Edwardsport Scandal Dogs Duke Energy CEO Jim Rogers

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Jim Rogers photoThe Indianapolis Colts’ loss of future Hall-of-Fame quarterback Peyton Manning (neck surgeries) has led to a winless (0-7) season so far, which places the team in the lead for the No. 1 overall pick in next year’s NFL draft. By unanimity football experts project Stanford University quarterback Andrew Luck – considered by many the best to emerge from the draft in many years – to be the top prize, so the “competition” to fail in order to attain the top choice has been deemed the “Suck for Luck” sweepstakes.

Meanwhile the locals who are following the costly boondoggle that is the Edwardsport power plant, which was intended to sequester carbon dioxide emissions from burning of coal that has been converted to gas, might want to call it the “Puke for Duke” project after regulators decide how much electricity customers will have to pay for it.

Of all Duke Energy’s forays into so-called “Green” power generation technologies, each of which are unproven or expensive or both, Edwardsport may be the topper. Burdened by repeated cost overruns, the nearly completed plant in the southwest corner of the Hoosier State may drive electric bills high enough to make an Indianan ill. Original estimates back in 2007 were that the plant would cost $1.9 billion; today the price stands at more than $3 billion.

“Yes, it's expensive,” said Duke CEO James Rogers in testimony before the Indiana Utility Regulatory Commission last week. “But it will be the cleanest plant in Indiana.”

That’s not much consolation. According to the Indianapolis Star, the IURC has already decided that Duke’s customers will pay $2.35 billion of the plants’ costs, but the utility giant wants to charge them for an additional $350 million-plus. The newspaper reported that Rogers “faced a barrage of questions about the plant's problems, such as its wildly wrong estimates on the amount of steel, piping and concrete needed to construct the facility, along with labor productivity issues and a costly, unforeseen water-disposal system.” 

Edwardsport’s cost per-kilowatt was originally estimated to be $3,364, but has now reached $5,593.

“Is there any plant in the whole Duke family anywhere near $5,000 a kilowatt?” asked Randall Helmen, chief deputy at the Indiana Office of Utility Consumer Counselor, the state advocate for the monopoly utilities’ customers.

“No sir,” Rogers replied.

Nevertheless, Duke officials insisted they “prudently managed” the project, and blamed its subcontractors for failure to accurately estimate the costs and/or deliver within budget. And as a Duke spokeswoman confirmed to the Evansville Courier & Press, unbridled environmentalism is also responsible for the Edwardsport excesses. 

“It's been 30 years since we last built a major Indiana power plant, and constructing a plant that meets today's environmental requirements and produces reliable power is expensive,” said Angeline Protogere, Duke’s communications manager in Indiana. “The new generation of power plants is environmentally cleaner, but they also more costly to build.”

As NLPC has repeatedly reported, Duke and CEO Rogers have a long track record of being all-too-willing to cater to the demands of environmental activists, because the company always finds a way to reap huge profits from the resultant government regulations, subsidies and tax breaks that bend advantages toward Duke. 

Occasionally that strategy goes awry, however, like in the current merger process between Duke Energy and Progress Energy, in which environmental groups are trying to extract more payoffs than the utilities really want to pay. Utility CEOs like Rogers and Exelon’s John Rowe will probably never learn, for as long as they still use coal, natural gas and nuclear to generate electricity, pesky environoiacs will never be far away to protest their use and demand reparations.

In addition to the costs, the Edwardsport project has not only earned the label of “boondoggle,” but it also has become a scandal. In May NLPC reported how the coal gasification plant suffered approximately $1 billion in cost overruns and led to Duke’s pursuit of a rate recovery deal, while at the same time the company sought to hire Scott Storms, the top lawyer at the Indiana Utility Regulatory Commission. In a clear case of conflict of interest, Storms took part in cases Duke had before IURC, and his behavior drew fines and punishment from the Indiana State Ethics Commission. The scandal ultimately cost Storms his new job with Duke, in addition to the jobs of James Turner, former president and COO of Duke’s U.S. Franchised Electric and Gas business, and Mike Reed, president of Duke Energy-Indiana and previous executive director of IURC. Indiana Gov. Mitch Daniels also fired IURC chairman David Hardy, because he knew about Storms’s conflict of interest but failed to do anything about it.

Now there are questions about Rogers’s direct involvement, as records show he was in at least one meeting with Hardy to discuss the Edwardsport cost overruns. A citizens action group in Indiana said such back-channel, “ex parte” communications with the head of regulatory agency are considered highly inappropriate, if not illegal, according to an Indianapolis Business Journal article. 

IBJ reported last month that the Storms scandal caused IURC to reopen a couple of cases he presided over. The regulatory body reversed his decision that would have allowed Duke to seek from customers the recovery of $12 million in costs related to a 2009 ice storm. Also, IURC rejected a case in which Duke wanted to recoup costs for the installation of “smart” electric meters, which would have cost $22 million.

“The spectre of the Scott Storms scandal loomed large,” IBJ reported. “The commission said Storms presided over the 2010 evidentiary hearing in the case after he accepted a job offer from Duke as an attorney for its Indiana operations.”

After the current IURC hearings about the costs of Edwardsport conclude today, another round will begin later this week that will address Duke’s management of the project and whether the company intentionally hid information. According to a report by the Indianapolis Star, company filings with IURC are heavily redacted, claiming they are “Privileged and Confidential” and “Not for Public Access.” 

“Maybe you’re curious about what Duke Chairman James Rogers discussed with Gov. Mitch Daniels as the utility was preparing to ask Indiana regulators to pass along hundreds of millions of dollars in cost overruns to customers,” wrote Star reporter John Russell. “A summary of the meeting, written by a Duke vice president, also is completely redacted.”

Clearly Duke and Rogers are deeply troubled by what has transpired with the Edwardsport fiasco. The Star reports today that the utility has even hired an expert witness for the IURC hearings at a cost of $3 million. “The huge fee Duke is paying…dwarfs the amount that any of the other parties in the case are paying their witnesses, and some critics say it calls into question how independent such a well-paid witness can be.”

It’s enough to make a Hoosier hurl.

Paul Chesser is an associate fellow for the National Legal and Policy Center.