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    Indiana customers continue to face higher bills as fossil fuels plants break, costs skyrocket


    December 5, 2022 - Sarah Bowman, Indianapolis Star

     

      For utility customers across Indiana, 2022 probably felt like one thing after another when it comes to their bills. And they would be right, according to consumer advocates.

      In recent months, utilities have repeatedly raised rates to cover the skyrocketing costs of the coal and gas needed to run their plants as well as the energy they had to buy from the grid when some of those plants unexpectedly shut down.

      Hoosiers are paying dearly for the failure of Indiana utilities to move more quickly on transitioning to clean energy, said Ben Inskeep, the program director at the Citizens Action Coalition, a consumer advocacy group.

      In 2021, Indiana ranked third in the nation for total coal consumption, fueling 58% of Indiana's electricity generation, according to the U.S. Energy Information Administration. Gas wasn't far behind, powering about 30% of the state's energy. Renewable resources, however, supplied just about 10% of the Indiana's energy.

      Indiana utility billing assistance:Utility companies, Indiana offer billing assistance for winter home heating

      Many customers, depending on their utility and the amount of electricity they use, are paying as much as $15 per month more this year compared to last year. And consumer costs have been increasing significantly in the last two decades.

      Residential customers at four out of Indiana’s five big utilities are now paying an average electric bill that is higher than $150 per month, according to data from annual residential bill surveys available from the state utility regulatory commission. That’s nearly double what most bills were in 2000.

      The average residential electric bill has increased drastically over the last two decades. This graph used the annual residential bill surveys posted on the Indiana Utility Regulatory Commission website and included in all of their annual reports.

      Indiana is not alone — spiking prices in coal and gas are resulting in high electricity prices, and utilities across the country are passing those costs on.

      But Indiana utilities in particular “are heavily reliant on coal and gas,” Inskeep said, “so their customers were particularly exposed to these high fuel prices.”

      Indiana now finds itself in an affordability crisis, consumer advocates say, and in the middle of a concerning trend of bills ticking even higher.

      “Rate affordability is a major concern and focus for the (Office of Utility Consumer Counselor) in general and in specific cases before the Commission,” said Olivia Rivera, spokeswoman for the OUCC, the state’s utility consumer protection agency. “We have raised affordability concerns in multiple case filings this year.”

      Skyrocketing electric bills

      All but one of Indiana’s five big utilities has filed for a rate increase in the last year. The only one that hasn't is Indiana Michigan Power, which serves the state’s northeast corner.

      Every other utility — AES Indiana, Duke Energy, NIPSCO and CenterPoint Energy — have all requested to raise rates. Most of those requests have been approved.

      Utilities do that through what is called a fuel adjustment charge, or an FAC tracker. That tracker is an adjustable-rate mechanism that allows utilities to adjust the price that customers pay to reflect fluctuations in the cost of fuel.

      Those price adjustments can be for the fuel used to power generation facilities — such as coal and gas — or the cost of any power the utility purchased from the grid to supply electricity to ratepayers.

      CenterPoint Energy rate increase:CenterPoint request 3-month rate hike for 2023 following coal plant failure

      FAC filings can result in a decrease in customer bills, if the utility budgeted more than they needed for fuel costs. That’s what happened with I&M’s most recent fuel adjustment case. For the other utilities, typically though, rates have gone up — and significantly.

      “The overall trend this year has generally raised bills due to significant increases in wholesale costs for both coal and natural gas,” Rivera said.

      Duke has had two back-to-back increases of roughly 16% followed by another 7% on top of that. Those increases represent customers paying as much as $30 more per month than in the same period last year. Company representatives said the increases are needed because fuel markets have been volatile and there has been a “significant and prolonged” risk in the price of coal and natural gas.

      Their most recent FAC, filed a month ago, would actually provide a roughly 5% decrease for customers, Duke spokeswoman Angeline Protogere said.

      For AES Indiana, their last FAC tracker increased customers’ bills by about 12% each month — or roughly $15. Their FAC rate before that added more than $6 per month for the average customer using about 1,000 kilowatt hours in a month. And their latest tracker approved this week will increase the average bill by more than $3.

      In an earlier statement, the utility said the prices of natural gas were expected to be nearly 290% higher for the period compared to the same time period last year.

      “The cost to provide reliable service to our customers is currently increasing and is driven by many factors, including the rising market cost of fuel,” said AES Indiana spokeswoman Kelly Young. “Global demand and tight fuel supplies, as well as labor shortages and inflation in prices of materials and labor also impact the cost of the power we produce.”

      CenterPoint Energy, which serves customers in southern Indiana, just recently filed an FAC case that, if approved, would allow an approximate $13.20 monthly increase in electricity bills that would begin in February, March and April. A company expert similarly cited “volatile fuel costs” for its coal-fired power plant.

      An electric power plant by CenterPoint Energy, which serves southern Indiana customers. Utilities across Indiana, including CenterPoint, have increased customers' rates in recent months to cover the rising costs of fuel including coal and natural gas.

      And most recently, NIPSCO initiated its FAC filing before the Indiana Utility Regulatory Commission, which has to approve all such trackers. If allowed, the average residential customer electric bill will increase by about $6 each month beginning in February. This proposed increase comes in addition to a nearly $5 per month bill increase approved in their previous FAC.

      Higher fuel prices for coal and gas are due to a number of factors: the Russian invasion of Ukraine, coal transportation issues and higher energy demand coming out of the pandemic when demand was lower.

      “The utilities have zero risk related to fuel costs, or wholesale power prices for that matter,” said Inskeep of Citizens Action Coalition. “All of the risk is absorbed by ratepayers as the utilities are allowed to pass on 100% of those costs to customers.”

      Unexpected power plant outages

      Expensive fuel costs are not the only thing pushing up utility bills — unforeseen plant shutdowns have also proved problematic.

      Three of Indiana’s utilities have had at least one of their power plants knocked out for an extended period of time, which has forced them to buy more electricity from the grid to make up for the shortfall in their production.

      All of these issues have been at what are considered traditional generating plants powered by coal and gas. These plants often have been promoted as more reliable, but consumer advocates say these latest problems call such claims into question.

      For example, AES Indiana’s Eagle Valley natural gas plant — touted as being state-of-the-art and one of the state’s most efficient plants — broke just three years after it began operating. Disconnected wires and ruptured pipes conked out the plant for close to a year.

      Customers were left paying for the $600 million plant to sit idle, but they also had to pay for some of the power that AES Indiana bought from the grid to cover the outage.

      The same happened for one of the units at CenterPoint’s coal-fired Culley plant. It broke in June and will remain offline for the rest of the year. It’s unclear how much it will cost to fix it, when it will come back online and all the incident details.

      It is clear, however, that CenterPoint hopes to recover the costs of the power the utility had to purchase from the grid because of the failure. That was part of its most recent FAC filing.

      NIPSCO hasn’t been immune either. One of its gas-fired units has been offline for the majority of the year, forcing the utility to purchase more power and at a much higher price. That is one of the main reasons for the looming increase in the utility’s latest FAC filing.

      In its filing the utility said that “the differences (between forecasted and actual fuel costs) were primarily driven by volatility in commodity prices and a significant increase in purchased power volumes and costs because of reduced availability at NIPSCO’s coal-fired generation stations due to unexpected outages.”

      More state environmental news:Indiana is failing to clean up its toxic coal ash pits, new report says

      NIPSCO also had to retire two coal-fired units at its Schahfer plant last year, two years early, due to a fire at the plant.

      The utility said that it seeks to find a balance between its rates that are fair to both customers and the utility. NIPSCO added that the FAC is adjusted quarterly to help minimize spikes in bills and allows fuel costs to be recovered from customers "somewhat real-time," including when customers may benefit from a decrease.

      "Customers deserve and depend on reliable electricity at a price that they value," said NIPSCO spokeswoman Tara McElmurry. "That’s why NIPSCO is working hard to continually improve service while effectively managing costs."

      A sign reads "You are beautiful,' in a park next in front of the NIPSCO Michigan City plant on Tuesday, Jan. 27, 2021 in downtown Michigan City, Ind.

      The OUCC has requested additional and closer examinations of more complex issues raised in FAC filings, when warranted. These often include purchased power costs due to extended plant outages, Rivera said.

      They did that for the Eagle Valley outage and plan to do so in the coming weeks for the CenterPoint incident.

      To Inskeep, the recent outages raise serious questions about the professed reliability of fossil fuel plants.

      “There have been a lot of problems with traditional power plants like coal and gas being a lot less reliable than promised,” he said. “NIPSCO’s filing shows many of its coal and gas plants experienced many unexpected outages just in the last quarter, so it was not an isolated issue at one unit of one power plant.”

      Relief for consumers

      Consumer advocates say that the state’s and utilities’ heavy reliance on fossil fuel power plants is hurting customers. Inskeep notes that Hoosiers are suffering in the form of higher bills, unhealthy air and unsafe water from pollution and a destabilized climate from the emissions.

      Wind and solar, on the other hand, don’t have fuel costs once built. While utilities are bringing more renewables into their portfolio, the companies as well as lawmakers are quick to point out that clean renewable energy is not widespread or consistent enough to reliably provide power.

      "We need a diversity of power sources, however, including natural gas and renewables, during this transition to ensure reliable service to our customers," said Protogere, Duke's spokeswoman. "Solar and wind power are weather-dependent, and until new, dispatchable and economic carbon-free technology arrives, we need natural gas."

      Many utilities are looking to gas in their next step transitioning away from coal. CenterPoint Energy just recently got approval to build two new gas units and AES Indiana is looking to convert one of its coal-fired plants to gas.

      Kerwin Olson, executive director of the CAC, said it’s too soon to know if the upcoming legislative session could provide some financial relief for customers — but “all signs point to the answer being no.”

      Rep. Ed Soliday, R-Valparaiso, listens in at the Indiana Statehouse. Soliday is the chair of the House Utilities Committee, which discusses many bills and topics relevant to energy and electricity topics in the state, including rate affordability.

      He said the recent report from the state task force looking at energy issues across Indiana was “very dismissive of the affordability crisis.” They also have not heard about any potential legislation that would help customers. Rather, they’re hearing about bills that could “streamline” the regulatory process and reduce the regulatory commission’s authority.

      That could lead to more frequent rate increases with less oversight, Olson said. Inskeep agrees.

      “This affordability crisis has been enabled by Indiana policymakers, who have resisted low-income programs, slashed energy efficiency and rooftop solar programs, and let monopoly utilities do whatever they want while making captive customers pay for it,” he said.

      Still, there are options for customers to get some help with their bills.

      First, there are income-qualified programs available to Hoosiers that can provide financial assistance, extended payment plans or help with free energy-efficiency improvements that can lower monthly bills.

      The OUCC suggests customers call 2-1-1 to get connected to their local LIHEAP offices, or Low Income Energy Assistance Program. From there they can learn more about the available programs and if they qualify, as well as get signed up.

      CAC stressed that energy efficiency is an easy and impactful way to bring electric bills down in a time when energy costs are so high, by using less to power and heat or cool the home. The organization says a good place for customers to start is their utility’s website.

      Many utilities have programs that provide free or reduced-cost home energy audits to help folks find the best ways to save money. Many also offer rebate programs for efficient appliances and lighting, which can be combined with federal tax credits to help offset the upfront costs of making these changes.

      Call IndyStar reporter Sarah Bowman at 317-444-6129 or email at sarah.bowman@indystar.com. Follow her on Twitter and Facebook: @IndyStarSarah. Connect with IndyStar’s environmental reporters: Join The Scrub on Facebook.

      IndyStar's environmental reporting project is made possible through the generous support of the nonprofit Nina Mason Pulliam Charitable Trust.

      This article originally appeared on Indianapolis Star: Indiana customers continue to face higher bills as fossil fuels plants break, costs skyrocket

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