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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.

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As Indiana utility ends feed-in tariffs, some question motive | Midwest Energy News August 23, 2012

Posted by Laura Arnold in Feed-in Tariffs (FiT), Indianapolis Power and Light (IPL), IPL Rate REP, Uncategorized.
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As Indiana utility ends feed-in tariffs, some question motive | Midwest Energy News.

As Indiana utility ends feed-in tariffs, some question motive

Posted on 08/23/2012 by

Workers install solar panels on the roof of an Indianapolis home in 2009. Indianapolis Power & Light may soon have more solar power installed in its service area than any other utility in the Midwest. (Photo courtesy EcoSource, Inc., used with permission)

Last month, Indianapolis Power & Light (IPL), an investor-owned utility that provides electricity to 470,000 customers in central Indiana, put out a press release boasting about its support of 30 MW of new solar developments.

The new developments would make IPL the leading provider of solar power among Midwestern utilities, the company claimed, citing Solar Electric Power Association’s 2011 utility solar rankings. IPL also touted the 300 MW of wind power already in its portfolio.

The utility’s claims were repeated in glowing news reports around central Indiana.

But what the company did not say was that the 30 MW of new solar was all that remained of an innovative feed-in tariff project that would have incorporated up to 100 MW of renewable energy into their generating mix, and is now ending—over the protests of both renewable energy developers and environmentalists.

“They did a 180-degree turn on the program,” said Laura Arnold, the president of the Indiana Distributed Energy Alliance.

“It’s really disappointing,” said Jesse Kharbanda, executive director of the Hoosier Environmental Council, an Indianapolis-based environmental group. “Just three years ago, IPL was part of a broad coalition of utilities that were rightly calling public attention to climate change and the need for a comprehensive national policy,” he added. “Now IPL is withdrawing one of its only existing policies to begin the long process of cutting carbon.”

IPL did not respond to several phone calls and emails requesting comment.

Voluntary policies

Unlike many other states, Indiana does not require utilities to incorporate increasing amounts of renewable energy into their generating mix via a renewable portfolio standard, although it did institute modest voluntary goals in 2011 that aim for 10 percent renewable energy in the state by 2025. The state also has no law mandating a renewable feed-in tariff—a policy that requires utilities to provide customers that provide electricity to the grid from solar, wind or biomass a long-term rate high enough to justify their initial investment.

As a result, any feed-in tariff program by an Indiana utility is voluntary. The state’s public utility commission, the Indiana Utility Regulatory Commission, approved IPL’s pilot feed-in tariff program, which it calls its Rate Renewable Energy Production (Rate-REP) program, in March 2010.

Under the program, as originally proposed, solar, wind and biomass developers would apply to IPL to participate, and the winning companies would build projects providing up to 100 MW of power—about 1 percent of IPL’s generating mix. In exchange, IPL would contract with the companies to pay them between 7 cents per kilowatt-hour for wind and 24 cents per kilowatt-hour for solar over a 10-year period. (IPL’s current contract terms guarantee a fixed rate for 15 years rather than ten.) IPL would charge slightly higher rates to its customers to cover the cost difference.

The policy worked: Within a year, solar and wind developers applied to build 170 MW of projects, Arnold said.

Then IPL pulled the plug.

‘Considerable return’ on investments

In a June 28 letter to the chair of the IURC explaining the company’s reasoning, William Henley, IPL’s vice president of corporate affairs, first lauded the pilot program, saying that it “had generated benefits for both customers and the Company.”

Customers, Henley wrote, would be paid for 15 years at rates high enough to cover costs and generate a “reasonable return on their investments.” IPL and its customers would benefit by “sourcing renewable energy from within IPL’s service territory at a set cost for 15 years to hedge against the potentially higher cost to comply with future renewable energy purchase mandates and to help keep the investments local.”

If it was so successful, then why did IPL terminate the program? In his letter to IURC chairman James Atterholt, Henley listed several reasons.

With 300 MW of utility-scale wind farms under contract and several MW of solar, IPL had enough renewable energy in its generation portfolio to promote clean energy and hedge against future renewable energy purchase mandates, he wrote. But today’s higher costs of renewable energy, as compared to “traditional forms of generation” such as coal, “must be balanced against other expected cost increases such as those necessary to comply with Environmental Protection Agency mandates,” Henley wrote.

Henley also maintained that costs for solar panels may soon rise, causing demand to fall.

And he said that “Rate REP has not generated the interest among customers that IPL originally expected.”

That’s highly misleading, say renewable energy advocates.

Afraid of competition?

By 2011, a year after the pilot program was launched, the company had 170 MW of proposed projects, more than the program could accommodate. Then IPL moved to end it.

“We believe they withdrew the program because the program would have been quite successful,” said Olson. “Utilities have fought solar PV for decades, especially rooftop PV. You’re generating your own power. It’s competition and loss of business,” Olson explained.

At the time of IPL’s announcement in late June, IPL had contracts for 2 MW in solar projects, and in their July 19 press release, they announced that Sunrise Energy Ventures, had won a reverse auction to supply 30 MW of solar energy to IPL’s mix. (In the reverse auction, the contractors proposed a price at which to sell electricity, and IPL chose the lowest bidder.

Dean Leischow, managing director of Sunrise, told Midwest Energy News the company plans to build three 10 MW, 70-acre solar farms in fields on the outskirts of Indianapolis. IPL has agreed to pay the company a fixed rate for 15 years.

As a result, IPL could lead all Midwest utilities in the amount of solar power generated in their service territory, according to Solar Electric Power Association’s 2011 utility solar rankings, IPL maintained in its press release.

That sounds about right, said Leischow, of Sunrise Energy Ventures.

“The Midwest is not a hotbed for renewable energy, so that would make it fairly easy for IPL to take a lead position. I think IPL going out with 30 MW puts them in the lead,” he said. “It’s an exciting project for Indiana and an exciting project for us, and I’m looking forward to getting it rolling.”

And Ken Zagzebski, IPL’s president and CEO, also touted the deal.

“IPL’s interest in solar energy is part of our commitment to a more diversified portfolio of power generation that includes appropriate renewable sources that allow us to provide safe, reliable energy at some of the most affordable residential prices in the nation,” Zabzebski said, according to the company’s July 19 press release.

But Olson had a very different take on the situation. “There’s lots of greenwashing going on,” he said.