Regulators Scold Utility for Proposing Natural Gas to Replace Coal

"The Indiana Utility Regulatory Commission [on April 24] rejected a Vectren proposal to build an 850-megawatt natural gas-fueled power plant to replace its aging coal-burning A.B. Brown Generating Station" in Wabash County, Indiana, reports Mark Wilson for The Evansville Courier & Press. The new power plant would have replaced Brown's two 245-megawatt generating units and one 90-megawatt unit at Vectren's F.C. Culley power plant in Warrick County.

The commission, which is required by state statute to make decisions in the public interest to ensure the utilities provide safe and reliable service at just and reasonable rates, based their decision on the cost and economic risk to ratepayers of the $781 million natural gas power plant replacement proposed by Vectren rather than environmental reasons which would favor carbon-free renewable energy sources such as wind and solar.

According to the 38-page order posted on the IURC website [pdf]: "The proposed large scale single resource investment for a utility of Vectren South’s size does not present an outcome which reasonably minimizes the potential risk that customers could sometime in the future be saddled with an uneconomic investment or serve to foster utility and customer flexibility in an environment of rapid technological innovation."

The IURC order took Vectren to task for not adequately considering various combinations of other less expensive alternatives, especially renewable energy sources, of which it said there was a lack of evidence that Vectren "...made a serious effort to determine the price and availability of renewables."

In essence, the commission was concerned that the new natural gas plant might become a stranded asset, defined by the Carbon Tracker Initiative, a London-based not-for-profit think tank researching the impact of climate change on financial markets, as:

[F]ossil fuel supply and generation resources which, at some time prior to the end of their economic life (as assumed at the investment decision point), are no longer able to earn an economic return (i.e. meet the company’s internal rate of return), as a result of changes associated with the transition to a low-carbon economy.

The commission's action was welcomed by the environmental community.

"I am grateful to the IURC for this decision,” said Wendy Bredhold, senior campaign representative with Sierra Club’s Beyond Coal Campaign. “Vectren made the right decision to retire its coal plants and now has an opportunity within their 20-year planning process this year to do the right thing and replace coal with clean and affordable wind, solar, energy efficiency and battery storage.”

Evansville-based Vectren, which serves 145,000 electric customers in southwestern Indiana, is not anti-renewable energy. On March 20, the utility received approval from IURC to build a 50-megawatt (MW) solar farm.  The approval "marks the next step toward Vectren’s carbon reduction plan of lowering carbon emissions by 60% over 2005 levels by 2024," according to their news release [pdf].

However, the Hoosier State is heavily dependent on coal power, reports Gavin Blade of Utility Dive on the commission's denial of the proposed natural gas plant.

The decision is notable in a conservative state traditionally served by centralized coal generators that still derives more than 70% of its electricity from the resource. Each of the IURC's regulators was appointed by a Republican governor, typically more friendly to fossil fuel interests.

Scott Pruitt back in the news

The IURC did approve the part of the utility's plan "to retrofit Vectren’s largest, most-efficient coal-fired generation unit, Culley Unit 3 (270 MW), to ensure it remains in compliance with EPA rules related to coal ash and wastewater handling," states their April 24 press release [pdf]. Surprisingly, it was opposed by the coal industry, including the former administrator of the U.S. Environmental Protection Agency. "Coal interests argued at the IURC that potential changes to the federal rules mean that regulators should delay any upgrades or plant retirements, as they may not be needed," reports Blade.

Coal interests also took that argument to the state legislature this month, with Pruitt lobbying GOP lawmakers to institute a generation moratorium that would prevent Vectren and NIPSCO [Northern Indiana Public Service Company] from replacing their old coal plants with new assets. But the legislature twice refused to take up that language, and regulators rejected the notion as well.

Finally, Blade reports on some surprising information the Affordable Clean Energy rule (ACE), EPA's lax replacement of the more rigorous Clean Power Plan rule proposed under President Obama (but never implemented). Apparently, from a utility's perspective, it is even costlier than the Obama plan while paradoxically causing up to 1,400 premature deaths annually.

During testimony, Vectren Vice President of Environmental Affairs and Corporate Sustainability Angila Retherford said that "ACE would increase uncertainty and could actually increase the cost of compliance," according to the order. "For units with high heat rates — such as A.B. Brown — ACE would cause significant future compliance costs."

 Hat tip to Ned Ford.