INDIANAPOLIS— Indiana needs a more diverse energy portfolio, developers of the Rockport coal-to-gas plant told lawmakers Thursday during a hearing over legislation that would throw its future into doubt.
Three of the plant’s top officials fiercely defended their project against challengers – led by Evansville-based Vectren Corp. – who question the Indiana Finance Authority’s 30-year deal to buy its product at a fixed rate and then resell it on the open market.
The contract would tie 17 percent of Hoosier gas users’ bills to the Rockport plant’s rate. Opponents point to a nationwide shale gas boom and say they expect natural gas to sell for an amount cheaper than that in the coming decades.
But Mark Lubbers, the Indiana lead for New York-based financier Leucadia National Corp., said that’s short-sighted. He said natural gas rates are historically volatile, so Indiana ought to lean in part on more stable coal prices.
“The great trick that’s being played on us as we try to evaluate this contract is focusing all the attention on the 17 eggs that we took out of the 100-egg basket,” Lubbers said.
“It’s a completely inappropriate way to evaluate the economics of this deal. The point is, you’re diversifying the portfolio, and so what you need to do is consider the economics of the entire portfolio.”
He underscored the 30-year contract’s requirement that at its end, if ratepayers haven’t saved money as a result of the plant’s rates, its owners would have to reimburse ratepayers or turn the plant over to the state.
“It’s not just a promise. It’s backed by hard assets,” Lubbers said. “We have made a bet – we will lose our company if we’re wrong.”
The Senate Utility Committee’s hearing on Thursday was over a bill by Sen. Doug Eckerty, R-Yorktown. It would require ratepayers to be reimbursed every three years if the Rockport plant’s rates top natural gas prices on the open market.
That would kill the deal entirely, Leucadia officials said.
“A large coal project is not financeable without a long-term, assured revenue stream. That’s not something that we can take to market,” said Dan Maley, Leucadia’s vice president.
Opponents of the project said that’d be fine with them.
“It’s not the role of the state to subsidize the cash flow of a company or to attempt to hedge the commodity price,” said Patrick Bennett, the Indiana Manufacturers Association’s vice president of environment, energy and infrastructure.
“This project should stand on its own within the current economic development, like the state does with other companies.”
Bob Kraft, the Indiana Farm Bureau’s director of state government relations, said the deal could hurt farmers now – and they’d find little solace in 30 years, when many of them will have handed their property off to relatives or other buyers.
“Chances are good that in the first few years in particular, the ratepayers will be asked to underwrite the cost of the project through the rates,” Kraft said.
“That being the case,” he said, “our members who have access to natural gas are going to wind up paying a larger, higher rate and not receive any kind of reconciliation until the end of the 30-year period” unless Eckerty’s bill is approved.
Days before the hearing, Vectren and other opponents of the deal launched a statewide campaign against it. That campaign includes full-page advertisements in major newspapers.
Senate Bill 510 is likely to change. Legislative leaders have said they’d like the Indiana Utility Regulatory Commission to take another look at the project, and the 30-year contract is currently tied up in a state appeals court.
Senate Utility Committee Chairman Jim Merritt, R-Indianapolis, said he plans to offer an amendment and vote on whether to advance the bill on to the full chamber at its meeting next week.