by Kerwin Olson
A close inspection of the proposed settlement between Duke Energy and the Office of Utility Consumer Counselor regarding the Edwardsport Integrated Gasification Combined Cycle Station Project is anything but a victory for Duke's ratepayers.
Just months ago the OUCC, the state agency charged with representing all utility customers, argued aggressively that Duke should be allowed no more than the originally approved $1.95 billion for the Edwardsport plant because of Duke's concealment, gross mismanagement and perhaps even fraud.
It is no cause for celebration then that those charges are being swept under the rug in hopes they'll just go away. How quickly they've forgotten about terminations, resignations, formal ethics charges and the four felony counts against the former IURC chairman.
Also, it's time for a little fact-check on the math of Duke Energy and the OUCC with respect to the advertised 14.5 percent rate increase resulting from the settlement. What they aren't telling you is that the charges that make up that increase do not include the so-called "hard cap" of $2.595 billion in capital costs. The 14.5 percent represents only construction work in progress.
Simply put, construction work in progress allows utilities to charge ratepayers today for financing costs (plus profit) for power plants while they are being built and not producing any electricity. Construction work in progress was passed by a huge margin in the General Assembly back in 2002 thanks to aggressive lobbying by Duke Energy and their comrades at the Indiana Energy Association.
This means that as a result of construction work in progress and this settlement, Duke's ratepayers' bills are going up 14.5 percent even before the actual capital costs are put into base rates. That's right, the rate effect outlined in the proposed settlement that "provides numerous customer benefits," to use the words of the OUCC, doesn't even include paying for the plant itself.
Lastly, Consumer Counselor David Stippler called the $700 million Duke shareholders will eat "egregious." What's egregious is the more than $3 billion that may be taken from Duke's ratepayers for a problem-plagued power plant riddled with scandal and cost overruns that we don't need. And, to add insult to injury, in Duke's recent 10-Q filed with the Securities and Exchange Commission, by taking the earlier $420 million write-off, the
company realized a $152 million tax benefit, so the write-off "net of tax" is only $268 million. So Duke shareholders have taken a $268 million write-off while U.S. taxpayers have taken a $152 million hit.
Here's hoping that Chairman James Atterholt is serious about reforming the IURC and finally putting an end to the too-cozy ties between the regulators and the regulated. He and his fellow commissioners should send a clear message by finding the courage to protect the ratepayers they are obligated to serve and summarily reject this proposed settlement for what it is: a massive ratepayer- and taxpayer-subsidized bailout of Duke Energy.
CAC Executive Director
These are the issues of immediate importance we are working on right now.