Proposed Edwardsport Plant Too Risky and Politically Driven

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Edwardsport not a worthy Rogers legacy
by Michael A. Mullett
September 12, 2007

The proposed Edwardsport coal-gasification plant is a politically driven, $2 billion, taxpayer gamble, reminiscent of the proposed Marble Hill nuclear power plant in the 1970s.

Until 2005, I served the Citizens Action Coalition of Indiana (CAC) as its special counsel for energy, utilities and the environment. In that capacity, I had the privilege for more than 20 years to represent CAC and its members before the Indiana Utility Regulatory Commission and the General Assembly on issues involving the regulation of public utilities.

Because of that, I have not had the opportunity until recently to speak publicly for myself, rather than a client, on an important issue involving public utility regulation.

Today, I write in my role as a bill-paying customer of Duke Energy to ask readers to urge Duke Chief Executive Officer Jim Rogers to defer plans for the Edwardsport power plant for three to five years.

In considering this request, I expect that readers will have two questions: 1) Why would Mr. Rogers care about their views on the Edwardsport plant? 2) Why should Mr. Rogers defer Duke’s plans?

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In answering the first question, I must make a candid admission: I know Jim Rogers – and I like, even admire him. So, I hope for his own sake that he avoids the tragic personal and business mistake of spending over $2 billion to build the Edwardsport plant. A mistake of that magnitude is simply not one that a person of Mr. Rogers’ lofty personal and professional standing wants to make at this point in his life and career because it will become his legacy, the one thing for which he is remembered, no matter what else he has done before or will do afterward.

In Mr. Rogers’ case, the mistake will be especially tragic because, unlike many other utility CEOs, he himself believes in the reality of global warming and the necessity of transitioning from our current dependence on fossil and nuclear fuels to more sustainable methods of making and using electricity

Equally important, Mr. Rogers knows that a broad cross-section of utility industry stakeholders – utilities, their investors, their consumers and their larger public – will have to join together in an effective coalition to make the essential transition in national energy policy.

Moreover, Mr. Rogers knows what it will take to forge that coalition. When he first arrived in Indiana, he moved PSI Energy to the forefront of the national debate on power plant emissions reduction, initiating aggressive programs to increase utility customers’ end-use energy efficiency and actively planning his company’s own transition from virtually exclusive reliance on coal-fired generation to other sources of supply that would be more sustainable over the longer term.

In those efforts, he courted and won the support of the consumer and environmental groups that had so bedeviled his predecessor during the long and bitter battle over the ill-fated Marble Hill nuclear plant.

So, hearing directly from many grass-roots consumer advocates and environmentalists that they cannot support coal gasification as a key component of global warming policy will matter to Mr. Rogers.

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In answering the second question, it is important for readers to understand that the principal consideration is not greenhouse gas emissions but the economic risk and reward to Duke shareholders and other stakeholders associated with building the plant.

In that context, the public record shows that Mr. Rogers must bet $2 billion on a coal-fired power plant without knowing for sure what, if anything, he will be able to do with the resulting carbon dioxide except emit it into the atmosphere.

As he himself has said, carbon sequestration – if it someday may work on the scale required – is today 15 years and three zip codes away from Edwardsport, Ind. The public record also shows this $2 billion gamble must be made today without knowing what the U.S. government will do to tax or regulate the resulting CO2.

And, Mr. Rogers would have to make that gamble even though he himself believes that CO2 is the principal greenhouse gas contributing to the rapidly developing global warming crisis that represents a threat to life on earth as we know it, which is unequaled with the possible exception of nuclear war.

Further, the public record shows that Mr. Rogers must bet $2 billion on Edwardsport with Duke assuming that the plant will have a sustained capacity factor of 82 percent or more over its assumed operating life of 30 years – without the company even evaluating the economic implications of lower capacity factors or shorter operating lives.

Moreover, Duke is making those critical assumptions while knowing that PSI Energy’s prior experiment in coal gasification never achieved an 82 percent capacity factor even for a single year and that no coal gasification plant anywhere has yet operated economically for 15, let alone 30 years.

Finally, the public record shows that Mr. Rogers must gamble $2 billion on Edwardsport faced with such profound risks and based on such unproven assumptions all by himself. Originally, he expected that other utility CEOs would share the risk with him, 50-50. Lately, he has been prepared to accept 80 percent of the risk if Vectren CEO Niel Ellerbrook took the remaining 20 percent.

But, recently, Mr. Ellerbrook announced that Vectren would rather do something else with its $400 million than gamble it on Edwardsport.

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I could relate other problems the public record reveals about Duke’s $2 billion gamble at Edwardsport. But, instead, I will end this letter with the same premise with which I started it: Jim Rogers is smarter than to bet $2 billion of his stakeholders’ money on Edwardsport – even if Duke shareholders are taken off the hook by an involuntary ratepayer guarantee of $1.5 billion and $0.5 billion in legislated taxpayer subsidies.

I think that Jim Rogers knows that the right thing to do with Edwardsport is what has been done with every other coal-fired, baseload plant that has been in the Duke Energy Indiana resource plan for the last 25 years: defer it with a combination of less expensive, less risky investments and revisit the issue in three to five years – when everyone will know more about the political, economic and environmental risks of CO2 emissions, capture and sequestration.

The Edwardsport plant is simply too risky to bet $2 billion on it now, no matter who pays the tab.

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