Duke Energy Indiana, a unit of Duke Energy (NYSE: DUK), announced a settlement agreement with some of the state's key consumer groups involved in regulatory proceedings dealing with the company's 618 MW Edwardsport coal gasification power plant. The proposal, which was filed with state regulators, is subject to Indiana Utility Regulatory Commission (IURC) approval.

Participants in the settlement, which covers all phases of the Edwardsport subdocket proceedings, are the Indiana Office of Utility Consumer Counselor, the Duke Energy Indiana Industrial Group and Nucor Steel-Indiana.

The proposal includes a cap on project costs to be included in electric rates of $2.595 billion, which includes estimated financing costs through June 30. If a commission order placing the project into customer rates comes after June 30, Duke Energy Indiana will be able to recover additional financing costs until customer rates are revised. Customers will not pay the full cost of the project.

Without the settlement, the project would have increased customer rates by approximately 22 percent, compared to approximately 14.5 percent as a result of the current agreement.

"If approved, this agreement achieves two important objectives: It reduces what Duke Energy Indiana customers will pay for an advanced technology power plant, and it resolves uncertainty for Duke Energy shareholders," said Duke Energy Indiana President Doug Esamann.

Other settlement terms that help limit the rate impact to 14.5 percent, effective upon commission approval, include reduced annual depreciation expense of $35 million on assets other than Edwardsport, and elimination of approximately $22 million in annual deferred tax incentives.

The settlement also stipulates a $32 million annual reduction in customer rates related to depreciation expense on emissions control investments in the company’s next electric base rate case. The agreement stipulates that the earliest the company can file a new base rate increase request is March 2013, with rates effective no earlier than April 1, 2014.

Construction on the Edwardsport plant near Vincennes, Ind., is nearly complete and due to begin serving customers this fall. Current plant costs are estimated at $3.3 billion, including financing charges.

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