INDIANAPOLIS — Indiana utility regulators are studying whether to expand state rules that could boost the state's renewable energy sector — a review that comes after a push to update the rules failed in the Legislature's closing days for the second straight year.

The Indiana Utility Regulatory Commission began its review after a state senator urged Gov. Mitch Daniels and the panel's chairman to begin the process of broadening the state's "net-metering" rules after lawmakers gaveled out last month.

Net-metering is so-named because electric utility customers with wind turbines, solar panels and hydroelectric systems are charged only for the net amount of power they use. They get credit on future bills for excess power generated and sent into the electric grid.

Indiana's current rules apply only to homeowners and K-12 schools and set a limit of 10 kilowatts per customer. Renewable energy advocates say those limits put Indiana well behind its neighbors and stifle its ability to increase clean energy jobs and investment.

"We're trying to bring the state up to snuff in terms of what the rest of the Midwest is doing with net metering — to become a leader rather than a follower in this region," said Steve Francis of the Hoosier Chapter of the Sierra Club.

At the end of 2009, 133 Indiana electric utility customers were generating about 500 kilowatts through net-metering arrangements mostly for wind turbines and solar panels.

A November report by the renewable energy advocacy group Network for New Energy Choices gave Indiana's net-metering policy an "F'' grade, while Illinois, Michigan, Ohio and Kentucky earned grades of "B."

Net-metering bills that passed the Democrat-led House and Republican-ruled Senate this year would have extended net-metering to businesses, industries, municipalities and farmers that are customers of investor-owned utilities.

But differences on how much to increase the rules' kilowatt capacity couldn't be settled in conference committee.

Republican Sen. James Merritt of Indianapolis wanted to boost the power limit from 10 kilowatts to 200 kilowatts, saying that was enough for nearly all potential users.

Rep. Ryan Dvorak's bill would have let businesses and homes generate as many kilowatts as they needed to cover their energy usage. The South Bend Democrat said 200 kilowatts isn't nearly enough to benefit the state's largest industries and other customers.

Days after the session ended, Merritt asked Daniels and IURC chairman David Lott Hardy to begin work to update the rules, which took effect in 2005 after being set by the panel.

Daniels' spokeswoman, Jane Jankowski, said the governor's office has initiated "a conversation" between Merritt and the IURC, which is an independent decision-making body.

"The appropriate thing for us to do in this case is to simply make sure the IURC and Sen. Merritt are conversing and the IURC will determine how to best move forward," she said.

Jankowski said she did not know whether the governor believes the state's net metering rules need to be expanded.

IURC spokeswoman Danielle McGrath said the commission is conducting an internal review to "review the effectiveness" of the current rules but is not "bound by any type of deadline" and doesn't face a mandate to update them.

Merritt said he's hopeful the panel will decide action is needed and begin rulemaking soon, although he said the panel's agenda is loaded with many other issues.

"I expect they'll take action by this summer and certainly sometime this year," he said.

Dvorak said he's not optimistic the IURC will make any significant changes to the state's net-metering rules. He also believes the Legislature, not the utility panel, should be the one setting state policy.

"I wouldn't object if the IURC were to update the rule into something great and on par with the rest of the nation, but I think the odds of that happening are below slim," he said.

Dvorak said he will sponsor another bill next session and said there's public support for policies that help businesses save on energy costs and can also create jobs.

Leon Bontrager, the president of Home Energy LLC in Middlebury, said that if Indiana only extended net-metering benefits to businesses his revenue from installing wind and solar energy systems would probably double in the first year.

He said the current rules are hindering his firm's growth.

"It hampers our business and prevents the customer from doing things a lot of them would love to do but which just aren't possible under the current rules," he said.

This article appeared in the Lafayette Counrie-Journal at http://www.jconline.com/article/20100424/NEWS09/100424004/Ind.-panel-takes-up-net-metering-rules.