Future energy decisions made in the state could soon have to officially account for a handful of considerations ranging from the availability and price of the energy to its effect on the environment.
The House Committee on Utilities, Energy and Telecommunications unanimously approved the passage of House Bill 1007, authored by Reps. Ed Soliday, Chris Jeter and Sharon Negele, which would make it official state policy for consider five attributes of generation when making decisions concerning the state’s electric generation mix, infrastructure and ratemaking.
Soliday said the bill derived from findings of the Indiana 21st Century Energy Task Force and calls from the governor and state entities, like the Indiana Chamber of Commerce, for the Indiana General Assembly to set an energy policy for the state.
The bill would require state lawmakers and officials to consider the reliability, affordability, resiliency, stability and environmental sustainability of electric utility service when making energy decisions.
HB1007 would also establish a study on performance-based ratemaking and codify how much capacity utilities should be able to fulfill through generation or purchasing electricity from other sources.
“Reliability means when we flip the switch, the light goes on,” Soliday explained.
Indiana has had a reliable electricity supply, with a few exceptions. In 2022, electric utilities in the state were involved in just three events the U.S. Energy Information Administration called “major disturbances and unusual occurrences.”
Soliday told the committee the state nearly experienced a major outage around Christmas due to a lack of resources across the national grid when an Arctic cold front brought extremely cold temperatures and blizzard conditions to the region.
Failures at power stations in a neighboring grid led the North American Electric Reliability Corp., the organization that oversees electrical grid operations in the U.S., to declare a level two energy emergency requiring all power stations to ramp up energy production and manage where the electricity is sent.
The Midcontinent Independent System Operator, the electrical grid managing the supply of electricity to Indiana and 14 other states and a Canadian province, ordered “conservative operations” for many MISO regions Dec. 23.
The grid held, and major service interruptions were avoided in Indiana, but failures attributed to poor reliability planning by utilities serving the PJM Interconnection led to major blackouts in North Carolina, Tennessee and other states. Reliability issues also affected hundreds of thousands of other people in Texas and parts of the northeast during Christmas.
“There was no gas to buy on the market. Those companies that didn't have contracts and didn't have generation capacity that were hedging had none to buy,” Soliday testified. “So, the warning is if you don't reduce load, you'll have rolling blowout brownouts and rolling blackouts, something you don't want in the dead of winter and in the heat of summer.”
Soliday said the state should also consider the affordability of electricity in its decisions.
“If you’ve been watching carefully, prices have been rising. Coal was $50 [a ton] a year ago, and today it’s $300. The price of natural gas two years ago was $1.89 [per million British thermal units]. It’s been all over the place. It’s been as high as $9. And that is a big chunk of rates,” Soliday said.
Electric utilities in Indiana have asked the Indiana Utility Regulatory Commission to approve substantial rate increases to keep up higher fuel costs.
Between 2019 and 2022, average monthly residential electric bills for investor-owned utility customers have risen between 13% and 14%, according to IURC electricity residential bill surveys. Recent rate increases by Duke Energy Indiana, AES Indiana, Northern Indiana Public Service Co. and CenterPoint Energy will result in customers paying even more per month.
“The price is gonna go up. Somebody's got to pay for it. But we need to control that price for Hoosiers for two reasons. One, for the average consumer, but, also, for the businesses. When they have to pay more for energy, they're going to pay less for employees and employment,” Soliday said.
Kerwin Olson, executive director of the Citizens Action Coalition, asked lawmakers to clarify language in the affordability section of the bill that calls for “affordable and competitive” rates.
“We feel the need, at least with respect to residential service for primarily low-income, fixed-income households, to define what is ‘affordable,’ or even what is ‘unaffordable,’ recognizing that generally speaking greater than 6% of a customer's household income is considered an unaffordable utility bill,” Olson testified.
Soliday defined resiliency as the ability to prepare for and recover from “off-nominal events,” like extreme weather events.
Human activity, like the release of greenhouse gases by using fossil fuels, has caused extreme changes in the earth’s climate. According to the American Meteorological Society, climate change has caused weather around the world to become more extreme, driving unprecedented heat waves, floods and droughts in recent years.
Those types of events have stressed electrical grids to the breaking point, in some instances.
Soliday said the state’s focus should include resiliency in its conversations about affordability.
“If we put so much downward pressure on price, and we have a tornado go through and they're not able to hit put the manpower there, you're gonna wait a long time to get your electricity back,whether it's a [rural electric membership cooperative] or a regular company,” Soliday said.
HB1007 defines stability as the ability of an electric system to maintain a state of equilibrium and deliver electricity at a frequency and voltage within defined parameters.
“Fluctuation in voltage or frequency can destroy some steel production, depending on the length of that instability. You can literally melt down the ladle in which steel is made. Eli Lily is hugely dependent. You can destroy an entire batch of pharmaceuticals with fluctuation,” Soliday testified.
Soliday said the bill would encourage companies to purchase technology that would help the adoption of renewable energy, like batteries and other technology that compensates for fluctuations when solar arrays are covered.
Soliday said future state energy decisions should consider environmental sustainability because of the demand for a sustainable approach.
“Here's what I know — there's a market. Every single company before the [Indiana Economic Development Corp.] right now is asking for renewable energy. If we want to compete in a global market, we have to be willing to address environment. And not only that, I think anybody who doesn't want clean air — I don't know what their problem is,” Soliday said. “But instead of debating those things that are hot button issues, show me there isn't a market. We have to address that issue. We have to be willing to embrace it.”
Most of the electricity produced in the state is made in plants powered by coal or natural gas, resources that release large amounts of greenhouse gases.
The state is becoming one of the top states for renewable energy installations, but state and local legislation backed by some utility companies or fossil fuel-funded organizations have hampered their adoption.
In 2017, state lawmakers passed a law phasing out net metering, a billing mechanism used to encourage solar system ownership. The mechanism allowed solar energy system owners to get paid for the electricity they added to the grid. Net metering was replaced by the excess distributed generation tariff, which pays solar owners much less for the energy they produce.
Residential solar installations dropped 93% after the net metering bill was passed in 2017.
Local ordinances spurred by misinformation have blocked several major wind energy installations from being constructed, including the planned Roaming Bison Wind Farm in Montgomery County.
Indiana now ranks 12th in the nation for installed wind energy capacity and 20th in total installed solar capacity.
OTHER PROVISIONS IN HB1007
HB1007 would also launch a study to look at performance-based ratemaking for electric utilities, which would tie electric utility revenues and profits to performance goals instead of how much they spend on capital infrastructure.
The bill would also require electric utilities to have a plan to be able to produce or purchase 85% of the peak energy demands.
The bill was unanimously approved by the committee and now heads to the full Indiana House of Representatives for consideration.