INDIANAPOLIS — Duke Energy has agreed to foot another $85 million in costs associated with its problem-plagued Indiana coal-gasification plant under a settlement with the state's utility consumer counselor and large industrial customers.
The proposed settlement announced Friday means Duke Energy, not its Indiana ratepayers, will pay those operating costs for the 618-megawatt power plant near Edwardsport in southwestern Indiana.
A 2012 settlement between Duke Energy, the state's utility consumer counselor, consumer groups and others required the company to pay about $900 million in plant construction cost overruns. The new deal, which still needs the Indiana Utility Regulatory Commission's approval, would boost ratepayers' total project savings to nearly $1 billion.
The plant about 40 miles north of Evansville went online in 2013 and is one of the world's largest coal-gasification plants. It generates electricity by converting coal into a synthetic gas that's burned in a traditional turbine power plant.
But the plant has been troubled by cost overruns — its original estimated $1.9 billion construction cost nearly doubled to $3.5 billion — and technical issues that have held down its power generation.
The new settlement was reached by Duke Energy, the utility consumer counselor, several large industrial customers and Nucor Steel-Indiana. The parties have agreed to designate June 7, 2013, as the plant's startup date for accounting and ratemaking purposes. That's the date Duke Energy had considered the plant "in service."
Indiana's utility consumer counselor's office and the other parties had contested that date, arguing the plant remained in the startup and testing phases before and after the date. The 2012 settlement agreement called for Duke's shareholders to bear all startup and testing costs.
Indiana Utility Consumer Counselor David Stippler said in a statement that the plant has generated less power than expected since it went online and operating costs have risen. But he said Duke Energy's agreement to absorb $85 million in operating costs will benefit the company's ratepayers.
"This agreement ensures that a significant portion of those rising costs will not be borne by Duke Energy's Indiana customers, while providing the utility with the chance to continue to address the plant's level of operations," Stippler said.
Duke Energy said in a statement that if the Utility Regulatory Commission approves the deal, "it would resolve all Edwardsport-related proceedings pending" before that panel. The company said its customers will see about a 2 percent increase in their bills under the remaining plant operating costs that would be passed onto them.
"If approved, this agreement limits what customers will pay for plant operations since Edwardsport was declared commercial," Duke Energy Indiana President Melody Birmingham-Byrd said.
The agreement includes an immediate $1 million rate credit to Duke Energy's Indiana residential customers and several other provisions.