Indiana Senate Utility Committee approves amended Rockport bill

The Senate Utility Committee voted 7-2 to scrap the original version of a bill that would have stopped the project in its tracks, and instead to advance a new version authored by its chairman, Republican Sen. Jim Merritt of Indianapolis.

His measure, now headed to the full Senate, would postpone any further action until an ongoing court battle between the plant’s financier, Leucadia National Corp., and its opponents, a coalition led by Vectren Corp., reaches its conclusion.

That would likely give the Indiana Supreme Court the first crack at the issue. And if the high court agrees with an appellate court’s objection to a specific provision in the contract, Merritt’s legislation would then send the deal back to the Indiana Utility Regulatory Commission for a full new review.

For Leucadia, that’s a win because it keeps the project alive – but it also means the regulatory process could last much longer than they’d hoped.

“There’s a lot riding on this piece of legislation,” Merritt said, acknowledging that his measure could be overhauled by the full Senate or in the House. “Some people may not like this – and people may love it.”

The deal negotiated in 2010 by former Gov. Mitch Daniels’ administration would have the Indiana Finance Authority buy the Rockport plant’s product for 30 years at a fixed rate, and then resell it to Hoosier customers on the open market.

It amounted to betting 17 percent of all Indiana ratepayers’ bills on the idea that converting coal into synthetic natural gas would be cheaper than utilities’ regular open-market prices.

Opponents have since argued that a nationwide shale gas boom has driven long-term natural gas price projections downward, and they’ve tried – both by lobbying lawmakers and in court – to force Indiana to abort the deal.

Those opponents complained Thursday that Merritt is “punting.”

“Everybody wants to shoot the turkey, but nobody wants to pull the trigger,” said Kerwin Olson, the executive director of the Citizens Action Coalition, an Indianapolis-based consumer advocacy group.

“We’re disappointed with the amended bill and we’d prefer that the bill be returned to its original form, because that provided a real, clear guarantee to ratepayers that the amended bill does not provide.”

As it was introduced, Senate Bill 510 would have required the plant’s developers to reimburse ratepayers if they’ve paid higher prices every three years, rather than only at the end of the 30-year deal.

It was a thinly-veiled attempt to stop the plant’s construction in its tracks because the change would have made financing the project impossible, said Mark Lubbers, the Indiana project manager for Leucadia National Corp.

Still, unless the Indiana Supreme Court somehow grants Leucadia a major win – a move that would involve reversing an Indiana Court of Appeals objection to one clause in the contract – the deal would head back to the Indiana Utility Regulatory Commission.

If that happens and Merritt’s measure becomes law, the contract would arrive back at the commission with a new set of specific instructions from lawmakers.

The commission would have to consider whether the deal is in the “public interest.” That would mean determining whether the initial price assumptions behind the contract were valid and whether ratepayers are adequately protected.

Merritt’s legislation would also have regulators conduct an in-depth study of the natural gas market – one that would include a look at how both synthetic natural gas made at plants such as the one proposed for Rockport and shale gas, which is increasingly available nationwide, are affecting prices.