Vectren's costly coal deal is a profit for company, pain for ratepayers (Star Watch Investigation)
The Indianapolis Star's Tony Cook shed some light on Vectren's questionable tactic of buying high-priced coal from its own subsidiary.
"Residents of southwest Indiana long have grumbled about high electricity bills, and for good reason -- they pay the highest rates in the state.
The provider of that electricity, Vectren Corp., has addressed those concerns by telling customers the high rates are a result of upgrades to its coal-fired power plants that dramatically reduce pollution.
But The Indianapolis Star has found a second major reason for Vectren's high rates.
At a time when coal prices were at record highs, Vectren locked into expensive, multiyear agreements to buy almost all of its coal supply from its own wholly-owned mining subsidiary, Vectren Fuels. And ratepayers paid the price.
Experts say Vectren disregarded the common industry practice of staggering its coal purchases through shorter-term contracts to hedge against unusually high prices.
Since that time in 2008, Vectren Fuels has sold coal to other Indiana utilities -- including Duke Energy, Indianapolis Power and Light, and Northern Indiana Public Service Company -- for much lower prices. On average, Vectren charged those utilities $44.35 a ton, but charged itself $68.48 a ton -- a difference of more than 50 percent, which translated to at least $136 million from January 2009 to June 2012."
Which explains this:
"In fact, Vectren's rates are among the highest in the nation. They rank in the top 10 percent among the country's 1,000 largest utilities, according to data from the U.S. Energy Information Administration."
We have some questions.
"'Why is the IURC allowing Vectren to sell coal to themselves from their own mines at significantly higher prices than what they are selling it to other utilities?' asked Kerwin Olson, executive director of Citizens Action Coalition. 'This is a glowing example of where the IURC is failing to protect consumers.'"
Read the entire story here: http://www.indystar.com/article/20121117/BUSINESS/211170348/