Sunday, April 7, 2013

Utilities fight proposal that could lower your bill


Would compWind power generating companies say the law regulating Indiana’s utilities lacks one key element that could slow the rapid rise in Hoosiers’ electricity bills -- competition.

State lawmakers have been considering a proposal to allow alternative energy companies to bid on the right to produce electricity, instead of leaving that responsibility in the hands of giant regulated utilities.
The current system, the alternative producers argue, denies them a home-grown market, creates big profits for utilities and contributes to rising electricity costs. Utilities, however, oppose the change, saying they are responsible for providing electricity and are therefore in the best position to make decisions on how to generate it.
To understand how such decisions are now made, consider the state’s last major project, Duke Energy’s $3.5 billion coal gassification plant in Edwardsport. State law allowed Duke to propose a builder for the plant.
Duke had two choices: build the plant itself and earn a substantial return on its investment -- in this case, about $181 million; or purchase power from another company and earn no return.
Such choices generally are easy for utilities like Duke. In Indiana, 95 percent of all electricity is generated by facilities owned by its five regulated utilities, or affiliated companies.
But other energy producers are calling for change. If the proposed amendment is added on an energy bill, utilities would have to request bids for their projects, creating an incentive to keep costs down. State regulators or their designees would choose the best project.
Under the proposed amendment, the winning bidder could no longer shift cost overruns onto ratepayers. Now, ratepayers sometimes shoulder those costs. Amid construction overruns and ethical questions, Duke’s project skyrocketed $900 million over estimates, and the company will raise rates by up to 16 percent, partly to recoup some of those costs.

Kerwin Olson of the Citizens Action Coalition, an advocacy group for energy policy and utility reform, contends Edwardsport never would have won approval in an open market. Olson, who backs the energy proposal, believes other energy sources, such as wind power, would have been less expensive to buildetition slow the rapid rise of electricity bills?