Settlement agreement limits cost recovery at Edwardsport

The Indiana Utility Regulatory Commission (IURC) on Dec. 27 modified and approved a settlement agreement reached in the Duke Energy Indiana case involving the revised cost estimate for the new integrated gasification combined cycle facility (IGCC) in Edwardsport, Ind.

The settlement agreement set a hard cost cap for the project at $2.595 billion, which prohibits Duke Energy from recovering project construction costs above this amount from retail electric customers, excluding costs related to force majeure situations defined in the agreement. It also requires the utility to absorb nearly $900 million in cost overruns, given the plant is now projected to cost approximately $3.5 billion.  

Although Duke Energy is limited in its recovery of project costs, the settlement agreement allows the utility to recover financing charges accrued to fund the project’s construction. Through a modification to the settlement agreement, the IURC also provided $28 million in additional value to ratepayers by directing Duke Energy to credit customers for cost control incentive payments found to be unwarranted, given the delays that arose from the project cost overruns. The IURC also modified the settlement agreement in such a way that if Duke Energy should recover through litigation claims more than the IGCC project costs absorbed by its shareholders, any surplus recovery is required to be returned to ratepayers.   

"Today's decision resolves key regulatory issues and allows us to focus on bringing into service a plant that will help us meet increasingly strict federal environmental regulations while still using an abundant local resource, Indiana coal,” Duke Energy said in a statement.

The IURC’s decision under Cause No. 43114 IGCC 4 S1 can be found at www.in.gov/iurc.

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