Duke agrees to 420M charge for plant
May 01, 2012 (Menafn - The Charlotte Observer - McClatchy-Tribune Information Services via COMTEX) --Duke Energy said Monday that it has agreed to take a 420 million charge on construction costs of its Edwardsport power plant in Indiana under a settlement with consumer groups.
The Indiana Utility Regulatory Commission has to approve the agreement between Duke and Indiana's consumer advocacy agency, industrial customers and Nucor Steel-Indiana. Four groups who have fought Duke over Edwardsport's costs are not part of the settlement.
Duke said it expects to take pretax charges of 420 million, worth 20 cents per share, in the first quarter of this year. Duke will report earnings on Friday.
Duke previously has taken 265 million in pretax charges for the project, in 2010 and 2011.
Construction is expected to be completed this year on Edwardsport, which will cost 3.3 billion including financing costs. The plant was expected to cost about 2 billion, excluding financing.
The plant will use cutting-edge technology that will turn coal to gas and capture much of its pollution.
But apart from cost overruns, controversy has swirled around the project.
Duke's former No. 2 executive, Jim Turner, resigned after emails between him and Indiana's utility commission chairman, discussing the plant, were published in late 2010. The commissioner also lost his job.
The Indiana Office of Utility Consumer Counselor, one of the parties to the agreement announced Monday, had charged that Duke hid information about looming cost overruns for the project. The agency wrote that Duke managers "demonstrated that they are ill-equipped to manage the construction of (a power plant) of this scale."
CEO Jim Rogers has defended Duke's performance and said the company didn't conceal rising costs.
The settlement includes a cap to be included in electric rates of about 2.6 billion. Customer rates will rise, on average, 9.6 percent more over two years, in addition to the 5 percent already in rates.
Duke said rates would rise 22 percent without the agreement.
The settlement includes reduced depreciation expense of 35 million on other assets and eliminates 22 million in annual deferred tax incentives. It includes a 32 million annual cut in customer rates from depreciation of pollution control investments in Duke's next rate case.
Citizens Action Coalition, the Sierra Club, Save the Valley and Valley Watch, formal parties to Duke proceedings before the Indiana utilities commission, are not part of the agreement.
Duke stock closed unchanged Monday at 21.43.
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