A handful of bills moving through the Indiana General Assembly are pitting the financial interests of utilities against what advocates say is best for consumers.
Among those bills in the legislature are proposals to expand incentives for utilities to build natural gas plants, allow utilities to defer costs that customers will be on the hook for later, and give utilities first dibs on projects to upgrade and expand transmission infrastructure.
Supporters contend the legislation is important to maintain a reliable supply of electricity for Hoosiers. They point to recent reports and concerns raised about vulnerabilities across the region’s power grid as the energy industry undergoes a major transformation, including the expansion of power sources.
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But consumer and environmental advocates question whether the legislation really does help ensure reliability — or if the bills actually threaten affordability for Hoosiers. According to at least one lawmaker, many of these bills come down to a question of who the legislature is working to protect.
Rep. Matt Pierce, D-Bloomington, said he keeps hearing: “Don’t worry consumers, the utility commission will protect you.”
“But the commission hasn’t protected the consumers, and it’s not their fault. That’s because the legislature has done things like this over and over again,” Pierce said during the Feb. 7 House Utilities Committee meeting.
“We need to stop being apologists for utilities and start protecting ratepayers.”
Committee Chairman Rep. Edmond Soliday said during the meeting he recognizes the state is in the midst of a major transition and that things need to change. The Valparaiso Republican, the main author of several utility and energy related bill, added “it’s a question of how we get there" and said it's important the transition is done "in a methodical way."
House Bill 1417: Deferred costs
This bill comes in response to an Indiana Supreme Court ruling last year. The case focused on a request from Duke Energy to recover more than $200 million spent to close and remediate some of its coal ash ponds across the state. The Indiana Utility Regulatory Commission approved that request, but it was challenged and ultimately landed in the state’s high court.
In a split decision, justices ruled those costs should not have been approved. Indiana does have a decades-old law that allows utilities to recover at a later time costs resulting from changes in federal regulations or extreme weather events, but it requires utilities to get prior approval.
But Duke didn’t do that.
This bill creates a list of the types of expenses which can be set aside as a deferred asset and then later recovered from ratepayers. While it would no longer require pre-approval, the bill does say the IURC has the authority to determine if those costs are reasonable and should be passed on to customers.
Supporters say: This bill corrects confusion from the Supreme Court ruling and returns the state to how it’s operated for years.
“We are trying to take us back to what has worked for 30 years,” Soliday said, adding that the bill is meant to reinforce the minority opinion of the Supreme Court’s ruling.
“Utilities don’t get a free lunch,” he added, “and the IURC decides whether it’s fair” to pass those costs onto customers.
Opponents say: This bill gives utilities a blank check to recover a variety of costs.
“I understand the intent is to return things to how they were, but we believe it goes much much farther than that and we see it as a significant threat,” said Kerwin Olson, executive director of Citizens Action Coalition, a consumer advocacy group.
In particular, opponents worry this bill would allow utilities to defer costs with significantly less oversight by not requiring pre-approval and including a long list of items that are open-ended.
Olson and other opponents said they worry this bill verges on retroactive ratemaking, or altering a rate after the fact for costs not previously approved. That is currently prohibited by law.
Status: This bill passed out of the House Utilities Committee on Feb. 7 by a 9-4 vote.
House Bill 1420: Transmission projects
As the electricity industry transitions from coal to cleaner energy sources such as renewables, there is a major need for upgrading transmission infrastructure.
MISO, the multi-state Midwest grid operator, has a plan to start working on upgrades. The first stage, alone, has a price tag of more than $10 billion. The looming question is who will be in charge of the projects.
Utilities currently have rights-of-first-refusal for transmission projects within their own territory, but the federal utility regulator passed a rule a decade ago eliminating that right for cross-border projects. This bill would return that right-of-first-refusal to Indiana’s major utilities when it comes to inter-regional transmission projects.
Supporters say: This bill is needed to keep control of projects in the state because Indiana utilities know the system best.
“The problem as we see it, if we don’t pass this bill, is MISO and [the federal commission] would oversee the bid process and a company could come in and low-ball the bid,” Soliday said in introducing the bill. “The IURC would have no control over price and these companies could impose any cost on our utilities.”
They stress that competition will still be in play when it comes to construction for the projects, but utilities will own and operate the infrastructure.
Opponents say: They would like to see this process opened up to allow for more competition. By giving utilities rights-of-first-refusal, critics say the bill essentially creates a closed-bid process they worry could drive up costs.
A representative from NextEra Energy Transmission said the bill eliminates competition for ownership, which is “where the real cost savings happen.” Competition for only construction is not enough, they add.
Status: Passed out of the House Utilities Committee on Feb. 7 by a 9-4 vote.
House Bill 1421: Natural gas projects
This bill is focused on a mechanism called CWIP, or construction while in progress. It allows utilities to start billing customers for a project before it’s producing electricity. The normal process is to start billing after energy generation begins.
Without CWIP, utilities must finance the project and later recover those costs. But with it, utilities can charge customers to pay-as-they-go through a tracker, before later incorporating those expenses into base rates.
Hoosiers may remember CWIP being used for Duke Energy’s Edwardsport plant. The CWIP mechanism originally was intended for what the state considered clean energy projects to encourage such development. This bill seeks to add natural gas plants to be eligible for the benefit.
Supporters say: The bill say is needed to truly make Indiana an all-of-the-above state and treat every type of generation equally.
Soliday said the state needs to have a reliable energy source to bridge the gap between coal and renewables — and he believes gas is the answer. This legislation will help encourage utilities to build natural gas plants to keep the lights on during that transition, he said.
Even more, supporters said that allowing utilities to use this mechanism can save consumers money because utilities won’t have to borrow money and pass all that interest onto ratepayers. The costs will also be incorporated into bills over time with CWIP, the Indiana utility trade group said, rather than a potentially big jump all at once.
Opponents say: Consumers shouldn’t be treated as a bank for utilities and should only be made to pay for a project once it’s online and delivering electricity — proving it's useful.
They also worry this bill will incentivize utilities to build larger gas plants. Utilities earn a rate of return on large capital projects like power plants, so the more expensive the project, the more money a utility can make, Olson said. All five of Indiana's major utilities have announced future plans to build gas plants.
Rep. Pierce raised concerns that these big and expensive plants will no longer be needed in 15 to 20 years when storage technology has caught up — which means customers will be left on the hook for what could become irrelevant plants.
Status: Passed out of the House on third reading on Feb. 6 by a 71-26 vote.
Call IndyStar reporter Sarah Bowman at 317-444-6129 or email at firstname.lastname@example.org. Follow her on Twitter and Facebook: @IndyStarSarah. Connect with IndyStar’s environmental reporters: Join The Scrub on Facebook.
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This article originally appeared on Indianapolis Star: Advocates worry utility bills could raise Indiana consumer bills