A southern Indiana utility wants to build two new natural gas plants, and a pipeline to get the fuel to them, outside Evansville. CenterPoint Energy, formerly known as Vectren, said this project will help the utility with its transition to renewable energy.
It also could cost its customers nearly $900 million over the next two decades, for plants CenterPoint expects to run no more than 10% of the time.
The Texas-based utility, which serves customers in southern Indiana, filed for approval of the plants with the state utility regulatory commission last year. CenterPoint claims this is a necessary step to continue providing reliable service as it retires some coal plants and brings more solar and wind into its mix.
“We take our role as utility provider very seriously, and reliability and stability is paramount to what we do,” said Steve Greenley, senior vice president of Indiana electric operations for CenterPoint. “We believe this is the best option and provides the most flexibility and really allows us to deliver on renewable energy commitments.”
Though much of CenterPoint’s electricity generation in the future will come from renewables, CenterPoint’s proposal for the gas plants and accompanying pipeline has both consumer and environmental advocates raising serious concerns.
They say it doesn’t make financial sense and that leaning into fossil fuels such as natural gas also further exacerbates the climate crisis. More so, Southern Indiana is already one of the most heavily polluted regions in the country.
The plants and pipeline are not in the best interest of the company’s ratepayers, advocates say, both economically and environmentally.
“The overall price tag for this is close to $1 billion, and they will have customers on the hook for it,” said Tony Mendoza, a senior attorney with Sierra Club. “The big question for the state Commission is: Does it make sense to spend $1 billion for plants that won’t operate that much, when there are other solutions?”
CenterPoint’s proposal is currently before the Indiana Utility Regulatory Commission, which has accepted testimony from various interested parties and is now reviewing the utility’s request. CenterPoint is hoping for a thumbs up, but advocates and many customers are pushing regulators to hand down a denial.
What CenterPoint is proposing
CenterPoint Energy has announced plans in Indiana to retire roughly 700 megawatts of coal generation and move toward more than 700 megawatts of solar generation and 300 megawatts of wind. On top of the renewables, the utility also is looking to build two new natural gas units that would provide about 460 megawatts of capacity.
CenterPoint spokeswoman Alyssia Oshodi said the retirement of many of CenterPoint’s coal-fired units will reduce carbon emissions by over 80% across its electric footprint, adding that the gas plants maintain the utility’s commitment to clean energy.
The plants would be built on the site of the utility’s A.B. Brown coal plant, which is expected to close next year. The company said using this site will save customers money and continue to generate tax revenue for the area.
The gas plants are meant to serve as peakers, meaning they won’t run all the time. Rather, they will run during times of peak demand or when the renewables aren’t providing enough power. The gas turbines would only be used 2% to 10% of the time, according to Oshodi.
“The transition to renewable energy complicates the task of having energy available 100% of the time,” Oshodi said. “When we talk about leading with renewables, we need to be able to support those by way of the combustion turbines.”
And to support the combustion turbines, CenterPoint said it needs a new pipeline to get the gas there.
The pipeline would be built by a company called Texas Gas Transmission, and would run about 24 miles from Kentucky underneath the Ohio River to the plants that are just southwest of Evansville. CenterPoint’s plants would be the sole purpose of building this pipeline, according to officials.
“This project will benefit the region as Texas Gas is providing the infrastructure necessary for CenterPoint’s retirement of existing coal units in favor of newer and cleaner burning flexible natural gas combustion turbines,” said Jillian Kirkconnell with Texas Gas.
Consumer advocates dispute that statement, and argue that CenterPoint would retire their coal plants regardless of the pipeline and gas plants. Coal is no longer economic, and utilities across the country are leaving the dated form of energy generation behind. Some are turning to natural gas to fill that gap.
The plants and the pipeline are before two different regulatory agencies: the plants are before the IURC and the pipeline is before the Federal Energy Regulatory Commission. Both made their requests during the summer of 2021.
CenterPoint filed a Certificate for Public Convenience and Necessity for the gas plants, which will cost between $317 million and $351 million, according to the most recent documents filed. The pipeline will cost $27 million annually over a period of 20 years, according to testimony from the company – which comes out to $540 million.
In total, that’s around $860 million, or more, for both the plants and pipeline. That doesn’t even include the cost of fuel to actually fun the facilities.
The cost to customers
That’s also nearly $900 million out of ratepayers pockets. Adding the natural gas turbines could mean a $23 per month increase to the bill of a homeowner who uses 1,000-kilowatt-hours of electricity, according to testimony the utility filed.
Oshodi said it is not accurate to portray the total costs to customers as $900 million.
That’s because CenterPoint said its investors will provide the more than $300 million of capital required to construct the gas turbines. While the utility will provide the upfront costs, it will seek to recover those funds from its customers through a rate case, which CenterPoint said it expects to file in 2023.
That’s why it needs the certificate of public need, or the CPCN, which is awarded if the commission finds that a facility is in the public’s best interest.
“These aren’t investors throwing money into the wind and hoping to get their money back, they know they are getting their money back with interest,” said Kerwin Olson, executive director of consumer advocacy group Citizens Action Coalition. “If they get a CPCN, then cost recovery is a done deal.”
CenterPoint also plans to seek cost recovery for the pipeline, according to testimony filed with the IURC in this case, but the company has not largely publicized that fact. Recovery won’t happen through a rate case, however. Instead, CenterPoint would pass that cost onto ratepayers through what’s called a fuel adjustment charge, a mechanism that lets utilities adjust the price of electricity to reflect the cost of fuel.
Though Texas Gas is building the pipeline, there is an agreement with CenterPoint that would go into effect when the plants begin service and would last for at least 20 years. The cost of that contract to pay for the pipeline is $27 million, each year.
That’s in addition to the cost of the actual fuel, and the price of natural gas has been very volatile over the years.
While the IURC isn’t responsible for approving construction of the pipeline, it would be responsible for signing off on passing the costs on to customers.
“It’s a little disingenuous to say the pipeline costs aren’t at issue here, they’re piecemealing the project to make it seem smaller,” Mendoza said. “It would be odd for the commission to give approval to build the power plant and then not allow CenterPoint to recover the cost for the pipeline to get the gas there.”
Concerns over cost
Customer advocates are seriously concerned about the financial burden this project will put on customers. They question whether spending that much money on a plant that will run so infrequently is the best use of customer funds, especially when they argue the gas turbines aren’t needed.
CenterPoint is more than replacing the lost coal capacity with renewables in the coming years, and the utility’s peak electricity demand has also continued to go down in recent years. Data provided by CenterPoint shows that their peak load has declined by 10% over the last five years and its peak in the last year is below what was predicted, Bredhold with Sierra Club said.
The company’s planning suggested large growth in its electricity demand, but Bredhold said CenterPoint failed to identify where those new sales would come from.
“They assume that their demand increases a great deal, but the fact is that their load is continuing to decline,” Bredhold said. “I don’t think the case against these gas units could be stronger.”
Especially when advocates say there are other options. Mendoza said that CenterPoint could look to install more battery storage to save energy for when extra is needed to meet peak demand. The utility could also look to buy any extra energy it needs from the grid to fill the gap, he suggested.
“Being part of a major grid is a benefit of Indiana so we don’t need to overbuild for these peak hours,” Mendoza said. “It would be the most expensive 5% generator in Indiana, basically.”
CenterPoint said it did look at alternatives, such as storage and market purchases and found there were risks with both. Oshodi said they deemed storage unreliable, because it had limited capacity available, and there were no assurances that market purchases would be available when needed.
“We evaluated other technologies that would perhaps be able to supply when renewables can’t, and this was the most cost-effective option,” she said, adding that any of those alternatives also would have come with their own costs to customers.
But Olson and other advocates worry it’s only a matter of time — and a short one, at that — until these plants are made obsolete, the result of regulations, environmental concerns and more cost effective options. Even if the plants were to close in 10 years, customers would still have to pay for them and the pipeline in their bills until all costs were recovered.
“There are enormous risks across the country of customers being saddled with stranded costs from too much investment in gas,” Olson said. “Lots of customers are facing enormous stranded costs from coal, and do we really want to do it all over again with gas.”
In the long-term, CenterPoint said this change could bring customer bills down as coal plants come offline. But right now, “in this case, they are asking for an additional $23 per month.”
This increase comes not long after ratepayers saw big bumps to their bills when CenterPoint acquired Vectren in 2019. Brittany Cox, a CenterPoint customer, said her bills basically doubled overnight — they went from between $135 to $150 per month, depending on the season, to now around $250 or higher each month.
Now the mom of one is facing yet another increase. She began a Facebook group in October about CenterPoint’s plans, and it had more than 2,000 members in just 48 hours.
“Some customers are wondering if they will have to choose between eating and heating their homes,” Cox said. “Captive ratepayers: If there is a term to describe the way I’m feeling, this is it.”
Time to make decisions
Both of these cases are before their respective regulatory bodies and are currently being reviewed.
This is not the first time that CenterPoint petitioned the IURC to build a gas plant in Indiana. Then-Vectren first announced plans for the facility in February 2018, looking to build a single 850 megawatt gas plant that would cost around $800 million.
The Indiana Office of Utility Consumer Counselor, as well as other advocacy groups, recommended denying the plant because it had not fully evaluated all viable options to meet customer needs. And in 2019, that’s what the IURC did — unanimously.
In the order it issued, the IURC said “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.”
If the IURC rejected that proposal then, the Sierra Club and Citizens Action Coalition are hoping they will do the same this time. The OUCC, which is the state’s consumer protection agency, again recommended denying this proposal. Instead, the agency said the better option, if needed, would be to convert the A.B. Brown plant into natural gas.
Advocates say they don’t even want that. They hope both CenterPoint’s and Texas Gas’ proposals are denied, and that the utility would lean more into storage or buying off the market.
“When the last CPCN was rejected, I think that was historic and that gives me a lot of hope that the IURC will listen to these powerful arguments against these gas plants,” Bredhold said. “I think the arguments against it feel to be even stronger and more compelling than the last one that was rejected.”
If the IURC were to deny the gas plants, CenterPoint said “then there would be no need for the pipeline.” And if FERC were to not allow the pipeline, company officials said they would “have to go back and rethink the set of solutions.”
Still, Greenley said CenterPoint feels this is the best way forward and is the best balance of various needs. If the plants are approved, CenterPoint said it would begin construction right away and hope to have the turbines running in 2024.
“All the solar, all the wind and these gas turbines are the complete solution that’s needed,” he said.
A FERC spokeswoman said she can’t speculate on the “timing of the issuance of documents or decisions” as it relates to the pipeline. The IURC will likely make a decision on the two gas plants in mid-2022 after reviewing and analyzing the testimony and evidence provided by stakeholders.
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This article originally appeared on Indianapolis Star: CenterPoint wants new natural gas plants, pipeline for nearly $900M