FAC Tracker: Expensive, Unreliable Fossil Fuels Driving Hoosier Bill Spikes

If you’ve noticed a recent spike in your electric bills, increases in the cost of fossil gas and coal are largely to blame.


Throughout late 2021 and all of 2022, the price of fossil gas and coal increased dramatically. Because Indiana is still heavily reliant on fossil fuels to produce electricity, Hoosier utility customers are paying a heavy price for the decisions of Indiana monopoly electric utilities to delay meaningful investments in renewables and energy efficiency. 


Utilities charge you for the cost of coal, fossil gas, and other fuels through a tracker called the Fuel Cost Adjustment/Fuel Adjustment Clause (FAC). Indiana’s monopoly electric utilities make FAC filings every three months, except for Indiana Michigan Power (I&M/AEP), which files every six months. The FAC tracker allows the utilities to adjust customer bills to reflect fluctuations in the cost of coal and gas (fuel for their power plants), as well as the costs related to purchasing energy in the wholesale markets and energy from their solar and wind long-term power purchase contracts. Although the utilities’ FAC tracker is updated every three or six months, many experts project long-term increases in the price of fossil gas and coal.


Hoosiers are being forced to pay the price for the poor choices of Indiana's monopoly electric utilities.


Utilities do not mark up or profit from the direct costs of fossil gas and coal - you pay the amount that the utilities paid to purchase those fossil fuels. However, there are extraordinary ongoing costs associated with the use of fossil fuels to make electricity - the costs to build the fossil fuel power plants, the ongoing operation and maintenance costs for the power plants, and the costs associated with dealing with the toxic coal ash produced by these power plants, to name a few. There are also enormous environmental and societal health costs that come from the air and water pollution generated by these fossil fuel power plants. 


Because Indiana’s profit-hungry monopoly electric utilities put off investing in renewables and efficiency (enabled by the Indiana General Assembly), captive Hoosier utility customers are struggling to afford huge increases in their electric bills caused by fuel cost volatility.  Unlike risky and expensive fossil fuels, renewables and efficiency are not subject to the regular and ongoing volatility of fuel prices and fuel-supply constraints facing coal and fossil gas, and they do not face the substantial ongoing capital and O&M costs that plague fossil-fuel power plants


Indiana's monopoly electric utilities have ZERO risk when it comes to rising fossil fuel prices.


With the FAC tracker, the utilities are insulated from the risks presented by rising and volatile fossil fuel prices. This leads to poor business and poor management decisions, evident by Indiana’s heavy reliance on coal and fossil gas to produce electricity. As captive customers of Indiana's monopoly electric utilities, Hoosiers - who are struggling to put food on the table and keep a roof over their heads - are forced to absorb the risk and the cost of fossil fuels. Meanwhile, the healthy monopoly utilities and their voluntary investors who are notoriously profligate with capital enjoy complete financial protection.

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