Duke Energy Indiana 2024 Rate Case
Synapse provided expert witness testimony on behalf of the Citizens Action Coalition of Indiana. Our testimony focused on the reasonableness and prudence of Duke Energy Indiana’s (Duke) historical and projected utilization and operation of its coal plants, including its use of a supply offer adjustment mechanism in making unit commitment and dispatch decisions. We also evaluated the coal procurement strategy and the proposal to allow coal inventory in rate base to fluctuate based on actual inventory levels.
We found that the coal plants at Cayuga, Gibson, and Edwardsport had operated with low capacity factors and higher-than-average outage rates over the past five years. We found that Duke has approached its fuel supply constraints with a focus entirely on strategies to mitigate cost and volatility in its fuel supply, instead of evaluating its electricity supply to find strategies to reduce its reliance on the constrained fuel. Regarding fuel procurement practices, we found that coal burn is projected to increase without justification, and that inflated coal burn projections are being used to justify locking in long-term contracts. Overall, we found that procuring coal at the upper end of projected need, using the supply offer adjustment mechanisms to manage supply, and earning a rate of return on excessive inventory all create incentives to over-buy coal. This could result in uneconomic commitment and dispatch of coal plants; and barring action by the Commission, all associated costs will be passed onto ratepayers. We also found that Edwardsport has been expensive to operate and maintain and will continue to be going forward.
We recommended that the Commission instruct Duke to revise its coal burn projections and provide transparent documentation and explanation for its assumptions. We recommended that the Commission not approve the proposal to track coal inventory in rate base through its fuel adjustment clause (FAC) filing and recover a rate of return on excess inventory beyond the levels included in rate base. We recommended that the Commission advise Duke that it will not allow recovery in future FAC dockets of excess coal costs incurred as a result of uneconomic commitment practices. We recommended that the Commission order Duke to manage fuel supply volatility through electricity supply, not just through fuel supply strategy. And finally, we recommended that Duke plan to operate Edwardsport on gas and only use coal at the unit when absolutely necessary to manage coal oversupply.