NIPSCO Plans Multibillion-Dollar Investments in Electric Business

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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--Northern Indiana Public Service Company (NIPSCO) (Merrillville, Indiana) is scheduled to break ground this quarter on a $250 million flue gas desulfurization (FGD) project at its Michigan City Generating Station. That project is part of the utility's 10-year capital investment program, during which the electric unit of NiSource Incorporated (NYSE:NI) (Merrillville, Indiana) could invest up to $5 billion in its generation, transmission and distribution systems.

Click on the image at the right to see an artist's rendering of NIPSCO's Michigan City Generating Station after construction is complete on a dry scrubber project, estimated for 2016.

Installing the dry scrubber at Unit 12 of its Michigan City plant will lower its sulfur dioxide emissions by an estimated 90%. The project, which will employ about 350 people, is scheduled to be completed by mid-year 2013, according to NIPSCO spokesman Nick Meyer. Although the utility has decided to install a dry scrubber, it has not yet selected an original equipment manufacturer, which it expects to do during the second quarter.

NIPSCO is about 60% through a scrubber installation project at one of its other coal-fired generating stations. A wet scrubber system is being installed on units 14 and 15 of the Rollin M. Schahfer Power Station. That project, which Meyer said has a total investment value of about $600 million, kicked off in early 2011. Construction is scheduled to be finished by the end of 2013 for Unit 14 and 2015 for Unit 15. That construction project will employ about 600 people during its peak.

Beyond the scrubber projects, NIPSCO plans to invest up to an additional $600 million in environmental remediation projects over the next decade, including:

• Between $80 million and $200 million to comply with the Mercury and Air Toxics Standards (MATS) rule recently issued by the U.S. Environmental Protection Agency (Washington, D.C.)
• Between $25 million and $100 million to improve wastewater treatment and water intake systems necessary under updates to the Clean Water Act
• Between $100 million and $300 million to upgrade the utility's handling and disposal of coal ash

"We're investing today to generate (earnings) growth," NIPSCO chief executive Jimmy Staton told investors recently. "As we get toward the end of the decade, we will need to introduce new gas-fired generation to our fleet." Today, coal-fired generation accounts for about 78% of NIPSCO's generation, with gas making up the other 22%. Staton did not offer any specifics about potential gas-fired generation, and his presentation to investors did not include any specific projects under development.

NIPSCO also plans hefty outlays for transmission projects over the next decade. "We are strategically situated at the seam between MISO and the PJM," two adjacent electric reliability organizations, Staton told investors. "We believe an electric superhighway will be built to move electrons from the west to the east. We don't want to build that superhighway, but we do want to build the on-ramps, off-ramps and loops to reduce congestion along that highway."

The utility has committed about $500 million to two transmission projects near Fort Wayne, Indiana, and could invest another $500 million in other transmission projects over the next decade, Staton told investors.

One major transmission project is the Reynolds-to-Hiple line, in which NIPSCO will invest $250 million to $300 million. That project, involving about 100 miles of 345-kilovolt (kV) line, is scheduled to begin construction in 2015 and enter commercial operation in 2018. The other transmission project is the Reynolds-to-Greentown line, a 75-mile line capable of carrying up to 765 kV of electricity. That project also is scheduled to kick off in 2015 and to wrap up in 2018. NIPSCO will invest $150 million to $200 million for its share of that project. There are other, as yet unspecified, transmission projects in which the Indiana utility could invest, Staton said.

NIPSCO spokesman Meyer told Industrial Info, "These transmission projects will relieve congestion at the MISO-PJM seam, enhance reliability and bring new sources of generation, including renewables, into our region."

By far the largest percentage of NIPSCO's capital budget over the next decade is modernizing its electric infrastructure. The utility is considering investing as much as $3 billion to $4 billion to replace infrastructure that is, on average, more than 40 years old, Meyer said.

The utility's annual capital spending budget has grown from about $150 million in 2009 to $400 million in 2012. Going forward, the utility expects to maintain its capital budget at $400 million to $500 million per year for the next decade.

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