INDIANAPOLIS (AP) — Indiana’s utility consumer counselor and public advocacy groups are raising questions about coal-buying agreements that have boosted Vectren Corp.’s profits at the expense of its customers, whose rates are among the nation’s highest.
The Evansville-based utility locked into expensive, multiyear agreements in 2008, when coal prices were at record highs, to buy nearly all of its coal supply for its coal-fired power plants from its subsidiary, Vectren Fuels.
The Indianapolis Star (http://indy.st/UNLRAd ) reported Sunday that Vectren’s coal purchases increased the parent company’s profits but led to higher rates for its southwestern Indiana electricity customers.
The Star also reported that since 2008, Vectren Fuels has sold coal to other Indiana utilities — including Duke Energy, Indianapolis Power and Light, and Northern Indiana Public Service Company — for much lower prices than those that it buys coal from its subsidiary.
Vectren charged those utilities on average $44.35 a ton, but charged itself $68.48 a ton — a difference of more than 50 percent, which translated to at least $136 million from January 2009 to June 2012.
Robert Burns, a research specialist for the Ohio State Center for Energy, Sustainability and the Environment, said Vectren disregarded a standard industry practice by seeking all its coal at the same time.
“You try not to put all your eggs into one basket,” he told the Star. “You want your coal supply to be broken up and staggered.”
According to data from the U.S. Energy Information Administration, Vectren’s rates are among the nation’s highest, ranking in the top 10 percent among the country’s 1,000 largest utilities.
Mike Roeder, Vectren’s vice president of government affairs, downplayed the coal purchases’ role in boosting customers’ rates. He said the utility’s high electric rates are being driven largely by $410 million spent on upgrades to its coal-fired power plants to reduce pollution. He also said Vectren has worked to reduce the burden on its ratepayers.
Roeder added that Vectren’s decision to make purchases of coal at high prices from its own subsidiary were the result of a competitive bidding process and represented market conditions at the time.
“That’s where the market was. It’s a timing issue,” he said.
But utility critics, including Indiana Consumer Counselor David Stippler — who represents ratepayers’ interests on such regulatory matters — contend that Vectren’s coal purchases boosted the parent company’s profits at the expense of ratepayers.
Stippler, who represents utility customers in rate cases before the Indiana Utility Regulatory Commission, said Vectren’s decision to seek its entire coal supply during a big spike in coal prices was highly questionable.
“It was not a good time to be thinking about renegotiating coal contracts,” he said. “In my view, it was a very questionable decision to make at the time, and I don’t believe these coal prices as negotiated at that time were in the best interest of consumers.”
Kerwin Olson, executive director of Citizens Action Coalition, faulted the commission for allowing Vectren’s coal-buying arrangement.
“Why is the IURC allowing Vectren to sell coal to themselves from their own mines at significantly higher prices than what they are selling it to other utilities?” he asked. “This is a glowing example of where the IURC is failing to protect consumers.”
Roeder said the Office of the Utility Consumer Counselor said in sworn testimony at the time that it was aware of the coal-buying agreements and had no issues with those purchases. He added that “it’s only recently that people have asked questions using a hindsight review.”
However, during the company’s 2010 effort to secure a base rate increase, the consumer counselor’s office did criticize the coal purchases and asked the IURC to force Vectren to renegotiate its contracts with Vectren Fuels.
Commissioners instead chose to require increased monitoring of Vectren’s coal purchases in the future.
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Information from: The Indianapolis Star, http://www.indystar.com
