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In Indiana, debate over how ‘trackers’ shape future energy system | Midwest Energy News January 21, 2013

Posted by Laura Arnold in 2013 Indiana General Assembly, Uncategorized.
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This article from Midwestern Energy News discusses SB 560  on utility transmission introduced by Sen. Brandt Hershman.  There is no official word yet about when this bill will be scheduled for a hearing before the Senate Utility Committee. Continue to watch this blog for details!

In Indiana, debate over how ‘trackers’ shape future energy system | Midwest Energy News.

Transmission lines near Walnut, Indiana. (Photo by Patrick Finnegan via Creative Commons)

Transmission lines near Walnut, Indiana. (Photo by Patrick Finnegan via Creative Commons)

Posted on 01/17/2013 by

New legislation in the Indiana Senate would ensure a healthy, guaranteed profit in perpetuity on utility investments in wires, telephone poles, substations, and other parts of the transmission and distribution infrastructure, and ratepayer advocates and environmentalists are crying foul.

If such a measure becomes law, they say, it will burden low-income ratepayers with unnecessarily high bills and further entrench centralized, coal- and gas-based electricity generation, placing distributed, renewable generation at a disadvantage.

At issue in the new legislation is an important but esoteric provision of utility law called a cost tracker. When states allow trackers, they bypass rate cases, a key step in which state utility regulators scrutinize the books of monopoly electric utilities on behalf of the customers who are forced to buy their electricity.

The state then allows a line item to be added to utility bills for a specified purpose—in this case, for costs incurred when utilities replace or maintain power poles, wires and the like. In Indiana, trackers typically guarantee utilities a profit of between 8.5 and 12 percent on costs of a particular type, and ratepayers supply the company with that guaranteed profit.

Tracking trackers

The electricity bills that Indiana residents pay are a sum of the utility’s rate and the various line items.

Over the years, the state’s five investor-owned utilities—Duke Energy, Indiana Power and Light, Vectren, Nipsco, and Indiana Michigan Power, have persuaded state legislators to let them recoup most of their costs through trackers, including the cost of coal, natural gas, uranium and other fuel, the cost of scrubbers and other pollution controls, the cost of energy-efficiency efforts, and now the cost of wires, poles, transformers and other parts of the transmission and distribution network.

Because the state’s utilities are allowed a variety of trackers, their rates are not an accurate reflection of what customers actually pay. So when an Indiana utility says that its rates are rising only 2-3 percent per year, that’s technically correct, said Kerwin Olson, executive director of Citizens Action Coalition, an Indianapolis-based ratepayer advocacy group. But it’s also misleading, Olson said, because “customers don’t pay rates, customers pay bills.”

What’s more, Olson said, “utilities don’t like rate cases” and try to avoid them because they’re expensive to litigate, and because they allow the public utility commission, and the interested public, to examine their books and question whether costs they’re trying to get reimbursed for are costs they actually incurred.

That’s nonsense, said Ed Simcox, president of Indiana Energy Association, a trade group that represents the state’s investor-owned utilities.

Trackers are routine in Indiana and other states, he said, and they’re legitimate ways to recoup costs. The tracker for transmission and distribution infrastructure, in particular, is a legitimate way for companies to recoup costs to repair and replace aging infrastructure, he added.

A benefit for whom?

The tracker for transmission and distribution is important for reliability, Simcox said.

There are some very basic needs that the system has, he said. “They include pipe in the ground for gas companies, half-century-old wooden poles to string power lines and aging transformers that need to be replaced,” Simcox said. A lot of this will be done in the foreseeable future—over the next 10 years.

Moreover, Simcox said, the expenses recouped by trackers “have to be approved by the commission. That’s something these advocates wouldn’t tell you. The commission has the ability to open the books of the company at any time.”

Having trackers even benefits ratepayers, Simcox maintained. By guaranteeing revenue, it “enhances the position of the company in the financial community.” That means that utilities can pay lower interest rates when they borrow money for capital improvements, which in turn saves money for ratepayers, who reimburse the companies for their costs, he said.

Olson maintains that utilities are simply feathering their nest at the expense of ratepayers.

“Utility rate increases are the most regressive taxes you can have on the general population. They hit the poor the hardest,” Olson added.

Moreover, trackers are simply a different way for utilities to get guaranteed revenue to maintain a reliable electrical system. Whether the companies open their books in rate cases or use trackers to pay for it, utilities still need to do their job and provide reliable electricity.

“They’re going to do that stuff anyway because they have to,” Olson said.

Charging ratepayers for coal’s costs

Guaranteeing cost recovery for transmission lines could perpetuate an electrical system that produces far more climate-warming greenhouse gases than it might, said Jesse Kharbanda, executive director of the Hoosier Environmental Council.

“If you replace the transmission and distribution infrastructure on a 1:1 basis or build in anticipation of new central power plants, you’re reinforcing the current system,” he said.

That current system in Indiana is one of the most coal-reliant in the nation. In 2010, the most recent year for which data was available, the state generated 90 percent of its electricity by burning coal, far more than the U.S. average of 48 percent, according to data from the Energy Information Administration.

And according to a report [PDF] from the Environmental Integrity Project, Indiana was the fourth-largest greenhouse gas emitter overall in the United States in 2010, emitting more than three times the carbon dioxide of New York and California, which are far more populous.

Trackers are one of several ways Indiana’s utilities perpetuate the current system, Olson said. Utilities have had such dominion over the Indiana legislature, he maintained, that if the current bill passes they will have guaranteed that ratepayers pay fully for the costs of coal to burn; pollution controls that keep coal plants in compliance with federal environmental rules, and the costs of wires and infrastructure to move electricity from central plants to the populace.

“Essentially they have a tracker from coalmine to light switch,” Olson said.


Midwest Energy News: Indiana coal controversy prompts push for more transparency in utility planning; Impact on IRP Rule? October 14, 2012

Posted by Laura Arnold in Duke Energy, Edwardsport IGCC Plant, Indiana Michigan Power Company (I&M), Indiana Utility Regulatory Commission (IURC), Indianapolis Power and Light (IPL), Northern Indiana Public Service Company (NIPSCO), Uncategorized, Vectren.
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See this blog post for details on the upcoming IRP Contemprary Issues Technical Conference. http://wp.me/pMRZi-Td
Original article: http://www.midwestenergynews.com/2012/10/12/indiana-coal-controversy-prompts-push-for-more-transparency-in-utility-planning/Posted on 10/12/2012 by 

The Edwardsport coal-to-gas plant under construction in Indiana. Cost overruns and other controversy surrounding the project have helped drive efforts to reform Indiana’s utility planning process. (Photo via Duke Energy)

For the first time in 17 years, Indiana’s public utility commission is rewriting the state’s rule governing how utilities develop long-term plans to meet electricity demand.

The new rule could force the state’s five investor-owned utilities to face more public scrutiny in developing their plans, and perhaps move more quickly than they might otherwise toward reducing carbon emissions.

But the utilities are pushing back, saying that since they have the most skin in the game, they should have the most say over their plans.

Public comments have already been taken on the rule, known as the Integrated Resource Planning Rule, and the state’s public utility commission will issue the final rule in a few months.

Under Indiana law, utilities must obtain a permit called a Certificate of Public Convenience and Necessity before beginning construction of a new power plant. To obtain this permit, they must show that the new power plant is needed to meet electricity demand and is the best, most affordable way to do so. They do that via an Integrated Resource Plan, which they have to file with the public utility commission, known as the Indiana Utility Regulatory Commission (IURC).

In the past, the integrated resource plans “have been very black-box procedures,” said Bowden Quinn, conservation organizer for the Hoosier Chapter of the Sierra Club, who has led that group’s effort in pushing for a new rule.

“There was no avenue for participation,” he said. “They just filed them.”

Coal-to-gas plant controversy

IURC began updating the rule in large part because of the perception that they let too much slide on the controversial Edwardsport coal gasification project, which ran significantly over budget and spawned a huge scandal involving cozy relations between Duke Energy and the IURC, said Mike Mullett, an attorney from Columbus, Indiana, who represents the Hoosier Chapter of the Sierra Club, other environmental groups and the consumer advocacy group Citizens Action Coalition before the IURC.

In that case, the commission issued Duke Energy the certificate of public necessity and convenience, but later, Duke asked for almost $1 billion more than the $1.985 billion they’d originally been approved for, spawning legal action and additional IURC hearings.

“This update is in many respects a response to Edwardsport,” Mullett said.

In particular, the commission sought to push utilities to better estimate financial risk and uncertainty on projects like Edwardsport that embrace new technology. The Edwardsport plant is designed to produce coal gas, and it’s one of two coal gasification plants in the United States that are currently under construction.

The proposed IRP rule raises the bar for utilities in several ways, Mullett said.

The first is increased transparency. At least two public meetings would be required any time an investor-owned utility develops an integrated resource plan (IRP), and more if the public expresses a strong interest. And a new provision called a compliance determination allows the commission to force utilities to redo the planning process if those meetings didn’t happen.

Utilities also “have to have a demand forecast that meets certain best practices,” Mullett said. That plan needs to include a variety of scenarios, including energy efficiency programs, Mullett said. And in a significant departure from the old rule, the IURC must determine whether utilities are actually in compliance with the rule, then issue a ruling saying that they are.

Utilities have objections

The state’s utilities have no problem with more transparency, said Ed Simcox, president of the Indiana Energy Association. “For the company to unveil in an IRP process what their long-range plans are is not objectionable,” he said.

But Indiana’s five investor-owned utilities do object to provisions allowing the state’s regulators to verify whether they’re complying with the new rule. In proposed edits of the rule submitted to the utility regulatory commission the trade group representing the state’s five investor-owned utilities, the Indiana Energy Association, struck that provision entirely. The IEA represents Duke Energy, Vectren, Indiana Power & Light, Indiana Michigan Power, and Nipsco.

They also have problems with another part of the rule that requires them to meet with environmental and ratepayer groups as the plan is being developed, rather than being presented with it after the fact. That gives those groups more input and perhaps influence on utilities’ long-term planning decisions, said Jesse Kharbanda, executive director of the Hoosier Environmental Council.

Such input matters, Kharbanda said, because it will allow advocates to “make sure utilities are properly modeling for prospective carbon rules, changes in renewable energy, capacity and operating costs, and things like combined heat and power.”

But the utilities are “very uneasy because it’s not them having unfettered discretion,” Mullett said. The current director of IURC’s electricity division, who reviews the utility filings, is someone who “asks hard questions and cares about the answers,”  he explained.It’s possible that hard questions from the IURC about whether the utilities are complying with the rule could delay approval of an IRP, which could delay approval of a power plant a utility wants to build. “That could delay a power plant, which could delay them from getting access to the money machine” that electricity ratepayers provide, Mullett maintained.

Simcox says the utilities are not necessarily opposed to more public input while they’re developing IRPs. But, he said, “the devil’s in the details.”

“To advise the public what companies are doing in terms of long-range planning is not an objection. The fine line is this: The companies are the entities that are responsible for producing and delivering power. The buck stops with them. You can’t have outside parties dictate to them what they’re going to do and how and when they’re going to do it.”