Plagued by cost overruns and claims of improper communications between the company and state regulators, Duke, in March, proposed a “hard” cap of $2.72 billion for the controversial coal gasification plant’s recoverable costs. Financing charges would add another $160 million or so, raising the total to about $2.88 billion.

The utility, a subsidiary of Charlotte, N.C.-based Duke Energy, said that would translate into an overall customer rate increase of about 16% for Edwardsport, down from the previous average of 19%. The average residential customer would pay about 14% more.

“The effect of these proposals would be to bring the project’s near-term rate impact to approximately the same level it would have been under the currently approved, $2.35 billion cost estimate,” said Duke Energy Indiana President Doug Esamann. “We believe this approach balances four important objectives: the continuing need for new power generation; modernizing Indiana’s aging power system; reducing the customer rate impact; and giving shareholders a reasonable return on their investment.”

The company’s critics were not swayed. Duke and several stakeholders, including an industrial group representing some of the utility’s largest Indiana customers, and the state’s consumer watchdog agency were wary. Last fall, they had entered into a proposed settlement with Duke that would have capped the project’s cost at $2.987 billion, including a hard cap of $2.88 billion. The company withdrew that deal from the Indiana Utility Regulatory Commission in December amid a growing ethics flap over e-mails that showed a cozy relationship existed between top Duke and IURC officials. Several officials involved in the e-mail exchanges already have lost their jobs. IURC Chairman David Hardy was fired by Republican Governor Mitch Daniels, and Duke dismissed Mike Reed, who was president of Duke Energy Indiana, and Scott Storms, a former commission general counsel and chief administrative law judge who was hired as Duke’s assistant general counsel last September. James Turner, who headed Duke’s franchised electric and natural gas businesses, resigned late last year. At least three investigations—by the FBI, Indiana Ethics Commission and Duke—are ongoing.

Tim Stewart, an industrial group attorney, supports the completion of Edwardsport, on which construction is about 70% finished and is scheduled to begin operating in September 2012. But he wants Duke and its shareholders to eat a larger portion of the costs—at least $500 million more than the company is proposing.

Duke remains unwavering in its support for the plant. In testimony accompanying the latest cost cap filing, James Rogers, Duke chairman, president and CEO, said, “the capacity and energy that will be provided by this project remains needed. This is particularly true in light of the prospect of large-scale coal unit retirements in our region as a result of U.S. EPA air and water regulations.”