June 30, 2022
CenterPoint Energy’s New Gas Plants and Their Impact
A coalition of more than a dozen religious, environmental and advocacy groups said a decision by the Indiana Utility Regulatory Commission to approve the construction of two new CenterPoint Energy Indiana South natural gas units will have “terrible consequences” for the company’s customers.
CenterPoint Energy retiring Indiana coal-fired plant to build $323M gas-fired combustion turbine project is now available! Read the latest article here ➡️ https://t.co/EIIjaRDUdO pic.twitter.com/q6JCXUSVHi
— POWERGEN International (@powergenintl) July 23, 2021
The IURC issued a permit, known as a certificate of public convenience and necessity, to CenterPoint Energy which allows the company to build two new natural gas-powered electrical generation units at its A.B. Brown Generating Station in Evansville. The $334 million 460-megawatt project will replace two coal-fired units that will be retired by late 2023.
Pending approval from the Federal Energy Regulatory Commission, natural gas for the plant will be supplied via an underground 24-mile natural gas pipeline extending from Robards, Kentucky to the A.B. Brown plant.
Potential Rate Hikes for Customers
CenterPoint Energy will pass on the price of the new gas units and will attempt to pass on the retirement costs of the coal units and the pipeline to ratepayers, potentially resulting in significant rate increases to customers.
The Energy for All coalition said the IURC’s approval will cause “widespread distress and hardship” in Indiana communities serviced by CenterPoint Energy due to more expensive energy and more pollution.
“This decision has terrible consequences for CenterPoint customers,” the coalition said in a written statement. “These gas plants are too expensive and not needed and will commit overburdened CenterPoint customers to paying nearly a billion dollars for decades to come. It’s outrageous that we should pay that much for plants CenterPoint admits will almost never run.”
Concerns Over Efficiency and Cost-Effectiveness
In IURC testimony, the Indiana Office of Utility Consumer Counselor, the state agency that represents ratepayer interests in cases before the IURC and FERC, said the project had “relatively low efficiency and operational functionality.”
OUCC utility analyst Anthony A. Alvarez said natural gas combustion turbines like those proposed by CenterPoint Energy are very expensive to run and possess “relatively low efficiency characteristics,” making them the last electricity generators dispatched by the electrical grid they serve.
The plant will eventually provide power for the Midcontinent Independent System Operator, the electric grid that serves 15 states and a Canadian province.
Alvarez said the plants were “peakers,” or power plants that are only turned on when energy demand is at its highest and the price of electricity is high enough to render the units economical to be brought online to meet demand.
That should make the plants guaranteed moneymakers for the companies that operate them, but a recent study of plant operations in 2019 by the Union of Concerned Scientists found that nearly all of the gas-fired power plants in the MISO grid and the neighboring Southwest Power Pool grid ran at a loss for nearly four months a year, even with much lower natural gas prices.
Companies then petition the IURC to pass on those losses to consumers, often resulting in higher bills for ratepayers in addition to already tacked-on construction costs.
“A smaller-scale utility facing these adverse downward-trending conditions should explore cost effective alternatives that do not require intensive capitalization and would not only extend the use of its existing assets, but still provide benefits to ratepayers,” Alvarez testified.
“However, in this case, CEIS opted to grow its rate base by investing in new assets instead of taking a more sensible approach of refurbishing and extending the life of its existing assets. In the pretext of obtaining ratepayer savings, CEIS justified the construction and installation of [the project] by subjecting and imposing unnecessary constraints on the alternative option, thereby rendering its pre-disposed choice to appear economically viable.”
Alvarez argued the less expensive option would have been for CenterPoint Energy to convert its coal-fired power plants to gas conversion plants, a process through which coal is turned into a synthetic form of natural gas.
Calls for Renewable Energy Alternatives
But opponents of the plan said the IURC should have pushed for the company to adopt a less expensive and less-polluting energy source for its generation, renewable energy.
“This outrageous decision approves unneeded and expensive fossil gas power plants that will significantly raise the cost of electricity for CenterPoint customers,” said Kerwin Olson, executive director of Citizens Action Coalition, an Energy for All coalition member group.
“The IURC’s approval of more expensive fossil gas plants in the middle of a utility affordability crisis and the climate crisis shows how out of touch our utilities and their regulators are with Hoosiers who are struggling to make ends meet and demanding a transition to clean, affordable energy solutions.”
In testimony filed to the IURC, the Citizens Action Coalition said CenterPoint Energy overstated the price of renewable energy systems and battery storage and based the need for its planned natural gas units on a “questionable” sales forecast.
Energy For All said CenterPoint Energy should move away from fossil fuels and adopt more renewable energy to reduce costs and the climate impact of fossil fuels. Natural gas, like other fossil fuels, are a source of greenhouse gases that trap heat in the atmosphere.
Natural gas is made up mostly of methane, which is at least 25 times as potent as carbon dioxide in trapping heat.
Environmental and Climate Concerns
Decades of greenhouse gas release from fossil fuels has sped up the rate at which heat is trapped in the atmosphere, resulting in deadly and expensive changes in the climate.
Energy for All, and almost all scientists that have studied climate change, believe that humans need to stop or drastically reduce the use of fossil fuels to prevent the worst effects of climate change.
“Climate change is real and is happening now. At a time when extreme heat, drought and catastrophic weather events have become routine, it is unconscionable to propose construction of a new fossil fuel power plant,” Energy for All said in a statement.
Hope for a Change in Course
It’s unlikely CenterPoint Energy will pursue renewable energy systems in place of its just-approved natural gas units, but the coalition said it hopes the company still pursues the option.
“CenterPoint can still change course and do the right thing for our community within their 20-year planning process which begins this year and take a serious look at replacing coal with clean and affordable wind, solar, energy efficiency, battery storage and an aggressive demand response program,” the coalition said.
