IURC rule will guide state's green energy mix 

click to enlarge Wind Farm in Fowler County, Indiana. Courtesy of k9mq, Flickr Creative Commons.
  • Wind Farm in Fowler County, Indiana. Courtesy of k9mq, Flickr Creative Commons.

The future mix of Indiana's energy supply — and how much green power it includes — hinges on the outcome of a policy battle brewing quietly all year at the Indiana Utility Regulatory Commission.

At issue is the language of the state's rule governing how investor-owned utilities develop long-term plans to meet electricity demand. Regulators are updating that rule for the first time in 17 years. If environmentalists prevail, the state's five investor-owned utilities will face more scrutiny from outside experts while developing the long-term plans, which are known as integrated resource plans (IRPs).

Those outside experts will include Indiana environmental groups and ratepayer advocates, who could ask tough questions that may steer utilities to promote energy efficiency and renewable electricity sources like wind and solar. This in turn would fight climate change and save ratepayers money.

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.

The rules governing IRPs will steer "long-term decisions of utilities, and therefore billions of dollars of investments," said Jesse Kharbanda, executive director of the Hoosier Environmental Council. It will influence the mix of coal, natural gas and renewables that utilities use to generate electricity.

"The mix will really drive our overall carbon footprint," Kharbanda said.

The public comment period on the IRP rule has ended, and the IURC will issue the final rule in a few months.

Fallout from Edwardsport?

The IURC began updating the IRP rule in large part because of the perception that they let too much slide on the controversial Edwardsport power plant, which will use a new technology that produces gas from coal, said Mike Mullett, an attorney based in Columbus, Ind., who represents such groups as the Hoosier Chapter of the Sierra Club, the Hoosier Environmental Council and Citizens Action Coalition. Edwardsport is one of two coal gasification plants in the United States currently under construction.

The Edwardsport project has run more than $1 billion over the company's initial budget estimate of $1.985 billion, spawning legal action by environmental and ratepayer advocates and additional IURC hearings. The advocates' goal was to keep the project's developer, Duke Energy, from dumping those excess costs on the public, Mullett said.

The Edwardsport project also spawned a huge scandal involving cozy relations between Duke Energy and the IURC.

The goal of the rule update is "to push utilities to do a better job estimating financial risk and uncertainty on projects like Edwardsport," he said.

The proposed IRP rule raises the bar for utilities in several ways. The first is increased transparency. At least two public meetings would be required any time an investor-owned utility develops an integrated resource plan, 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 follow the industry's best practices when forecasting electricity demand. That entails considering a variety of scenarios in their planning, such as increased investment in energy efficiency programs, Mullett said. And in a significant departure from the old rule, the IURC must determine whether utilities are actually complying with the rule, rather than having them simply say that they are.

Utilities push back

The state's utilities have no problem with more transparency, said Ed Simcox, president of the Indiana Energy Association, which represents the state's five investor-owned utilities — Duke Energy, Vectren, Indiana Power & Light, Indiana Michigan Power and NIPSCO.

"For the company to unveil in an IRP process what their long-range plans are is not objectionable," Simcox said.

But the utilities do object to a provision allowing the state's regulators to check whether they're complying with the IRP rule. In proposed edits of the rule submitted to the utility regulatory commission the trade group struck that provision.

The utilities say the new rule gives environmentalists a new way to obstruct the process of building power plants by suing, and that there's already a mechanism in place for them to object. But Bowden Quinn of the Hoosier Chapter of the Sierra Club says that "we're not looking for that ability" to sue.

"They're like teenagers who don't like their parents setting their hours and telling them about their friends," Mullett said. "The attitude is, 'We're perfectly capable of managing our own business without a government agency telling us how.'"

The Indiana Energy Association also objects to another part of the rule that forces them to meet with environmentalists and ratepayer advocates as they're developing their plan, which gives those groups more input on utilities' long-term planning decisions.

In the past, the integrated resource plans "have been very black-box procedures," said Quinn, who has led Sierra Club's effort in pushing for a new rule.

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

Devil in the details

The real problem for utilities is a possible delay that could slow a power plant's construction, which "could delay them from getting access to the money machine" that electricity ratepayers provide, Mullett maintained. That's because utilities are allowed a guaranteed return on investment for building power plants. Hard questions about whether they're complying with state rules could delay approval of an integrated resource plan, which could delay a power plant that a utility wants to build.

Simcox says that's not the reason the utilities are pushing for changes. They're not necessarily opposed to more public input while they're developing IRPs, but "the devil's in the details," Simcox said.

"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."

Dan Ferber is an Indianapolis-based journalist, author and speaker. His 2011 book, Changing Planet, Changing Health, which he wrote with the late Dr. Paul Epstein of Harvard Medical School, describes how climate change jeopardizes public health and offers a suite of solutions to help us protect ourselves.

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