Senate Utilities Committee Hearing Notice

Thursday, February 7, 2013

Agenda for : Utilities February 7, 8:30 AM, Room 233, State House, Indianapolis

Chairman : Merritt

Members : Kruse R.M., Bray, Crider, Leising, Tomes, Yoder, Breaux R.M.M., Randolph, Broden

Hearing : Watch on-line at http://www.in.gov/legislative/2441.htm

SB 0365 Utility facility relocation (Sen. Crider)

SB 0510 Substitute natural gas contracts (Sen. Eckerty) IndianaDG supports.

Digest of SB 510: Substitute natural gas contracts. Defines "guarantee of savings" with respect to retail end use customers of substitute natural gas (SNG). Amends the definition of "purchase contract". Defines "savings shortfall". Requires the Indiana finance authority (IFA) to submit a final purchase contract, including amendments, and any other agreements with a producer of SNG to the utility regulatory commission (IURC). Requires the IFA to determine on a three year cycle if retail end use customers are provided a guarantee of savings or a savings shortfall under a purchase contract. Requires the IFA to electronically submit its findings to the IURC. Requires the IURC to verify and approve the findings and, if there is a savings shortfall, order a producer of SNG to provide a refund.

Summary of Legislation: The bill defines "guarantee of savings" with respect to retail end use customers of substitute natural gas (SNG). It amends the definition of "purchase contract". It defines "savings shortfall”. The bill requires the Indiana Finance Authority (IFA) to submit a final purchase contract, including amendments, and any other agreements with a producer of SNG to the Indiana Utility Regulatory Commission (IURC). It requires the IFA to determine on a three year cycle if retail end use customers are provided a guarantee of savings or a savings shortfall under a purchase contract. It requires the IFA to electronically submit its findings to the IURC. It requires the IURC to verify and approve the findings and, if there is a savings shortfall, order a producer of SNG to provide a refund.

BACKGROUND: The Indiana Finance Authority (IFA) entered into a purchase contract with the SNG producer in November 2011 under the authority of IC 4-4-11.6. Among other provisions, this contract includes a guarantee of savings clause pursuant to IC 4-4-11.6-7(3). The guarantee of savings clause requires the SNG producer to make a determination of any savings shortfall not later than 30 years after commercial production begins and, upon determining that a shortfall has occurred, make a payment of the shortfall amount to retail end-use customers.

The bill retroactively amends IC 4-4-11.6, effective March 24, 2009, and requires the final purchase contract submitted by the IFA to the IURC to include any amendments, addenda, or other modifications made or added to the contract at any time and any other agreements entered into between the IFA and the SNG producer. The amendments also specify that the purchase contract grant regulated energy utilities the right to enforce the contract as third-party beneficiaries. With respect to the guarantee of savings under the purchase contract, the amendments require the IFA to make a determination every three years whether a guarantee of savings or a savings shortfall has occurred. The amendments specify that a savings shortfall arises when the purchase price for SNG under the purchase contract is greater than the three-year average market price of natural gas during the particular three-year determination period. If a savings shortfall arises, the amendments require the SNG producer to make a payment to retail end-use customers in the amount of the savings shortfall.

The validity of the contract entered into in November 2011 is the subject of pending litigation. This bill may require additional contract negotiations, administrative review, and legal costs. This fiscal impact is contingent on the decisions made in response to the changes in this bill.

Indiana Senate Utilities Committee Members:

Senator Jim Merritt (R-Indianapolis), Chair, s31@in.gov or (317) 232-9533

Senator Dennis Kruse (R-Auburn), R.M., s14@in.gov or (317) 233-0930

Senator Rod Bray (R-Martinsville), s37@in.gov or (317) 232-9466

Senator Mike Crider (R-Greenfield),  s28@in.gov  or (317) 232-9463

Senator Jean Leising (R-Oldenburg), s42@in.gov or (317) 234-9054

Senator Jim Tomes (R-Blairsville), s49@in.gov or (317) 232-9414

Senator Carlin Yoder (R-Goshen), s12@on.gov or (317) 232-9984

Senator Jean Breaux (D-Indianapolis), R.M.M., s34@in.gov or (317) 232-9534

Senator Lonnie Randolph (D-East Chicago), s2@in.gov or (317) 232-9532

Senator John Broden (D-South Bend). s10@in.gov or (317) 232-9423