Courier & Press: Indiana Regulators should reject Vectren plan to pay for natural gas plant, OUCC says

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Mark Wilson, Evansville Courier & Press

“Any electric utility that seeks to overhaul its generation fleet today must evaluate all possible options. It must also carefully examine the ways the options would impact its customers in terms of both money and electric reliability,” said Indiana Utility Consumer Counselor Bill Fine in a written statement Monday. “In this case, Vectren has not evaluated all options or shown that it is proceeding in the most prudent manner.”

The commission is scheduled to hold a hearing on the Vectren proposal Oct. 9, with a final decision expected in 2019.

On Monday, Vectren officials replied the utility considered its options in 2016 during the renewal process of its Integrated Resource Plan (IRP). These 20-year plans are required to be updated every three years.

In addition to the gas plant, Vectren’s IRP includes a nearly 300-acre solar power facility.

A written response from Vectren Monday said: “We feel confident that our generation transition plan is the best option for our electric customers in southwestern Indiana. The new natural gas plant will provide reliable, cleaner energy in addition to local jobs in Posey County. The 50-megawatt solar farm — when combined with the 4 megawatts already under construction in Vanderburgh County — will power more than 12,000 homes.”

Company officials said various scenarios were explored during the public process leading up to the IRP in 2016.

But Swinger said the IRP process is different than what is required in a rate case.

“An IRP is a non-binding plan that does not affect rates and does not involve testimonial filings from the OUCC,” he said.

Swinger explained Vectren is seeking legal permission from the IURC to build and operate its projects, including raising rates to pay for them, and the state law dictates what a utility must include in such a request.

“Among others, it requires a utility to demonstrate, within such a case, that its proposal is prudent — particularly in comparison to other options that could be considered,” he said.

Vectren’s proposal is to install emissions control technology on one of its five coal-fired generation units, retire the remaining four units in 2023 and build a new 850 megawatt natural gas-fired plant to replace the retired coal units.

Vectren has estimated construction costs at about $781 million for the new power plant and $95 million for four coal emissions control projects on a generating unit at its F.C. Culley power plant in Warrick County. The utility is proposing operating that unit until 2036.

The utility had sought to recover those costs because they claimed they are federally mandated, but failed to show two of the Culley projects met that criteria, Swinger said.

In addition, the OUCC statement said Vectren did not look at a less expensive option of transitioning its A.B. Brown power plant’s two coal-fired generating units to gas.

“The evidence shows that such a move would be viable and would cost far less than building an entirely new plant, even though Vectren disregarded the option early in its planning process,” the OUCC said. “Refueling one A.B. Brown unit and building a smaller natural gas plant is an alternative worth exploring.”

On Monday, the utility responded it considered the idea of converting A.B. Brown to gas during the IRP process and that it would result in higher rates for customers in the long run.

The OUCC also criticized the size of the proposed gas plant: “Vectren’s customer demand for electricity over the last five years has gotten smaller, not larger. In addition, Vectren currently has a surplus of produced electricity even after serving its peak load.”

Vectren responded the gas plant’s size “can be utilized to serve potential future growth.” Until then, the utility said, it would sell the extra power to other utilities and use half of those profits to reduce customer bills.

Finally, the OUCC said the proposal put Vectren customers at further risk from potential future increases in natural gas prices because it would consolidate all its power production at a single generating station.

Vectren replied: “This proposal includes coal, natural gas, renewable energy and energy efficiency; it creates the most cost-effective balanced energy mix for our customers and clearly provides a diverse supply.”

The utility also said natural gas prices are forecast to remain low and stable through 2050, according to a February 2018 federal Energy Information Administration report.

More: Who opposed Vectren’s proposed natural gas plant and rate hikes at Wednesday’s public hearing? Almost everybody

In addition to its own testimony, the OUCC submitted comments from more than 600 customers, mostly covering objections to Vectren’s current rates, environmental concerns and potential harm to the state’s coal industry.

In written testimony filed by Kerwin Olson, executive director of Citizens Action Coalition, he noted that the IURC’s own 2018 bill survey showed that Vectren customers pay the highest monthly electric bills in the state. A Vectren customer using 1,000 kilowatt hours averaged $21-a-month more than the next highest utility, NIPSCO.

Olson’s testimony called attention to the economic burden of the already-high electric rates on Vectren customers. He cited U.S. Census data showing the average median household income in Indiana in 2016 was $50,443 and its poverty rate 14.1 percent, while in Vanderburgh County it was $43,311 and 17.4 percent and in Evansville, $36,300 and 21.7 percent.

“It is fundamentally unfair that struggling Hoosier communities are being forced to pay some of the highest bills in the country for an essential human service, when our State has franchised that utility with an exclusive, monopoly service territory,” OIson said.