INDIANAPOLIS | The state has reached a 30-year deal to buy synthetic natural gas from a $2.6 billion coal-gasification plant planned for southern Indiana in a move that will affect NIPSCO customers' bills.
The Indiana Finance Authority on Thursday voted 5-0 to buy synthetic natural gas from Indiana Gasification LLC for the next 30 years and have that gas distributed to customers of existing Indiana utilities. The company is a subsidiary of Leucadia National Corp.
Gov. Mitch Daniels touted the vote Thursday, saying it will "protect ratepayers against the likelihood of higher long-term gas prices."
"We're out to pay Hoosiers instead of people elsewhere for the energy we need," Daniels said.
Consumer groups decried the deal, saying Indiana utility customers will be held hostage to a nonregulated, private company and paying sharply higher prices for natural gas.
"Regardless of the price of gas on the market, ratepayers will be forced to buy this gas," said Kerwin Olson, a utility campaign organizer for the Citizens Action Coalition.
The IFA on Thursday stressed the consumer protections in the deal, including a $150 million reserve set up by Indiana Gasification to protect consumers when the price of its synthetic gas exceeds market prices for natural gas.
The plant will be built in Spencer County. Coal gasification plants produce synthetic natural gas by turning coal into a combustible gas cleansed of coal's pollutant-forming impurities, according to the U.S. Energy Department.
NIPSCO officials on Thursday acknowledged the utility will deliver natural gas from the Indiana Gasification plant at prices set by the IFA's purchase and sale agreement with Indiana Gasification.
"It will have its own costs associated with it," NIPSCO spokesman Nick Meyer said. "That's not something NIPSCO determines."
The IFA on Thursday said technically utilities only will be passing debits or credits to customers through their bills. About 17 percent of each utility's overall nonindustrial supply will come from the gasification plant. All aspects of the agreement still must be approved by the Indiana Utility Regulatory Commission.
The spot price for natural gas is currently less than $5 per million British thermal units at most supply hubs across the U.S., according to the U.S. Energy Information Agency.
The price of the Indiana Gasification synthetic natural gas would average somewhere between $6 and $6.50 per BTU over the 30-year life of the contract, according to figures the IFA released Thursday.
The deal approved by the IFA comes about a month after the Indiana Utility Regulatory Commission approved a settlement between NIPSCO and consumer groups that would decrease a typical residential customer's natural gas bill by about $7.50 per year.
Two years ago, it looked like the gasification plant was dead when NIPSCO and other utilities withdrew from negotiations on buying natural gas directly from the plant. But four months later, Gov. Daniels signed legislation allowing the IFA to enter into a 30-year deal to buy gas from the plant.