Indiana’s “NowGen”

630 MW IGCC Plant On-line the Summer 2012

Chairman David Lott Hardy

Indiana Perspective

A traditionally regulated electric franchise state

A state with significant coal reserves and infrastructure

Indiana’s average retail electric rates were 12th lowest in the country for 2008

         

IURC PerspectiveThe Commission’s mission is to assure that utilities and others use adequate planning and resources for the provision of safe and reliable utility services at a reasonable cost.

In fulfilling this aim we attempt to provide the necessary investment security to foster deployment of the long term infrastructure needed to cost effectively provide utility service for our citizenry.

Indiana statutes support the continued use of coal for electric

generation CPCN Law (IN Code 8-1-8.5 )

Showing of Need Reasonable Solution

Clean Coal Technology Certificate Law (IN Code 8-1-8.7) CWIP treatment

Generation and CCT Incentives Statute (IN Code 8-1-8.8) Suite of incentives available to encourage qualifying projects

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IGCC Plant Approval, Docket # 43114General Landscape

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Indiana’s regulated coal baseload fleet 69% of Indiana’s regulated fleet is Coal Nearly 4,000 MW, more than 23%, of that fleet is over 40 yrs old Nearly 10,000 MW, about 60%, is over 30 yrs old

Plant replaces an existing 1940’s vintage coal fired plant Brownfield site Broad local support

Plant provides the potential to further home grown energy efforts

$450 million in Federal, State & Local tax incentives Duke Indiana has a strong balance sheet Duke Indiana has solid technical experience

Includes Wabash River Station Gasification experience

Ultimate Findings (Order page 42-43)

Edwardsport IGCC is Clean Coal Technology Relative environmental benefits compared to conventional PC

90% Hg capture 30% less water use 50% less solid waste

Superior thermal efficiency Initial step toward future carbon control requirements Substantial federal, state and local tax benefits Local economic benefits Need for baseload capacity to meet customer needs

Adequate consideration of alternatives Consistent with integrated resource plan Consistent with State’s generation expansion plan

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Ratemaking and Incentives (Order pages 57-60)

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CWIP Tracker provides for timely recovery of costs Financing costs, O&M, depreciation, property taxes, payroll costs, property insurance costsTax credits amortized over plant lifeTracker filed every 6 months

Denied incentive ROE request

Creative Deferred Income Tax (DIT) TreatmentIndiana normally includes DIT in regulatory capital structureAllowed exclusion of non-IGCC DIT in determining return revenue requirementTreatment increases rate of return early in the life of the project

In contrast to the denied incentive ROE which increases rate of return over the life of the project Targeted credit supportive treatment

Additional Order Terms

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Carbon Capture and Sequestration study proposals required (Order page 47)

Capture study underwayDisposal study proposal before Commission

Ground work for oversight structure (Order page 36)Commission selected Black and Veatch to work with a newly created internal Project Oversight Team

Team attends on-site construction meetings B&V effectively embedded with construction team

Would the decision be different today?

(2 yrs later) Initial cost approved estimate of $1.985 Billion has since been

revised and approved to $2.35 Billion DIT treatment incentive not authorized for increment

Economic downturn Wabash River Station NSR Outcome

265 MW of low cost generation closed

Gallagher Station NSR outcome pending

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