Talking The Talk But Not Walking The Walk: How Traditional Utility Strategies At The New Duke Are Undermining Economic Development And Environmental Quality

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The New Duke Energy (parent company to PSI Energy), formerly Cinergy to Indiana ratepayers, touts its interest in addressing global warming and supporting alternative energy resources. Although alternatives exist that are far superior in terms of job creation and environmental quality improvements, indications are that Duke has no interest in fundamentally changing its traditional approach to providing power: coal, nuclear and natural gas plants. This strategy boosts company revenues and retains ironclad utility control over how electric power is generated and delivered but represents a significant financial burden and public health threat to ratepayers.

Talking The Talk But Not Walking The Walk: How Traditional Utility Strategies At The New Duke Are Undermining Economic Development And Environmental Quality

Submitted by the Citizens Action Coalition of Indiana
June 2, 2006

Introduction
CAC is very concerned with Duke/Cinergy’s conduct and business plans with respect to:

  1. The impacts on affordability for ratepayers;
  2. Quality of life for our citizens; and,
  3. The international problem of global warming.

From a policy perspective, CAC does not see how we can continue to rely so heavily on coal and central-station power plants to the point of ignoring investments that pose much less risk to the ratepayer that also enhance grid reliability, are cleaner, and can be cheaper or comparably priced. Our current approach can only undermine our economic stability and further erode our quality of life.

A gross misperception is that coal is cheap. The pervasive and extensive impact coal-fired power has on public health and the environment is only partially included in the price of generating electricity. Moreover, new coal gasification plants will be extremely expensive to build and maintain. Sequestration technology will add to the cost and significantly reduce plant efficiency.

However, there are other ways to meet energy demand that can control costs for ratepayers as well as boost investment and job opportunities. At the same time, these other options can significantly contribute to reductions in carbon dioxide emissions.

CAC respectfully submits to the Utility Regulatory Commission that a coal gasification plant without sequestration is obsolete on the drawing board. We also respectfully submit to the Commission that a coal gasification plant designed to generate electricity with sequestration is inefficient to the point of not justifying the costs. Moreover, ratepayers, one way or the other, are saddled with the financial risk of these plants. Ratepayers cannot afford the status quo with respect to energy policy or with respect to Duke/Cinergy’s proposal for a $15 million, ratepayer-funded engineering study to ascertain the possibility of repowering the company’s Edwardsport generating station in Knox County with coal gasification technology that will most assuredly culminate in a certificate of need filing (proof the plant is needed) with the Commission.

Senator Richard Lugar explained in a recent speech, “Our long-term security and prosperity require sufficient, affordable, reliable and sustainable energy.” 1 We urge the Commission to begin the process of moving Indiana down that path. We applaud the Commission’s and OUCC’s initiative in scheduling a meeting to discuss energy efficiency and rate design in April. We applaud the Governor for his interest in renewable energy. We fear, however, that a piecemeal approach to discussing policy and rates, which is the case with Cinergy, will undermine the overall effort to create a balanced approach to meeting electric energy demand that is fair and just to everyone involved.

CAC urges the Commission to reject the settlement before it in the engineering study proceeding and to order a series of discussions with Cinergy that address the following issues in a holistic manner:

  1. Least cost planning;
  2. Planning for environmental compliance, including carbon regulations;
  3. Diversification of the energy mix:
    • Planning for energy efficiency;
    • Planning for renewable energy;
    • Planning for distributed power;
    • Net metering and interconnection.

Establishing a Social, Economic and Environmental Context for Duke/Cinergy’s Engineering Study Request

Affordability
There is no question that emissions from coal gasification technology, to the extent that it operates as purported by proponents (the technology has yet to be commercially proven2), can be more readily controlled than with conventional coal plans. However, cost is just as important a consideration. In this light, there is a much broader social context that we urge the Commission take note of in addressing the myriad requests from Duke/Cinergy that have a direct impact on rates and a ratepayer’s ability to pay their utility bill.

Specifically, there is a national trend, very prevalent in Indiana as well, towards the erosion of the financial status of the middleclass: Wages are dropping; the number of people who cannot get access to health insurance continues is increasing; the winter heating crisis is encroaching on the budgets of middleclass households3; and the negative savings rate among taxpayers in the United States is growing worse. The specific trends for Indiana tend to be worse than the rest of the country. Indiana has among the highest bankruptcy and foreclosure rates in the country.4 Moreover, Indiana appears to be adding to the ranks of the poverty-stricken at much higher rates than the rest of the country.5 Median income for Hoosiers is also falling6 while the number of Hoosiers without health insurance is rising.7 The lack of an expansive mass transit system throughout the country also means that high gasoline prices will have a disproportionate impact on consumer wallets than would otherwise be the case.

Simply put, people are finding it increasingly difficult to afford the basics and to make ends meet. And a utility plan based primarily on enhancing revenue rather than providing least cost service, which appears to be the case with Duke/Cinergy, is not good for ratepayers or the economy.

Quality of Life
Diminished standard of living has an impact on quality of life in terms of diet, access to health care, housing, the ability to stay warm in the winter, self-esteem, etc. However, Indiana’s excessive reliance on coal-fired power represents an on-going and severe external cost inflicted on the American population that is not reflected in the cost of coal. Analysts estimate that hundreds of people die prematurely in Indiana due to lung disease caused by particulate emissions from coal-fired power plants.8 Nationally, the figure extends into the tens of thousands.9 In Indiana alone, these plants are associated with thousands of asthma attacks annually.10 Nationally, the health-related costs of these emissions are estimated to be nearly $170 billion per year.11 Arguably, we have a lung disease epidemic in the nation caused, in large part, by coal-fired power plants.

If “Life, Liberty, and the Pursuit of Happiness” is a core principle on which we have based our society, coal-based power generation certainly should not be as prevalent as it is, particularly since cleaner, less expensive, more cost-effective alternatives that carry less financial risk are available to us. The pertinent ethical issue before us is whether we allow the fossil fuel and utility industries to drive our energy policy; or, in the alternative, we seek options that improve the economic standing and quality of life for the vast majority of our citizens - i.e. in the context of IURC responsibilities: commercial, residential and industrial customers – while providing for financially healthy utilities (not utility holding companies).

Quality of life is both an ethical and economic issue. Coal-fired power and our treatment of it are shifting billions of dollars of costs onto PSI Energy customers (a subsidiary of Duke/Cinergy) and onto humanity globally. If alternative technologies exist that vastly mitigate these impacts at a reasonable price and contribute to meeting electric energy demand, which certainly appears to be the case, we should be employing them to our economic and environmental benefit.

Global Warming
Global warming is a proven scientific fact.12 The rate of warming is occurring at a much quicker pace than previously thought. Moreover, human activity, in the form of massive carbon dioxide emissions, is contributing substantially to the warming trend on the planet. Global warming is associated with increased rates of disease, crop damage, dropping lake levels, more severe weather, altered precipitation patterns and rates13, acidification of the oceans, etc.14 Duke/Cinergy is the number one emitter of carbon dioxide in the country and recognizes global warming as a reality.15

Duke/Cinergy’s solution is to talk a good line to Wall Street and to investors but to do next to nothing to address the issue in a reasonable manner.16 In the current context with respect to the science of global warming, a base load coal plant without sequestration is an obsolete proposition.17 A base load coal plant with sequestration, with greatly diminished efficiency and much higher cost that will end up in the rate base18, is a highly costly proposition for ratepayers, particularly in light of the billions of dollars in other investments the company has successfully incorporated or is planning to incorporate into the PSI rate base.19 It can readily be argued that a narrow coal-based solution to global warming will make the payment of electric bills untenable for many ratepayers, including business ratepayers.20

Duke/Cinergy’s Apparent Business Plan: Costly, Polluting, Unviable
Duke/Cinergy is not conducting itself in a manner befitting a good corporate citizen. In its position and with its resources, the company has a great responsibility to its PSI customers as a state-franchised monopoly. The reality of global warming and Duke/Cinergy’s contribution to it extends the sphere of responsibility to the international arena. However, Duke/Cinergy’s main interest does not appear to be providing service in a least cost manner to its captive customers; rather, Duke/Cinergy appears, institutionally, to be locked into current investment patterns that lend the impression that the company has embraced a revenue-enhancement strategy at any cost to ratepayers and, with respect to PSI, at any cost to the Indiana economy.

The company’s strategy is steeped in coal-based technology. The strategy appears to be to keep antiquated, uneconomic power plants running while adding new base load coal, incorporating all other alternatives in its briefs and rationale as mere peripheral considerations. As actions speak louder than words, Duke/Cinergy’s recent filings ignore critical issues that would tend to argue against what essentially amounts to a one-dimensional, coal-based business plan.

In its requests to the Commission, Duke/Cinergy has consistently ignored:

  1. The looming economic crisis facing many of its customers;
  2. Its impact on global warming;
  3. Its own public statements relative to global warming and meeting electric demand;
  4. The IURC in terms of diversification of its energy mix;
  5. The toll on public health its coal-based energy delivery system is exacting on the Hoosier and national population;
  6. Least cost planning; and,
  7. Assessing the market potential for energy efficiency and renewables.

The Cinergy Perspective and Dabbling At the Edges of Change
Diversification of the energy is essential to Indiana’s economic and environmental survival. Report after report suggests that energy efficiency can meet a substantial portion of Indiana’s electric energy demand at low cost. In addition, the state is blessed with significant wind and bioenergy resources. However, Duke/Cinergy has not taken advantage of any of these resources in any serious way. Moreover, Duke/Cinergy is not acting on nor, apparently, planning to address the issue of carbon dioxide emissions in a way that is economical to PSI ratepayers.

Perhaps Duke/Cinergy’s perspective on “diversity”, “sustainability”, “coal”, “renewable power”, and “energy efficiency” present institutional and behavioral barriers to any significant change in company investment patterns when it comes to acquiring and maintaining energy resources.

The Three-Headed Duke/Cinergy Monster : Company Perspective of “Energy Diversity”, “Sustainability”, and “Coal”
Calls for diversifying the energy mix usually include expansion of energy efficiency and renewable investments, distributed power, and similar approaches that reduce reliance on conventional sources of power such as coal-fired, natural gas-fired and nuclear generation. Duke/Cinergy, on the other hand, considers its new energy mix as a result of the merger between Duke and Cinergy a “diversified energy production portfolio” that consists of “coal, natural gas and nuclear.”21

For Jim Rogers, CEO of Duke/Cinergy, the “essence of sustainability” was characterized by PSI turning around its “financial problems” and restoring “the company’s good name.”22 In other words, the fundamental focus of the concept of sustainability for Duke/Cinergy is the company’s financial well-being and public relations; it is not, although discussed, an approach to energy resources that is least cost, clean, affordable, or renewable.

Similarly, the support of coal-based power is unswerving23 at Duke/Cinergy despite global warming and the enormous costs of environmental compliance and new construction. The company considers “coal… the most abundant and affordable energy fuel in North America.”24 The company also contends that its “continued use of coal means we can deliver affordable energy to our customers…”25 Arguably (see below), wind power is the most abundant and affordable energy fuel in North America. Secondly, while the fuel may be inexpensive, coal costs are rising and the means to convert the fuel to electric energy, as previously discussed, is very expensive and the most recent generation of technology commercially unproven.

In terms of renewable energy, the company still maintains an outmoded perspective, asserting that “[r]enewable energy, while promising, can only serve a small portion of our nation’s increasing demand for energy with currently available technology.” This statement ignores on-going technological advances in renewable technology (something the company appears to assume with respect to sequestration of carbon and the viability of coal gasification technology) and current technology that is commercially proven and competitive with new coal plants. (See discussion of wind power below)

Duke/Cinergy does not spend much time with energy efficiency (the least expensive energy resource) in either its Sustainability Report or Annual Report. The company’s history with energy efficiency suggests that it has little to no interest in capturing the cost-effective energy efficiency potential in PSI territory. (See below)

The fundamental question is how can a company whose perspective is so averse to changing its portfolio mix and investment patterns be expected to address the social and economic issues of affordability, quality of life, and global warming in a systematic, rational and timely manner. CAC contends that it cannot. Indeed, recent filings made by the company before the IURC and its approach to addressing these issues with stakeholders reinforce CAC’s contention.

Recent IURC Proceedings Illustrate Duke/Cinergy’s Institutional Bias Toward Coal In its order in the Cinergy rate case of 2004, the Commission stated: “We agree with the CAC that it is prudent for PSI to begin evaluating options and planning to address environmental compliance issues well before the specific requirements are known with absolute certainty. Due to PSI’s reliance on coal, the development of an improved resource mix, including the implementation of cleaner generating resources in conjunction with the utilization of energy efficiency programs, must be undertaken by PSI in order to ensure long term benefits to customers.”26

Recent filings with the Commission, however, demonstrate that Duke/Cinergy has not adequately addressed the IURC findings.

ENVIRONMENTAL COMPLIANCE PROCEEDING
Although the Commission is still reviewing the evidence, Duke/Cinergy’s environmental compliance plan is illustrative of the company’s institutional bias toward the status quo. Duke/Cinergy is asking for $1.4 billion in bolt-on pollution control investments on practically its entire Indiana fleet. Duke/Cinergy did not include energy efficiency or renewable sources of power as an input in its modeling. Indeed, its model is incapable of this function.27 Similarly, the company ignored one of its own consultants when the consultant raised issues with respect to the inadequacy of the company’s modeling and cost of pollution control equipment.28 Moreover, the company did not model carbon dioxide costs properly, thereby reinforcing its contention that “[c]arbon regulation does not change the attractiveness of investing in large base load coal power plants.”29 Finally, the company cites Senate Bill 29 as the defining factor for the state’s on-going interest in coal. However, SB 29 provides the same incentives for renewable energy, including wind power(30) and Duke/Cinergy made no mention of it.

DSM PROCEEDING
Duke/Cinergy’s DSM proposal was rejected by both the OUCC and the Commission. CAC’s expert witness found that Cinergy’s energy efficiency programs are woefully underfunded.(31) More disturbing is that the programs appeared to be designed to enhance revenue, not provide customer benefits.32

In addition to these observations, recent studies conducted with respect to cost-effective energy efficiency potential discredit Duke/Cinergy’s claims as to the robustness of their DSM programs.33

Duke/Cinergy’s Piecemeal Approach of Addressing Issues
Duke/Cinergy tends to compartmentalize issues. It has essentially separated discussions on energy efficiency and renewables from other issues, such as major rate cases and environmental filings. It has not engaged in any serious discussion with respect to carbon policy. Currently, an engineering study for a base load power plant is being proposed without discussion of carbon policy or eventual plant cost or resource allocation issues. In order to rationally proceed with respect to resource acquisition, dealing with affordability of utility bills, and carbon policy, discussion of these issues should be merged into a general discussion on resource planning, the ultimate goal of which should be to incorporate these issues meaningfully into the Integrated Resource Planning process required by all regulated utilities that is based on least cost planning principles.

The current negotiation approach creates piecemeal policy making which, can be argued, is resulting in less than optimum capture of energy efficiency and renewable potential, skewing the compliance options and costs for environmental compliance and, arguably, leading to excessive high rates for customers.

The New Paradigm: Utility Responsibility and Diversification of the Energy Mix
Richard Lugar recently stated, “…[B]y the time a sustained energy crisis fully motivates the market, we are likely to be well past the point where we can save ourselves. Our motivation will come too late, and the resulting investment will come too slowly to prevent the severe economic and security consequences of our oil dependence. This is the very essence of a problem requiring government action.”

CAC believes that this also holds true for monopoly utility companies. We cannot wait for utilities to move, by themselves, in a way that will adequately address affordability issues for ratepayers, diversifying the energy mix, and addressing global warming. In particular, Duke/Cinergy is neither institutionally equipped nor financially motivated to move with decisive action to address these issues.

However, others are moving in this direction, and planning is the critical concept with respect to carbon policy. In a recent article by utility company representatives and NRDC, the authors stated:

“…[U]tilities believe (apparently other than Duke/Cinergy) that incorporating carbon dioxide into planning and procurement demonstrates foresight and prudence due to the long lead-times to acquire certain resources, and the long depreciated lives of those resources once they are developed. By comparison, utilities that do not build carbon risk into their long-term planning will be left with few avenues to reduce costs in complying with regulations, due to sunk costs and more limited and costly options to reduce emissions from existing resources.

“The financial risk associated with likely future regulation of carbon dioxide emissions is becoming a focus of utilities’ and regulators’ risk management efforts, as they recognize the imprudence of assuming that carbon dioxide emissions will not cost anything over the thirty-year or longer lifetime of new investments.”34

But carbon should not be the only motivating factor in terms of influencing the resource mix of Cinergy. The state has significant renewable and energy efficiency at its disposal, and energy efficiency and wind (where wind capacity is significant) are cheaper than coal gasification.35

Moreover, the way to address carbon, affordability and energy mix issues is through renewables and energy efficiency36, although CAC supports distributed, combined-heat-and power projects as well.

WIND CAPACITY IN INDIANA
The National Renewable Energy Lab recently estimated that Indiana possess 40,000 MW of wind capacity.37 The site of current interest is in Benton County, Indiana where developers want to develop 700 MW of wind power. 700 MW could represent as much as $280 million of investment and create 120 construction jobs per 100 MW.38 Although Duke/Cinergy has purchased the rights to develop a wind project in Benton County, the company’s investment in wind, in CAC’s estimation, will ultimately be inadequate, similar to the company’s energy efficiency investment history in Indiana.

In addition, wind installations can be constructed much more quickly than an IGCC plant, approximately 18 months for one 100 MW wind farm.

ENERGY EFFICIENCY POTENTIAL IN INDIANA
In terms of the research conducted, it can readily be argued that energy efficiency represents a powerful economic development tool and that Indiana has vast energy efficiency potential. Another study that deserves mentioning was conducted recently by the American Council for an Energy Efficient Economy (ACEEE). ACEEE assessed the impact of energy efficiency on both the gas and electric side on the commodity cost of natural gas. Whether the full potential for energy efficiency is captured in Indiana alone or on a regional basis Hoosiers make out economically and with respect to savings on electric and gas bills. Hoosiers could realize hundreds of millions of dollars in savings per year, with attendant job creation, if energy efficiency were aggressively pursued as described in the ACEEE report.39

In light of the overwhelming evidence that renewables and energy efficiency address the key issues for ratepayers of affordability, meeting electric demand, and mitigating carbon and other risks borne by ratepayers, the Duke/Cinergy proposal to conduct an engineering study for a technology that is not commercially proven, highly expensive, and inefficient is ill-timed and counterproductive.

It should be noted, however, that Duke/Cinergy recently agreed to a market potential study for energy efficiency in its PSI territory in Indiana. However, the devil is in the details, and a full-blown program that significantly reduces electric demand, which threatens the need for a base load coal plant the company’s plans to build, is unlikely.

Analysis of the Duke/Cinergy Approach
Reiterating an important concept made by utility representatives and the NRDC in the article cited above: “…[U]tilities that do not build carbon risk into their long-term planning will be left with few avenues to reduce costs in complying with regulations, due to sunk costs and more limited and costly options to reduce emissions from existing resources.”

The fundamental question is whether Duke/Cinergy’s aggressive position with respect to its IRP and environmental compliance modeling, its recent DSM proposal, and the current proposed study is the result of institutional bias per se or a deliberate attempt to lock scarce ratepayer capital into a coal-based approach that limits our options in the future with respect to meeting energy demand and addressing carbon regulation.

As to the latter contention, although Duke/Cinergy acknowledges the reality of global warming, the company is doing next to nothing about it and the approach with respect to the $10 million the company earmarked in 2005 to reduce carbon emissions was to expend most of the dollars to improve the efficiency of coal plants.40 The mechanism for utility recovery of capital costs for environmental investments is construction work in progress (CWIP) (which means ratepayers, not the company) bear the largest financial risk for those projects. Senate Bill 29 (passed a few years ago by the Indiana General Assembly) allows for CWIP for the construction of coal gasification plants, which, if approved by the Commission, shifts the financial risk significantly to ratepayers and away from the company. Duke/Cinergy also proposed mandating ratepayers to pay 100% of the costs of its engineering study for the proposed gasification plant. (This will occur if the project is ultimately approved by the Commission and the company will receive half, if not.)

At the same time, Duke/Cinergy opposes a public benefits charge to support a Third Party Administrator for delivering energy efficiency and renewable programs. (An entity (i.e. university) that is independent of utility companies.) Moreover, the evidence clearly shows that Duke/Cinergy’s energy efficiency programs are pitiful in comparison to robust programs in other parts of the country.

Duke/Cinergy also opposes a Renewable Energy Standard for Indiana (which is supported by Senator Richard Lugar and Congressman Pete Visclosky41, preferring, instead, a tax credit that allows the company to take advantage of it when it’s ready to invest in wind or other resources.

Finally, the company does not include energy efficiency or renewables, as an input, in any of its modeling for planning purposes.

As to the former contention, Duke/Cinergy believes that coal, natural gas, and nuclear represents a diverse portfolio and that coal-based generation technology is inexpensive, which is obviously no longer the case. Duke/Cinergy’s rates may be lower relative to other parts of the country, particularly those states that implemented retail deregulation where rates inevitably increased, but lower relative cost does not mean least cost service.

Either way, it is time for the Commission to take action.(see below) Neither ratepayers nor the Indiana economy can afford the Duke/Cinergy business plan.

Objections to the Proposed Engineering Study
In launching the effort to maneuver for approval of a 600 MW power plant at the Edwardsport power station, Duke/Cinergy is putting the cart before the horse. CAC urges the IURC to:

  1. Reject the study;
  2. Order Cinergy to engage in a negotiation process with the OUCC and other interested parties to:
    • Integrate energy efficiency and renewables into the company’s IRP;
    • Integrate carbon pricing into the company’s IRP;
    • Conduct an energy efficiency market potential study;
    • Conduct a renewable energy market potential study;
    • Make cost-effective investments in energy efficiency and renewables;
    • Determine the energy demand of the company with the appropriate resource mix factoring in efficiency, renewables, and carbon pricing for a 10 year period based on least cost principles.
    • Report back to the Commission on a six-month basis the progress of the negotiations.

1Speech by Senator Richard Lugar. The Brookings Institution 90th Leadership Forum Series: Energy Security: Cause for Cooperation or Competition? Monday, March, 13, 2006.

2Standard and Poor’s: “Prospects Improve for IGCC Technology in U.S., but Challenges Remain,” August 25, 2005. Specifically,

“Despite such broad commercial acceptance of gasification (used in developing chemicals, fuels, and other byproducts) and combined cycle power systems, the integration of coal gasification with combined cycle power generation to produce electricity as a primary output is relatively new and has been demonstrated at only a handful of facilities around the world. Various technical and operational impediments have been experienced that affect the reliability of operations, key among which is syngas clean up.

“Air separation unit (ASU) integration is also an important reliability issue. The compression of oxygen for oxygen-blown gasifiers requires costly compressors, utilizes substantial power and represents the largest parasitic load on an IGCC facility.” (pg. 5)

3“The Home Heating Crisis in Indiana: On the Brink of Heat or Eat,” Citizens Action Coalition, October 25, 2005.

4“Bankruptcy’s Next Chapter,” Indianapolis Star, Sunday, September 25, 2005. The Star reported that Indiana, at the time, had “the fifth-highest rate of bankruptcy in the country and “second-highest foreclosure rate.”

5Tim Evans & Jason Thomas, “1 in 10 Hoosiers lives in poverty : Rate of increase from 2003 to 2004 was 3rd-highest in the U.S.,” Indianapolis Star, Wednesday, August 31, 2005.

6John Ketzenberger, “Falling pay in state lost on Treasury secretary,” Indianapolis Star, Sunday, March 26, 2006. Specifically,

“The median income for a Hoosier household fell 5.5% from 2000 to 2004, according to Jerry Conover, director of the Indiana Business Research Center at Indiana University.”

7Evans and Thomas, August 31, 2005. Specifically, the article reported that in 2003 850,000 Hoosiers were uninsured, an increase of 31,000 in one year.

8Conrad Schneider, “Dirty Air, Dirty Power: Mortality and Health Damage Due to Air Pollution from Power Plants.” Clear the Air, June 2004. Specifically, 887.

9Ibid. Specifically, 24,000.

10Ibid., 21,532

11Ibid, pg. 14.

12The Intergovernmental Panel on Climate Change as referred to in Testimony of Bruce E. Biewald prepared on behalf of Citizens Action Coalition and Hoosier Environmental Council in Cause NO. 42622, March 17, 2005. Specifically,

“International scientific consensus, expressed in the Third Assessment Report of the Intergovernmental Panel on Climate Change, is that climate will change due to anthropogenic emissions of greenhouse gases. Scientists expect increasing atmospheric concentrations of greenhouse gases to cause temperature increases of 1.4 – 5.8 degrees C by 2100 (the fastest rate of change since the end of the last ice age.)

13“Confronting Climate Change in the Great Lakes Region.” A report of the Union of Concerned Scientists and the Ecological Society of America, 2005.

14Scott C. Doney, “The Dangers of Ocean Acidification,” Scientific American, Volume 294, Number 3, March 2006. Specifically,

“The“The ocean has absorbed fully half of all the fossil carbon released to the atmosphere since the beginning of the Industrial Revolution.” (pg. 60)

“The shift toward acidity, and the changes in ocean chemistry that ensure, makes it more difficult for marine creatures to build hard parts out of calcium carbonate. The decline in pH thus threatens a variety of organisms, including corals, which provide one of the richest habitats on earth.” (pg. 60)

15Cinergy 2005 Sustainability Report: Improvement for Today, Growth for Tomorrow. Jim Rogers, CEO of Cinergy said in the report,

“Climate change is the greatest environmental challenge we’ve ever faced. The science increasingly points to the build up of carbon dioxide in our atmosphere caused by the burning of fossil fuels as the reason behind rising global temperatures. As the leader of one of the largest coal-burning utilities in the U.S., I believe we need to develop a plan for bringing emissions down….”

16For instance, Cinergy announced spending $21 million on a problem as daunting as global warming over a two year period but $15 million on an engineering study to prove the viability of one inefficient and costly 600 MW coal gasification plant.

17Karl Bokenkamp (Idaho Power Company), Hal LaFlash (Pacific Gas and Electric Company), Virinder Singh (Pacificorp), Devra Bachrach Wang, (Natural Resources Defense Council), “Hedging Carbon Risk: Protecting Customers and Shareholders form the Financial Risk Associated with Carbon Dioxide Emissions.” May 31, 2005. Specifically,

“Integrated gasification combined cycle (IGCC) coal-fired power plants emit nearly 800 metric tons of carbon dioxide per GWh, 20% less than a conventional coal plant but still double a combined cycle gas plant…” (pg. 5)

18Depending on the study the numbers vary; however, at a presentation before the Indiana Utility Regulatory Commission in 2004, William Rosenberg from the Center for Business and Government, John F. Kennedy School of Government located at Harvard University, remarked that sequestration could increase the capital costs of an IGCC plant by as much as 50% and reduce its efficiency by as much as 30%.

19Cinergy received an additional $1.3 billion in its 2004 rate case, is requesting $1.4 billion more in its pending environmental compliance request, $15 million for an engineering study, and may ask for at least another $1 billion to construct a 600 MW coal gasification plant. (The billion dollars excludes maintenance, labor, depreciation, tax and fuel costs.)

20There are a number of analyses that attempt to assess carbon price. In Karl Bokenkamp (Idaho Power Company), Hal LaFlash (Pacific Gas and Electric Company), Virinder Singh (Pacificorp), Devra Bachrach Wang, (Natural Resources Defense Council), “Hedging Carbon Risk: Protecting Customers and Shareholders form the Financial Risk Associated with Carbon Dioxide Emissions.” May 31, 2005, the authors review a number of scenarios. Here are examples of what they found: The price of emission allowances in the European Union’s Emissions Trading Scheme has ranged from $9 to $22 per metric ton. The Energy Information Administration modeled costs for the McCain-Lieberman Climate Stewardship Act, which past the U.S. Senate. They found that prices ranged from “$15 to $34 per metric ton, over the period 2010-2020 (in 2001 dollars).”

21Cinergy 2005 Sustainability Report, Jim Rogers. Specifically,

“Our diversified energy production portfolio – coal, natural gas and nuclear – will give us more fuel flexibility….”

22Ibid. Specifically,

“Working side-by-side with the people of PSI, we fixed our financial problems and restored the company’s good name… This is the essence of sustainability.”

23In testimony provided to Commission in 2005 with respect to environmental compliance the company’s witness stated, “Carbon dioxide regulation does not change the attractiveness of investing in large base load coal power plants.”

24Cinergy 2004 Annual Report, pg. 7

25Cinergy Sustainability Report.

26IURC Cause No. 42359, pg. 142

27Biewald testimony.

28Ibid

29Cinergy testimony.

30IC 8-1-8.8-1 et. seq. Specifically: The “Legislative Findings” (8-1-8.8-1) section states:

“The development of a robust and diverse portfolio of energy generating capacity including the use of renewable energy resources, is needed if Indiana is to continue to be successful in attracting new businesses and jobs.”

In addition, “Clean coal and energy projects” (8-1-8.8-2) includes “Projects to develop alternative energy sources, including renewable energy projects.”

The definition of “renewable energy resources” (8-1-8.8-10) includes “energy from wind”, “solar energy”, “dedicated crops grown for energy production”, etc.

31Testimony of William Steinhurst, Senior Consultant Synapse Energy Economics, Inc., on behalf of Citizens Action Coalition, Inc. before the Indiana Utility Regulatory Commission. Cause NO. 42612, September 3, 2004. Specifically:

“PSI’s proposed level of program spending is only .57% of its expected 2005 revenues. As indicated in Attachment 2, the top utilities in the country spend 1-3% of revenues.” (pg. 21)

In addition: “A good set of DSM programs will generate energy savings each year of up to .8% to 1% o f the utility’s annual electricity demand. For the years in PSI’s proposal, 2005 to 2009, that fraction is .25 to .29% of projected sales.” (pg. 22)

32Ibid. Specifically:

“Under PSI’s current proposal, in 2005 (the first year of the proposal) PSI will recover an amount of lost revenues equal to $2.2 million (23% of the DSM program costs), by 2009 PSI proposes to recover lost revenues in the amount of $12.2 million (113% of the DSM program costs).” (pg. 25)

“Together, lost revenue and shared savings would total $4.6 million (49%) of the DSM programs costs) in 2005 rising to $15.6 million (144% of the DSM program costs) in 2009.” (pg. 26)

33Five Labs Study…. “found that nationwide energy demand reductions of 12.1% by 2010 and 24% by 2020 as a result energy efficiency were possible.” (Scenarios for a Clean Energy Future, Interlaboratory Group on Energy-Efficient and Clean-Energy Technologies, November 2000, pg 8)

Repowering the Midwest… “found that energy efficiency can cost-effectively reduce electricity demand in Indiana 17% by 2010 and 29% by 2020.” (Repowering the Midwest: The Clean Energy Development Plan for the Heartland. Prepared for the Environmental Law & Policy Center and a number of public interest groups by Synapse Energy Economics, Brower and Company, the Renewable Energy Project, and the Tellus Institute, 2001. pg. 7)

34Karl Bokenkamp (Idaho Power Company), Hal LaFlash (Pacific Gas and Electric Company), Virinder Singh (Pacificorp), Devra Bachrach Wang, (Natural Resources Defense Council), “Hedging Carbon Risk: Protecting Customers and Shareholders form the Financial Risk Associated with Carbon Dioxide Emissions.” May 31, 2005.

35Managing Environmental Risks. Synapse Energy Economics. The Synapse study looked at Cinergy’s environmental compliance plan and found that using EIA data and after all costs were included that energy efficiency costs $23 to $44/MWh; class five wind costs $44/MWh; IGCC costs $58.4/MWh; PC costs $65.5/MWh; and, combined cycle natural gas costs $62.5/MWh.

36Eleanor Stein, “Global Warming: Public Nuisance or Political Question? A Case Study: Connecticut v. American Electric Power,” Albany, New York, March 2006. Specifically:

“In February 2006, NASA Goddard Institute for Space Studies climate scientist James Hansen assessed: ‘How long have we got? We have to stabilize emissions of carbon dioxide within a decade, or temperatures will warm by more than one degree. That will be warmer than it has been for half a million years, and many things could become unstoppable. If we are to stop that, we cannot wait for new technologies like capturing emissions from burning coal. We have to act with what we have. This decade, that means focusing on energy efficiency and renewable sources of energy that do not burn carbon. We don't have much time left’”.

Amory Lovins, “More Profit With Less Carbon: Focusing on Energy Efficiency Will Do More than Protect the Earth’s Climate – It Will Make Businesses and Consumers Richer.” Scientific American, September 2005, pg. 74 Specifically:

“If done properly, climate protection would actually reduce costs, not raise them. Using energy more efficiently offers an economic bonanza – not because of the benefits of stopping global warming but because saving fossil fuel is a lot cheaper than buying it.” (pg. 74)

Also: “In all, preventable energy waste costs Americans hundreds of billions of dollars and the global economy more than $1 trillion a year, destabilizing the climate while producing no value.” (pg. 75)

37Dennis Elliott, principal research scientist at the U.S. Department of Energy’s National Renewable Energy Lab in testimony before the Indiana House Utilities and Energy Committee.

38Steve Aker, White Construction, in testimony before the Indiana House Utilities and Energy Committee.

39Martin Kushler, Dan York, and Patti Witte, “Examining the Potential for Energy Efficiency to Help Address the Natural Gas Crisis in the Midwest,” American Council for an Energy Efficient Economy, January 2005. Specifically:

The ACEEE projects savings for Indiana with respect to natural gas, electricity, and commodity cost savings (if all states in the region implement energy efficiency programs) in each year as follows: 2006 $244 million; 2010 $518 million; 2015 $1.1 billion; 2020 $1.4 billion.

40Cinergy 2005 Sustainability Report. Specifically:

“70 percent of the funds included improvement projects at Gallagher, Gibson, Beckjord and East Bend to increase efficiency and reduce coal combustion.”

41Letter by Richard Lugar and Peter Visclosky to State Representative Don Lehe, January 24, 2006. Also see Lugar speech at the Brookings Institute.

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