Indiana regulators on Wednesday struck down efforts from clean energy and environmental groups to have Duke Energy operate its coal plants less often, in order to reduce carbon pollution and save customers money.
The Indiana Utility Regulatory Commission (IURC) in March last year opened up a subdocket in order to examine more closely Duke's coal operations — whether plants were operating unnecessarily during periods when running coal facilities exceeded market costs. The Sierra Club had estimated such operations caused a $5.2 million loss for the utility from September to November of 2019, the time period examined by the commission. Sierra Club also found Duke lost a total of $40 million from September 2019 through May 2020.
But the IURC in its ruling found that Duke's commitment decisions during that time period were reasonable, siding with the utility that had argued contractual obligations, and shutting units off and on regularly is inefficient.
Utility self-commitment practices are coming under increasing scrutiny by state regulators across the country, based largely on reports from Sierra Club and the Union of Concerned Scientists that such practices are costing ratepayers millions of dollars across the Southwest Power Pool (SPP) and the Midcontinent Independent System Operator (MISO) markets in particular.
Indiana regulators opened up the subdocket in response to issues that were raised during Duke's fuel adjustment cost proceeding on whether the utility could have saved customers money by electing not to run its coal-powered plants during periods of depressed market prices, and instead purchased power from the wholesale market.
The facilities in question were Duke's 618 MW Edwardsport hybrid coal and combined cycle gas plant and its 1,104 MW Cayuga coal plant.
Duke, in its testimony, told the commission that there were a variety of reasons it might run its coal-fired power plants, even when it's not economic to do so. The Cayuga plant, for example, is under contract with paper producer International Paper, wherein it must provide the company a certain supply of high-pressure steam — only possible from burning its coal units, testified John Swez, generation dispatch director at Duke.
In other cases, said Swez, keeping plants at an economic versus a "must-run" basis, wherein the plant is committed by the company to operating even if it isn't the cheapest resource on the market, is sometimes necessary because coal units were not built to ramp up and down production quickly, and MISO can only predict day ahead prices — not prices a week or two into the future.
"Using Cayuga Unit 1 as an example, which has a 32-hour combined cold startup/notification time, the unit would only be available for full output for the last approximate 1 hour of the 24-hour day, making it almost impossible for MISO to commit in the Day-Ahead Market," Swez said in his testimony.
But Citizens Action Coalition (CAC) of Indiana, Sierra Club, Earthjustice and Advanced Energy Economy testified that the utility's decision to repeatedly commit its plants to a must-run status was costing customers money, and that more economic avenues are available. In response to the IURC's ruling Wednesday, the groups noted the commission did not dispute that Duke had lost customers money over the period examined.
"Neither Duke nor the Commission have refuted the fact that Duke's practice of always running Edwardsport on coal is costing its customers millions of dollars every quarter," read a joint statement from CAC and Earthjustice, both of which had focused their testimony on the Edwardsport plant. "Such losses are unnecessary and reflect a stubborn refusal to acknowledge that the Edwardsport coal plant is effective at only one thing – sucking money out of Hoosier's wallets."
Devi Glick, senior associate at Synapse Energy Economics, who testified on behalf of Sierra Club, found all but one of Duke's coal plants reported net-operational losses during the time period examined, half its units were self-committed, and the Edwardsport and Cayuga plants incurred total net losses of $5.2 million during those three months. Over a nine-month period, Sierra Club estimates its coal units cost ratepayers a "conservative" $40 million.
"Duke's customers would have saved more than $40 million from market commitment of all of the coal units during these nine months because we're not counting the foregone positive energy margins that would have likely occurred at Edwardsport," said Senior Sierra Club Attorney Tony Mendoza in an email, "i.e., instead of losing vast sums of money every day, Duke would have instead made money on most days."
But the IURC in its decision determined it was not appropriate for its coal-fired units to be offered at an economic status at all times. "Despite the assertions of Sierra Club, CAC and other Intervenors, this can lead to inefficient outcomes for Duke Energy Indiana customers," the commission wrote.