The Edwardsport coal-to-gas plant under construction in Indiana. Cost overruns and other controversy surrounding the project have helped drive efforts to reform Indiana’s utility planning process. (Photo via Duke Energy)

For the first time in 17 years, Indiana’s public utility commission is rewriting the state’s rule governing how utilities develop long-term plans to meet electricity demand.

The new rule could force the state’s five investor-owned utilities to face more public scrutiny in developing their plans, and perhaps move more quickly than they might otherwise toward reducing carbon emissions.

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.

Public comments have already been taken on the rule, known as the Integrated Resource Planning Rule, and the state’s public utility commission will issue the final rule in a few months.

Under Indiana law, utilities must obtain a permit called a Certificate of Public Convenience and Necessity before beginning construction of a new power plant. To obtain this permit, they must show that the new power plant is needed to meet electricity demand and is the best, most affordable way to do so. They do that via an Integrated Resource Plan, which they have to file with the public utility commission, known as the Indiana Utility Regulatory Commission (IURC).

In the past, the integrated resource plans “have been very black-box procedures,” said Bowden Quinn, conservation organizer for the Hoosier Chapter of the Sierra Club, who has led that group’s effort in pushing for a new rule.

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

Coal-to-gas plant controversy

IURC began updating the rule in large part because of the perception that they let too much slide on the controversial Edwardsport coal gasification project, which ran significantly over budget and spawned a huge scandal involving cozy relations between Duke Energy and the IURC, said Mike Mullett, an attorney from Columbus, Indiana, who represents the Hoosier Chapter of the Sierra Club, other environmental groups and the consumer advocacy group Citizens Action Coalition before the IURC.

In that case, the commission issued Duke Energy the certificate of public necessity and convenience, but later, Duke asked for almost $1 billion more than the $1.985 billion they’d originally been approved for, spawning legal action and additional IURC hearings.

“This update is in many respects a response to Edwardsport,” Mullett said.

In particular, the commission sought to push utilities to better estimate financial risk and uncertainty on projects like Edwardsport that embrace new technology. The Edwardsport plant is designed to produce coal gas, and it’s one of two coal gasification plants in the United States that are currently under construction.

The proposed IRP rule raises the bar for utilities in several ways, Mullett said.

The first is increased transparency. At least two public meetings would be required any time an investor-owned utility develops an integrated resource plan (IRP), 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 have a demand forecast that meets certain best practices,” Mullett said. That plan needs to include a variety of scenarios, including energy efficiency programs, Mullett said. And in a significant departure from the old rule, the IURC must determine whether utilities are actually in compliance with the rule, then issue a ruling saying that they are.

Utilities have objections

The state’s utilities have no problem with more transparency, said Ed Simcox, president of the Indiana Energy Association. “For the company to unveil in an IRP process what their long-range plans are is not objectionable,” he said.

But Indiana’s five investor-owned utilities do object to provisions allowing the state’s regulators to verify whether they’re complying with the new rule. In proposed edits of the rule submitted to the utility regulatory commission the trade group representing the state’s five investor-owned utilities, the Indiana Energy Association, struck that provision entirely. The IEA represents Duke Energy, Vectren, Indiana Power & Light, Indiana Michigan Power, and Nipsco.

They also have problems with another part of the rule that requires them to meet with environmental and ratepayer groups as the plan is being developed, rather than being presented with it after the fact. That gives those groups more input and perhaps influence on utilities’ long-term planning decisions, said Jesse Kharbanda, executive director of the Hoosier Environmental Council.

Such input matters, Kharbanda said, because it will allow advocates to “make sure utilities are properly modeling for prospective carbon rules, changes in renewable energy, capacity and operating costs, and things like combined heat and power.”

But the utilities are “very uneasy because it’s not them having unfettered discretion,” Mullett said. The current director of IURC’s electricity division, who reviews the utility filings, is someone who “asks hard questions and cares about the answers,”  he explained.It’s possible that hard questions from the IURC about whether the utilities are complying with the rule could delay approval of an IRP, which could delay approval of a power plant a utility wants to build. “That could delay a power plant, which could delay them from getting access to the money machine” that electricity ratepayers provide, Mullett maintained.

Simcox says the utilities are not necessarily opposed to more public input while they’re developing IRPs. But, he said, “the devil’s in the details.”

“To advise the public what companies are doing in terms of long-range planning is not an objection. 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.”