Duke Energy ratepayers will see an increase in their monthly bill starting next year after the Indiana Utility Regulatory Commission on Wednesday approved a $3.3 billion plan by Duke Energy Indiana to replace its two coal-powered units at the Cayuga Generating Station with natural gas units, an effort the utility company maintains is necessary to meet growing energy demands.
The ruling was the result of a months-long battle at IURC public hearings between Duke and opponents who expressed concern about the environmental and financial effects of Duke’s proposal, which will commission a feasibility study examining whether the coal plants should be sold to a third party and kept running.
Under the IURC’s ruling — and Indiana state statute — Duke will receive clean energy incentives as the company builds the new natural gas units.
A 2023 law allows utility companies to use what is known as “Construction Work in Progress” to charge customers for natural gas projects gradually while the project is still being built. The measure is meant to avoid sudden rate increases upon the project’s completion, but also reduces financing costs for utility companies. While the two natural gas units are being built, the Cayuga coal plants, which are nearly 60 years old, could be operational.
Angeline Protogere, a spokesperson for Duke Energy Indiana, said the financing will ultimately save customers more than $812 million over the new plant’s lifetime. But consumer advocacy groups predict customers could see increases of at least $20 per month by 2031, when the two gas units are complete.
Combined with orders from national and state leadership prioritizing coal for energy production, the approval means the public ultimately loses, said Kerwin Olson, executive director Citizens Action Coalition, which intervened in the case. “We are extremely disappointed in this order,” Olson said. “This order from the commission only stands to exacerbate the affordability crisis that faces your consumers today. Duke pretty much got everything they asked for.”
MEETING THE ENERGY DEMAND
The Cayuga Station, located in Vermillion County, first went into service in 1970 and is the oldest coal-fired plant in Duke’s Indiana network.
With a current capacity of around 1,000 megawatts, Protogere said the two natural gas units will add 470 megawatts more for a total capacity of 1,470, a necessary expansion given the units’ age and limits as they approach retirement in 2029 and 2030. Since the last major power plant was added to the Hoosier system in 2013, Protogere said, Duke has acquired about 126,000 new customers.
“That includes everything from homes to small businesses to manufacturers and industries,” Protogere said. “So we will now be able to increase the amount of power generation there on site at Cayuga to meet the rising demand.”
On top of adding new customers, utility companies around the nation are grappling with how to meet energy demands as artificial intelligence data centers continue to boom, making it difficult to predict how much power they will need to ensure reliability in their service areas.
The Cayuga plan is just one way Duke is responding to the demand for more energy. According to a September filing with the IURC, Duke purchased 470 megawatts of additional capacity to serve customers ahead of summer 2025, and the company is projected to come close to falling below requirements in 2030.
“We are seeing growth in our system since 2013,” Protogere said, “and we have an obligation to meet that increased demand for power.”
President Donald Trump in April also issued an executive order to support and increase coal production across the nation, a sentiment that Indiana Gov. Mike Braun shared in an executive order of his own directing Indiana to consider extending the life of every coal plant in the state.
The regulatory approval includes a settlement with Reliable Energy, Inc., an Indiana-based trade association representing the state’s major coal producers, for the study that could transfer operation of the Cayuga units to an outside party. When Duke initially filed its proposal in June, REI opposed, but later agreed to support Duke’s request to build the power plants in exchange for the study, which must be completed within eight months.
“Duke Energy’s exploration of selling its coal units to an independent third party represents a significant step toward Gov. Braun’s vision of ensuring reliable, affordable energy, preserving valuable in-state generation, and strengthening Indiana’s power supply,” REI President Savannah Kerstiens wrote in a statement.
“As power demand continues to rise, a central goal of this vision is to position Indiana as an energy exporter rather than an importer — a milestone that can be achieved by keeping every megawatt of capacity online.”
The filing details required elements of the study, a request for proposals and bidding and a negotiations and due diligence period. Protegere said a condition of the settlement is that it will not affect the operation of the natural gas units, the cost or the schedule. Duke will wait to proceed on demolition of the coal plants during the request for proposals process, and will not close them before 2029.
DECISION UNFAIR TO RATEPAYERS, GROUPS SAY
Several environmental and customer advocacy groups have strongly opposed Duke’s proposal since June. Two public field hearings were held in April in Bloomington and Terre Haute, where advocates like Olson of the Citizen’s Action Committee and nonprofit Vote Solar expressed frustration and filed testimony, leaving the IURC with final say.
The Indiana Office of Utility Consumer Counselor, which represents the interests of utility customers, recommended against the plan in May, citing affordability concerns, ever-changing environmental regulations and technological advancements, according to testimony documents. The OUCC suggested alternatives, like continuing to operate the Cayuga coal units or refueling them with natural gas.
“After the IURC issues an order, the OUCC begins extensive legal and technical review,” OUCC Director of External Affairs Olivia Rivera told the News and Tribune in an email. “The order is 80 pages, and our staff has begun the review process, which will take time. I can not offer additional information or comment at this time as I must allow staff to continue their review.”
Protogere of Duke said the rate increase will hit consumers in six-month increments over the construction of the natural gas units, helping smooth out the rate impact so the plant is paid for over many years.
“Rather acquiring the required [power] then, than investing and incurring interest charges that are then compounding,” she said. “By paying as you go, you reduce those financing charges.”
Olson said customers have already seen significant increases in monthly electric bills year over year, citing the $395 million increase requested by Duke and approved by the IURC in January. With people already struggling to get by on a daily basis in today’s economy, Olson said, Wednesday’s decision will shift the risks of the facility’s construction onto people who cannot afford it.
“What ratepayers will see are periodic filings from Duke Energy where they will be seeking cost recovery for expenses recurred to date,” Olson said. “Initially, customers will see a small bill impact – 50 cents, a dollar.”
But those costs will grow over time as construction continues, he said, and ratepayers could see bills go up $20 or more. Protegere said she could not give a specific estimate as to what the first six-month increase might be, but said Duke predicts a 5.4% overall increase during construction years.
What’s more, Olson said, is that natural gas is not as environmentally-friendly as utility companies tout. While natural gas does emit a lower level of carbon dioxide, it still, like coal plants, creates pollution that contributes to global warming. Olson said he thinks oil, gas and utility industries are “very good at PR” advertising natural gas as clean when it isn’t.
“There’s an enormous amount of emissions related to the extraction, the transportation, the storage, the combustion of natural gas,” Olson said, “so let’s not kid ourselves. While it may have fewer emissions than coal, it has emissions that are harmful to public health and our environment and have a negative impact on the climate crisis.”
He said cleaner and cheaper alternatives exist in the way of wind and solar energy, and the CAC filed testimony with a “no-regrets” strategy emphasizing the value of clean energy options that would lead to better outcomes for customers and society.
“What we see is an emphasis on wealth creation for the few at the expense of the many,” he said. “We can have our disagreements over what resources we should be using to power the grid, but there should be no disagreement about who can afford to pay for this stuff and finance this stuff, and it is certainly not your everyday, average Hoosier.”
That being said, the IURC’s ruling was given on the basis Duke’s proposal satisfied Indiana’s required five pillars of energy policy — reliability, resilience, stability, affordability and environmental sustainability.
Olson said he does not see how a plan that will raise costs falls into those pillars.
“It should not be ratepayers funding this thing,” he said. “Part of our issue with this ruling is how the state of Indiana is allowing this thing to be financed, and they’re allowing this thing to be financed on the backs of ratepayers.”
Protegere reiterated the Cayuga project was determined to be the right solution for meeting the needs of demand across the state, balancing the need for consistent service with cost and environmental regulations.
“This is a way to do it efficiently with natural gas units, but also gradually spread out the rate impacts over a number of years.”
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