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FERC OKs Duke Plan to Ship Gas to Indiana Power Plant

FERC has granted Duke Energy Indiana certificates authorizing the company to construct and operate a pipeline across the border from Kentucky to Indiana to move natural gas to a coal-fired plant that Duke previously agreed to convert to gas-fired boilers.

In an order issued Wednesday, the Federal Energy Regulatory Commission (FERC) said Duke could move forward with its Gallagher Station Pipeline Project, which includes construction of 19.5 miles of 20-inch diameter pipeline extending from an interconnection with Texas Gas Transmission's mainline facilities near Kosmosdale, KY, across the Ohio River to Duke's R. Gallagher Generating Station in Floyd County, IN. Duke also plans to build a metering station in Jefferson County, KY, a regulation station at the Gallagher facility, and a pair of mainline block valves in Floyd and Harrison counties in Indiana.

The proposed facilities are designed to provide peak flow of 5.6 MMcf per hour and off-peak flow of 4.4 MMcf per hour of firm transportation service. The pipeline would be used to deliver gas owned by Duke solely to its units at Gallagher station, and is therefore exempt from FERC's open-access regulations and other reporting requirements, the Commission said.

Duke operates four electric power generating units at the Gallagher facility. The company agreed in late 2009 to pay $93 million to resolve Clean Air Act violations at Gallagher, and agreed to convert half of its portion of the coal-fired power plant to natural gas (see Power Market Today, Dec. 23, 2009).

"Duke asserts that it will be unable to convert the two units at its Gallagher Station without access to the natural gas provided by the proposed pipeline," because the facility "is in an area that does not have access to gas delivery facilities with sufficient capacity and pressure to meet the demands of the converted electric generation units," FERC said.

But Duke may not proceed with the project if an alternative it is pursuing pans out. The company has offered to pay $68 million for a stake in the gas-fired Vermillion Generating station in Vermillion County, IN, according to spokeswoman Angeline Protogere. Duke Indiana already owns the equivalent of six of the station's eight 80 MW units, while Wabash Valley Power Association (WVPA) owns the equivalent of the remaining two units. If Duke could obtain the increased gas-fired output from Vermillion, it would retire the coal-fired Gallagher units, Protogere told NGI.

"We have informed FERC of that, but we have not ruled out building the pipeline," Protogere said. "We still need regulatory approval of a purchase of an interest in the Vermillion power plant, and if for some reason we would not receive regulatory approval, then our plan would be to proceed with the pipeline."

But WVPA also has eyes on additional Vermillion output: last month the wholesale power supplier announced plans to increase its ownership at Vermillion to 240 MW from the current 160 MW. The company has offered to pay $13.6 million for the additional unit, a WVPA spokesperson told NGI. Those plans await approval from FERC and the Indiana Utility Regulatory Commission.

Duke and WVPA have shared Vermillion's output for several years. In 2004 Duke sold a 25% undivided interest in the facility to WVPA for $44.4 million (see Power Market Today, May 4, 2004; Aug. 13, 2003). The Vermillion facility has been in operation since June 2000.

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