a reasonable cost.  In fulfilling this aim we attempt to provide the necessary investment security to foster deployment of the long term infrastructure needed to cost effectively provide utility service for our citizenry.

4 Indiana statutes support the continued use of coal for electric generation  CPCN Law (IN Code 8-1-8.5 ) Showing of Need Reasonable Solution  Clean Coal Technology Certificate Law (IN Code 8-1-8.7) CWIP treatment  Generation and CCT Incentives Statute (IN Code 8-1-8.8) Suite of incentives available to encourage qualifying projects 4

5 IGCC Plant Approval, Docket # 43114 General Landscape 5  Indiana’s regulated coal baseload fleet 69% of Indiana’s regulated fleet is Coal Nearly 4,000 MW, more than 23%, of that fleet is over 40 yrs old Nearly 10,000 MW, about 60%, is over 30 yrs old  Plant replaces an existing 1940’s vintage coal fired plant Brownfield site Broad local support  Plant provides the potential to further home grown energy efforts  $450 million in Federal, State & Local tax incentives  Duke Indiana has a strong balance sheet  Duke Indiana has solid technical experience Includes Wabash River Station Gasification experience

6 Ultimate Findings (Order page 42-43)  Edwardsport IGCC is Clean Coal Technology Relative environmental benefits compared to conventional PC  90% Hg capture  30% less water use  50% less solid waste  Superior thermal efficiency  Initial step toward future carbon control requirements  Substantial federal, state and local tax benefits  Local economic benefits  Need for baseload capacity to meet customer needs Adequate consideration of alternatives Consistent with integrated resource plan Consistent with State’s generation expansion plan 6

7 Ratemaking and Incentives (Order pages 57-60) 7  CWIP Tracker provides for timely recovery of costs Financing costs, O&M, depreciation, property taxes, payroll costs, property insurance costs Tax credits amortized over plant life Tracker filed every 6 months  Denied incentive ROE request  Creative Deferred Income Tax (DIT) Treatment Indiana normally includes DIT in regulatory capital structure Allowed exclusion of non-IGCC DIT in determining return revenue requirement Treatment increases rate of return early in the life of the project  In contrast to the denied incentive ROE which increases rate of return over the life of the project  Targeted credit supportive treatment

8 Additional Order Terms 8  Carbon Capture and Sequestration study proposals required (Order page 47) Capture study underway Disposal study proposal before Commission  Ground work for oversight structure (Order page 36) Commission selected Black and Veatch to work with a newly created internal Project Oversight Team  Team attends on-site construction meetings  B&V effectively embedded with construction team

9 Would the decision be different today? (2 yrs later)  Initial cost approved estimate of $1.985 Billion has since been revised and approved to $2.35 Billion DIT treatment incentive not authorized for increment  Economic downturn  Wabash River Station NSR Outcome 265 MW of low cost generation closed  Gallagher Station NSR outcome pending 9


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