Duke Energy said Wednesday it will take another $180 million charge on its third-quarter earnings, to be reported next week, because of rising costs at its new Edwardsport power plant in Indiana.
A second troubled plant in Florida will cost Duke another $100 million, the utility said.
Edwardsport will now cost more than $3.5 billion, including $400 million in financing charges, Duke said in a securities filing. The plant was initially expected to cost about $2 billion without financing.
Duke took a $420 million charge on Edwardsport in its first-quarter earnings, as part of a settlement with consumer groups, and $265 million in charges in 2010 and 2011.
The plant is the largest to use new technology that turns coal into a gas, sharply reducing air emissions, but has been beset by cost overruns. Duke on Wednesday moved its expected start-up date from early next year to mid-2013.
After burning natural gas to produce power for about six months, the 618-megawatt plant last week produced its first syngas from coal. On Tuesday night, it first generated electricity from that gas.
Duke says downtime as it made adjustments to the plant reduced the expected revenues from natural gas-generated electricity. Extensive testing produced more delays. Those factors added $174 million to the plants costs, Duke says.
Theres been no one dominant issue. Its a complex project and has just taken longer to work out issues before beginning commercial operation, said Angeline Protogere, a Duke spokeswoman in Indiana.
In building Edwardsport, Duke also ran into an ethics scandal and claims it mismanaged the project.
Indianas former utility commission chairman, David Lott Hardy, faces trial on charges he met secretly with Duke executives about cost overruns at the project. Dukes former No. 2 executive, Jim Turner, resigned after private emails to Hardy were revealed.
In April, Duke struck a deal with Indianas consumer advocacy agency which had criticized Dukes management and large industrial customers to cap Edwardsports costs to customers at about $2.6 billion, including financing costs through mid-2012.
The Indiana Utility Regulatory Commission is expected to rule on whether it will accept the plan by the end of the year. The higher costs Duke reported Wednesday will not affect the proposed settlement, Protogere said.
A Duke critic who did not sign the settlement agreement, Kerwin Olson of Indianas Citizens Action Coalition, said Duke failed to spell out the risks of the first-of-its-kind project. The utility commission will have failed in its job of protecting consumers if it agrees to the settlement, he said.
You dont give an investor-owned utility a blank check to build a science project, Olson said.
Crystal River questions
In a separate filing, Duke reported that subsidiary Progress Energy Florida will record a $100 million charge against third-quarter income from its Crystal River nuclear plant. The charge will not be reflected in Dukes earnings.
The plant has been shut down since 2009 after a botched component-replacement project cracked concrete in its reactor containment structure. Duke is deciding whether to repair the plant, at an estimated cost of $1.5 billion to $3.4 billion, or retire it.
An agreement the Florida Public Service Commission approved in February triggered the expected $100 million charge. Progress agreed to refund to customers $40 million in 2015 and $60 million in 2016 if repairs dont begin by the end of this year the money paid for replacement power while Crystal River was not operating.
Duke now says it is unlikely to be in a position to begin the repair by years end. At a regulatory conference Monday on Crystal River, Duke said it expects to decide whether to fix or retire the 35-year-old plant between December and next summer.
Nonbinding mediation between Progress Florida and the plants insurer, Nuclear Electric Insurance Ltd., is scheduled to begin in November. NEIL paid most of an initial claim but has refused two later claims.
If mediation fails, the two would go to binding arbitration, a Progress official told the Florida commission Monday.