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Originally published Tuesday, March 8, 2011 at 6:40 PM

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Duke CEO: Improper contact might have occurred

Duke Energy Corp. Chairman James Rogers has alerted Indiana utility regulators to internal e-mails he says could be construed to suggest the company's fired Indiana president held improper talks with the former head of the regulatory panel about cost overruns at a coal gasification plant.

The Associated Press

INDIANAPOLIS —

Duke Energy Corp. Chairman James Rogers has alerted Indiana utility regulators to internal e-mails he says could be construed to suggest the company's fired Indiana president held improper talks with the former head of the regulatory panel about cost overruns at a coal gasification plant.

Duke filed the letter and copies of e-mails between former Duke Vice President James Turner and the company's former Indiana president, Michael Reed, this week with the Indiana Utility Regulatory Commission. The materials served as an update to testimony Rogers gave to the commission in November at a technical conference on the Edwardsport coal gasification plant in southwestern Indiana, where costs have risen by $1 billion to $2.9 billion.

In an Aug. 20 e-mail, Reed told Turner he had met with former IURC chief David Lott Hardy and that Hardy "asked if we were having settlement discussions with the parties. I acknowledged we were. He asked if a cap was on the table. I said not at this time." The term "cap" appears to refer to a limit on construction costs.

Turner asked, "Did Chairman's question lead you to believe he thinks one needs to be on the table?"

Reed responded: "Perhaps or signaling me."

The exchange and Rogers' letter was first reported in The Indianapolis Star on Tuesday. Duke, based in Charlotte, N.C., provided a copy of the filing to The Associated Press.

Rogers, in his letter dated Monday, wrote that he did not believe the e-mails provided conclusive evidence of any improper talks about the cost overruns at the plant. He had testified at the November conference that he was not aware at that time of any improper communication between Duke employees and Indiana regulators over the project. Indiana law restricts private talks between utility officials and regulators.

Gov. Mitch Daniels fired Hardy as IURC chairman in October amid an ethical flap over Duke's contacts with IURC officials, and Duke fired Reed in November over his role in the matter. Turner resigned from Duke in December.

Tim Stewart, a lawyer representing large industrial customers of Duke, told the Star the new e-mails convinced him the company held improper talks with the IURC. He said the plant's cost overruns should not be passed along to customers under the circumstances.

"We pulled out (of the settlement agreement), claiming that they might have been getting inside information during the settlement discussions, and this pretty much puts the nail in the coffin," Stewart said.

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