The Utility Agenda

Tue, 06/19/2012 - 14:34

Indiana’s major utility companies (Duke, AEP, IPL, Vectren, NIPSCO) provide retail electric service essential to the health and vitality of Indiana, its economy, and its citizens. It is a business that has public interest mandates, and they have been granted state franchised monopolies that protect them from competition and guarantee them an opportunity for profit in exchange for a requirement they provide adequate and reliable electricity service at the lowest reasonable cost to the public.

However, once local utilities are now part of growing corporate empires that stretch over many states. As a result, the public service aspect of their business has virtually disappeared. Moreover, the lobbying efforts of these monopoly utilities are erasing the regulatory and legal balancing act between utilities and ratepayers interests.

Significant deregulation occurred during the 1990s under the pretense of competition. Ratepayers were going to have a choice of supplier and those owning power plants would compete for customers. What happened, however, was further consolidation of the industry and entrenching of monopolies who gamed the deregulated system to receive windfall profits. The manipulation of gas markets and electric wholesale markets continues on a smaller, but still, detrimental scale today.

Indiana avoided the catastrophe of near total deregulation the utility industry won in other states. However, Indiana’s utility industry has found ways to force, through law and regulation, virtual (or backdoor) deregulation.

CAC, with the critical and necessary support of its members and other citizens, has kept the floodgates from opening. However, as a spokesperson for some of Indiana’s industrial energy consumers once quipped, the current utility deregulation approach is "like being nibbled to death by ducks."

Since 2002, Indiana’s large gas and electric utilities have aggressively implemented the following strategies:

  • Recover costs from ratepayers as quickly and automatically as possible;
  • Reduce or eliminate regulatory oversight of planning, revenue, and profits;
  • Create new incentives on top of their cost-plus rates to increase their rate of return (profit) for making investments they are already obligated to do under the law.

Some of the ways utilities do this are:
Trackers
Construction work in progress (CWIP)

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