2011 General Assembly - Dead Bad Bills
Low carbon and non-carbon is code for nuclear power. This bill is designed to extend construction work in progress (CWIP) to nuclear reactors. Wall Street will not finance new reactors therefore utilities cannot build them without CWIP. Ratepayers should not be the involuntary, captive financiers of these unnecessary and prohibitively expensive power plants. To paraphrase Mark Cooper of the Consumer Federation of America, CWIP assumes that ratepayers have nothing better to do with their money than to give interest free loans to utility companies.
It also extends CWIP to any "qualified utility expense" which includes "siting, design, licensing, and permitting costs, regardless of whether the facility for which such costs are incurred is ultimately constructed or placed in service." The reason the utilities need this language is:
- The permitting and licensing process for new coal and particularly new nuclear reactors is prohibitively expensive;
- Many coal plants are being abandoned prior to construction beginning, so they want to make sure they can recover those losses from ratepayers; and
- Hundreds of reactors were abandoned in the 70s and 80s because they were financially unviable. The same is true now - this bill reinforces that reality.
The Congressional Budget Office is estimating a better than 50% default rate on new reactors today. So essentially, new reactors are so enormously risky and the utilities know this. They want to make sure they have absolutely no skin in the game, and that the public has to assume all of the risk and all of the cost in every phase of the project, including just thinking about building one.
Grant Smith, CAC's Executive Director, said that anyone that would vote to extend CWIP after the State’s first experiment with it - the fiasco known as Edwardsport - needs to have their head examined.
Projects connected to bill: Without question this is primarily I&M’s (AEP's) bill as they want to do a huge uprate at their DC Cook Nuclear Power Plant in Bridgman, MI. I’m sorry I meant the "Cook Clean Energy Station". However, IPL has told us they are not "very interested" in coal and Duke has publicly announced an interest in expanding nuclear generation, most recently in Piketon, OH. It is doubtful that any of that capacity would be used to serve their Indiana customers. There are also Sen. Boot’s public statements about wanting the State to explore a reactor at the Newport Weapons Depot outlet outside Terre Haute. And there is a lot of nuclear activity at the Crane Naval Warfare Center. Lastly, there is also Babcock & Wilcox (and the Governor’s) desire to sell their "mini" nuclear reactors throughout the State.
Give the Indiana Energy Association (IEA - the lobbying group for the Indiana investor owned utilities) some credit here. They were able to eliminate consumer protections, the requirement for monopoly utility companies to provide least cost service, and all but remove the requirement that monopoly utility companies actually submit an integrated resource plan in only 37 lines. Nice work Barnes & Thornburg and Baker & Daniels! They must not be billing by the hour anymore.
This bill will give the utilities a tracker for any costs associated with any mandates that are or with "reasonable certainty" will be "imposed" on a utility by the Feds. So essentially, even though a regulation may never be "imposed," as long as it is being discussed at some level, no matter how serious those discussions are, the utility will be able to track those costs. It also allows utilities to recover costs for Research & Development. Hmmm... Sounds familiar. Those regulations can be related to:
- Environmental laws, rules, regulations, or consent decrees, including clean air standards associated with (1) reducing or offsetting greenhouse gas emissions or (2) the purchase of emission allowances;
- Any Renewable Portfolio Standard or energy efficiency standard including retrofitting current generating facilities to fuel switch, including natural gas and substitute natural gas (which is to benefit the Leucadia, Indiana Gasification, LLC coal-to-gas plant scheme targeting Rockport, IN).
- Participation in a reliability organization or a Regional Transmission Organization (Midwest Independent System Operator (MISO) or Pennsylvania New Jersey Maryland Interconnection (PJM)), aka transmission and distribution systems, aka the cost of doing business.
- Transmission and distribution pipelines, aka CO2 pipelines.
The bill also severely limits the Commission’s authority to deny the tracker as the bill states the Commission SHALL approve the tracker if the proposed tracker "reasonably complies with this section." It is unclear what the utility is supposed to "reasonably" comply with.
Lastly, and perhaps the most egregious part of the legislation, is the last section. For all intents and purposes, this section removes the earnings test and states the Commission SHALL allow the utility to retain ALL revenues collected through this tracker. Even if rates imposed on consumers are determined to be unjust and unreasonable, under ANY circumstance (no exclusions are listed), the utility gets to keep the money.
For example, say that a certain utility is building a certain new coal plant and it is determined that the project was grossly mismanaged, evidence was concealed from the Commission, and fraud was committed in the process, that certain utility would get keep all of that money, no questions asked and no recourse for the public.
This bill is once again an attempt by the IEA to eliminate the necessity of rate cases and to ensure that providing "least cost" service is not discussed. The bill provides consumers no protection and does not require that utilities examine cost to ratepayers when complying with these mandates, even if those mandates are only imagined.
In addition, the bill is not needed. First of all, the Courts have ruled that the Indiana Utility Regulatory Commission (IURC) already has the ability to authorize trackers if they deem them appropriate and reasonable. Secondly, the utilities already have the authority to request any tracker they want through the Alternative Regulatory Statute (alt reg). The issue is that the IURC has denied recent requests through the alt reg statute because what the utilities were asking for would have resulted in rates that were not just or reasonable. Therefore, the utilities are asking the General Assembly (GA) for "certainty." This means the IURC would be mandated by the GA to approve these trackers, even if the trackers do not meet the test of least cost service and may lead to rates that are unjust and unreasonable.
Projects connected to bill: Obviously, with the inclusion of the substitute natural gas (SNG) language, it is a further attempt to mandate a marketplace for the Rockport plant, as if the contract with the Indiana Finance Authority (IFA) isn’t bad enough. Duke also has a filing to retrofit units at Gallagher to fuel switch to natural gas, and we know I&M is discussing doing the same with Tanners Creek. It will also force ratepayers to pay for the construction, operation and maintenance of CO2 pipelines, and allow utilities to track the costs of Research & Development associated with any of these, or future projects that could be entered into under the guise of compliance with "clean energy" mandates.
- 01-31-11: SB 72 passed the Senate Energy and Environmental Affairs Committee by a vote of 6-1.
- 02-08-11: SB 72 failed in the Senate by a vote of 21-28.
The intent of SB 72 is fairly obvious. It permits an entity engaged in the transportation of carbon dioxide by pipeline to acquire real property by eminent domain. That entity can be a person, a firm, a partnership, a limited liability company, or a corporation. The bill wrongly declares that "the transportation of carbon dioxide by pipeline in Indiana is declared to be a public use and service, in the public interest, and a benefit to the welfare of Indiana and the people of Indiana." This is one of several pieces of legislation that the industry needs to enable carbon capture and storage (CCS).
The notion of giving privately held corporations eminent domain is reason enough to oppose this bill. But we believe this bill has moved us past a discussion about coal and coal plants, and into a larger discussion about the role of government. What we have here is a multi-billion dollar corporation with unfettered access, unlimited cash, and massive influence using the legislative process to mandate their agenda because the free market simply will not support their business plan. Not only has legislation passed guaranteeing them a revenue stream in the form of the captive ratepayers of Indiana, legislation has been railroaded through guaranteeing a marketplace, which is now the State of Indiana, better known as taxpayers. Now, in addition to ratepayers and taxpayers being used as involuntary financiers for these speculative ventures, these private, unregulated corporations are now seeking the authority to take our property, no questions asked.
It is also worth noting that there are no carbon capture facilities in the State of Indiana, so this is essentially enabling a pipeline to nowhere.
Projects connected to bill: No big secret here: the Leucadia, Indiana Gasification, LLC coal-to-gas plant scheme targeting Rockport, IN. Senator Gard has publicly stated that this bill is solely about this facility slated to be built right next to the Ohio River. Leucadia stated last year they need to build an 8-9 mile pipeline for the Rockport plant. Why then, does this legislation open the entire State to construction of CO2 pipelines?
Leucadia can't secure funding for plant unless they sell their waste carbon dioxide and use the profit to offset the cost of the substitute natural gas (SNG) made by the plant. Leucadia wants to sell this CO2 to Denbury, a multi-billion dollar company whose primary business is enhanced oil recovery (EOR), or the use of CO2 to extract oil and gas from depleted reservoirs. Surely Denbury has the financial and legal resources to negotiate contracts for this pipeline with a few landowners?
Denbury has proposed to build a pipeline from Mississippi into Southwest Indiana to transport the CO2 from coal-fired power plants, most notably the proposed Leucadia project. CAC would suggest this bill is about far more than an 8-9 mile pipeline. Leucadia is now at the Illinois General Assembly working a similar scam there to build SNG plants, so this is clearly not only about the Rockport facility. It is about the Denbury and Leucadia business plan.
We’re still trying to analyze these bills and will provide a more detailed description as we complete our review. However, what we do know is these bills will be advertised as "utility rate stabilization" legislation. It should be understood that the only thing being stabilized by these bills are utility profits. The utilities have been criticized for not going in for rate cases often enough. For example, IPL has not been in for a rate case in over 20 years. The Indiana Utility Regulatory Commission (IURC) has been scrutinized for not making the utilities come in for rate cases. The IURC and the IEA, will attempt to sell this legislation as a rate case, yet nothing could be further from the truth.
First of all, these rate reviews limit the review to a utility's rate of return based on common equity. What that means is what gets "reviewed" is the operating revenue necessary to provide the utility their jurisdictional rate of return. It does not require the utilities to open ALL of their books as they would otherwise have to do in a rate case. It also allows the utility to decide which one of their currently approved trackers they want to include in this review, and which they do not.
Second, it requires the Commission to issue an order on these reviews within 120 days, or the utilities request is automatically approved. Both the recent NIPSCO and I&M rate cases took over two years to complete. The IURC also has an expedited rate case process in place which allows the utility to follow minimum filing guidelines and receive an order in about 10 months!
Third, while it does allow interested parties to intervene, it does not require the Commission to hold an evidentiary hearing. This means that if the IURC denies a hearing, intervening parties such as Citizens Action Coalition would not have the ability to cross examine utility witnesses in these cases.
Last but certainly not least, it allows the utility to withdraw the filing at any time prior to the IURC issuing an order or to rescind the order up to 90 days after the order is issued. Of course if the utility withdraws or rescinds, monies spent by the IURC, the Office of Utility Consumer Counselor (OUCC), or other intervening parties on these proceedings are not refunded, just wasted because monopoly utilities didn’t like the outcome.
Projects connected to bill: Protecting utility profits and excluding the public from the process.
While HB 1509 died, it's companion bill in the Senate (SB 66) is unfortunately alive and well. This bill amends the definition of "renewable energy resources" in utilities law to add low temperature, oxygen starved gasification of municipal solid waste. There are several issues with this. First, this bill is a violation of both the Precautionary Principle and the golden rule of conservation before consumption. We should be enacting policies and practices that eliminate waste, not putting a price on it. Once you put a price on a waste stream, you make that waste stream a valuable commodity, thereby incentivizing the waste and ultimately encouraging it.
Secondly, we do not need to burn trash! Enormous untapped potential still exists in conservation, energy efficiency, and truly renewable sources of energy. We should exhaust the potential of both energy efficiency and renewables before entertaining anything else. This will be yet another diversion of funding and Research & Development away from truly sustainable resources.
Lastly, this technology is unproven; in fact, this would be a pilot project. We should not be putting experimental technology into statute. By putting this into the statutory definition of renewables, it will make it eligible for federal grants, again diverting this very limited funding away from truly sustainable resources. It will also more than likely allow the energy generated from these facilities to qualify as renewable energy credits (RECs) on the market. It should be incumbent on those who stand to gain to prove the viability and sustainability of their technology before we codify it as though it is tried and tested.
Projects connected to the bill: This bill was introduced by Richmond Power & Light.