Duke Energy Files Progress Report, Cost Update for Clean Coal Gasification Plant

* Global competition for materials, increased labor rates raise project cost estimate
* Customer rate impact rising about 2 percent
* Plant will be one of the cleanest, most efficient coal-fired plants worldwide
* Project could be among the first demonstrations of carbon capture, sequestration at a power plant

Duke Energy today filed a progress report with the Indiana Utility Regulatory Commission on its clean coal gasification power plant under construction in southwest Indiana. The update included a revised cost estimate of $2.35 billion.

If approved, the $365 million cost increase would result in approximately an additional 2 percent rate impact between 2008 and 2013.

“In North America the cost of building all types of power plants has risen substantially in the past year,” said James L. Turner, president and chief operating officer, Duke Energy U.S. Franchised Electric and Gas. “While we’re not seeing as big an increase as some projects, the same pressures are driving up the costs of contracts from our major vendors. We’re now in competition with developing nations such as China and India for materials, and we are seeing increased labor costs to build power plants.”

The IURC granted the company permission in November to construct the technologically advanced clean coal power plant in Edwardsport, Ind. The commission will need to approve any cost increase for the plant. The plant is scheduled to be completed in 2012.

“We continue to believe in the importance of this project,” said Duke Energy Indiana President Jim Stanley. “When it’s completed, this will be one of the cleanest, most efficient coal-fired plants in the world.

“In the Midwest, coal is plentiful and relatively low-cost, and finding ways to burn it cleanly is fundamental to meeting our customers’ demand for power,” he added. “If we didn’t pursue this project, our primary alternative would be to rely on natural gas. Natural gas is more costly than coal, and gas prices and supplies are volatile and unpredictable.”

The approximately 630-megawatt plant will use advanced integrated gasification combined cycle technology. The new plant will produce 10 times as much power as the existing plant at Edwardsport, yet it will emit less sulfur dioxide, nitrogen oxide and mercury than the plant it replaces. Due to the plant’s superior efficiency, it also will emit 45 percent less carbon dioxide per megawatt-hour than the existing facility.

The Edwardsport project is the first major new coal-fired power plant to be constructed in Indiana in more than 20 years. The Indiana State Utility Forecasting Group predicts that Indiana will need new power generation equal to five projects the size of this plant by that same time period.

The plant is slated to receive more than $460 million in local, state and federal tax incentives, which will help reduce the customer cost impact. The project will result in an average customer electric rate increase of approximately 18 percent phased in from 2008 through 2013.

Duke Energy selected an existing power plant site in Edwardsport, Ind., for the project. The company will retire the existing plant – with coal and oil units built between 1944 and 1951 – upon completion of the new facility. Construction of the plant will help modernize Duke Energy’s Indiana generating fleet.

“We believe this is the best alternative for reliably meeting our customers’ power needs,” Stanley said. “We think that greenhouse gases will be regulated, and coal gasification plants with carbon capture and sequestration technology hold tremendous promise to reduce carbon dioxide emissions and help address global climate change. Our goal is to make this one of the nation’s first demonstrations of carbon capture and sequestration at a power plant.”

Integrated gasification combined cycle technology uses a coal gasification system to convert coal into a synthesis gas (syngas). The syngas is processed to remove sulfur, mercury and ash before being sent to a traditional combined cycle power plant, using two combustion turbines and a steam turbine to efficiently produce electricity.

The technology could also remove the carbon dioxide from coal during the syngas conversion process to enable it to be stored or sequestered in underground geologic formations.

In accordance with the IURC’s previous order, Duke Energy also filed with state utility regulators today a request for approval of plans for studying partial carbon capture and underground storage at the plant. If approved, the studies would look at the plant site’s suitability and costs for capturing and storing carbon dioxide, a primary greenhouse gas.

Duke Energy also is meeting increased Indiana power demands through green power sources such as wind energy. In April, the company began purchasing power from a Benton County, Ind., wind farm.

This month, Duke Energy also will notify companies who have made the short list of bidders in its request for additional green energy for its Indiana customers. The company also has filed a plan with state utility regulators to increase tenfold its customer energy efficiency program savings.

Duke Energy’s Indiana operations provide approximately 7,300 megawatts of safe, reliable and competitively priced electricity to more than 780,000 electric customers, making it the state’s largest electric supplier.