The state agency tasked with protecting utility consumers has asked regulators to reject Duke Energy Indiana’s “ill-advised” plan to retire two coal-powered units – and replace them with new natural gas units – at the Cayuga Generating Station in west-central Indiana.
The project would add more than 470 megawatts to the aging facility’s 1005-megawatt capacity. Cayuga has operated for 55-plus years and is the oldest coal-fired facility in Duke’s Hoosier fleet.
But it also comes with an estimated $3.3 billion price tag that could balloon to $5.3 billion after financing costs, according to Duke officials. The company is one of the Big Five investor-owned regulated monopolies.
“Between 2026 and 2032, the average estimated rate impact is about 5.4%. A future rate case following that time period will determine the project’s base rate impact,” spokeswoman Angeline Protogere said this week in a statement to the Capital Chronicle.
If approved, the first tracker filed would add $1.87 to the typical residential customer’s monthly bill, according to Duke’s estimates. But that amount would rise as construction continues – with the Office of Utility Consumer Counselor estimating a total hike of $19.37 monthly.
Duke contends the pay-as-we-go approach would “smooth out” the impact to its Hoosier customers and save them an estimated $812 million over the life of the revamped facility.
In addition to requesting denial, the Office of Utility Consumer Counselor asked that the Indiana Utility Regulatory Commission direct Duke to consider alternatives: extending the existing units’ lifespan or converting them to natural gas.
Adding a decade to that lifespan would cost $430 million in maintenance and compliance and wouldn’t grow capacity, according to Duke. Neither would conversion.
Protogere, Duke’s spokeswoman, said the utility’s Hoosier service area has gained almost 116,000 customers since adding its last major generation facility in 2013. She added that “Indiana’s economy has been growing, and we have an obligation to meet that demand.”
Agency push
In testimony filed this month, Brain Latham, the Office of Utility Consumer Counselor’s electric division director, said the investment is particularly “ill-advised” because President Donald Trump and Indiana Gov. Mike Braun are “resoundingly reexamining” the environmental factors driving the shift away from coal.
Latham further testified that technological advancements, like small modular nuclear reactors, could render the project “obsolete” before its planned decades-long lifespan has elapsed.
The consequences of the project becoming a stranded asset are “much greater” than the costs of the alternatives, said Cynthia Armstrong, electric division assistant director.
Duke’s Protogere rejected such arguments, emphasizing the “near-term need for additional power.” She wrote that “waiting to see” how regulations and technology “might evolve isn’t an option.”
Although Duke Managing Director Nathan Gagnon has testified that the new natural gas units are more affordable than conversion, John Hanks, electric division utility analyst, argued his cost comparisons were faulty, making retirement and replacement “look more attractive.”
Jared Hoff, the Office of Utility Consumer Counselor’s natural gas division utility analyst, meanwhile, contended that Duke “inappropriately understated” its plan’s operational costs by not discussing three elements: expenses for natural gas itself, transmission via the Rockies Express Pipeline system and CenterPoint Energy Indiana North’s construction of a connector pipeline. They’re part of separate proceedings.
Hoff estimated Duke undercounted natural gas spending by $300 million; pipeline-related estimates were redacted as “highly confidential.” He noted that Duke has entered into transmission agreements with both entities, but an executed construction contract hasn’t yet received commission approval.
Other office witnesses accused Duke of overstating indirect and transmission upgrade costs and not fully evaluating some bids, while another said the utility company should choose the lesser of two options when it proposes profit margins for financing cost recovery.
Weighing in
More than 2,000 public comments – in support and opposition – were additionally filed.
“We need much more capacity to allow for growth of industry,” wrote Bedford resident Bradford Dykes, while Terre Haute mechanical construction company Freitag-Weinhardt called the project a “sound investment in Indiana’s energy future.”
The Indiana State Building & Construction Trades Council applauded the expected 550 construction jobs associated with the project, plus long-term operations jobs and increased property tax revenue for Vermillion County.
In other comments, Hoosiers railed against rising bills.
“People have to choose whether to pay for groceries, medicine or their electric bill(s),” plus “whether to run their air conditioning or suffer through the heat,” wrote Valparaiso resident Marissa Barnes. “We heard as much through the public hearings for Duke’s 2024 rate case, and that was before folks saw their Duke bills increase by $19/month from the rate hike they just got.”
“There won’t be any AC in hell when you people get there,” wrote Marty Wyatt, who accused regulators of taking bribes. He didn’t identify his place of residence.
Others professed support for coal’s retirement at Cayuga but were unsatisfied with natural gas as the replacement – “another fossil fuel,” wrote Bloomington resident Christine Glaser.
Citizens Action Coalition and Reliable Energy, two groups often on opposite sides of the energy debates, also opposed the plan.
Duke is scheduled to file rebuttal testimony next week.
Indiana Capital Chronicle is part of States Newsroom, a nonprofit news network supported by grants and a coalition of donors as a 501(c)(3) public charity. Indiana Capital Chronicle maintains editorial independence. Contact Editor Niki Kelly for questions: info@indianacapitalchronicle.com.