2009 Indiana General Assembly

While our legislators did not talk much about tax increases this year, there were several bills at the State House that would have dramatically increased our utility rates. These bills were loaded with trackers, which allow the utilities to avoid rate cases by raising rates when their costs go up, without ever having to lower rates when their costs go down. Trackers allow utilities to bypass most of the regulatory process, effectively implementing "backdoor deregulation." The good news is that we stopped every single one of these bills from passing this year!

However, this year's legislative process is not entirely over. Because our legislators failed to pass the Budget Bill, the Indiana General Assembly will have to go into Special Session this summer. Going into Special Session, we expect that Governor Daniels will continue to drive the agenda that the utilities are pushing. This agenda focuses on building more coal and nuclear power plants rather than moving towards renewables and energy efficiency. Efficiency and renewables will drive utility rates down, improve public health and the quality of our environment, and create more jobs per megawatt than either coal or nuclear.

The following are the synopses of the energy policy bills that passed the 2009 Indiana General Assembly.

Bad Bill - Leucadia Resurrected: Socializing the Risk and Privatizing the Profit

SB423:Substitute natural gas contracts

Authors: Sen. Hershman (R), Sen. Merritt (R), Sen. M. Young (R), and Sen. Hume (D)
Sponsors: Rep. Stilwell (D), Rep. Soliday (R), Rep. Crouch (R), and Rep. Moses (D)
Status: Signed into law by Governor Daniels on 3-24-09.

Summary: SB423 permits the Indiana Finance Authority to enter into contracts for the purchase and sale of substitute natural gas (SNG) from coal gasification facilities to regulated energy utilities for delivery to retail end use customers. It also requires the authority to establish the Substitute Natural Gas Account to provide funding for SNG related business.

For the last three years, CAC has been fighting legislation to force the construction of a coal-to-gas plant in Rockport, Indiana. In 2007, legislation was passed that practically gave Leucadia (a multi-national speculative venture corporation) the project and shifted the entire cost of construction and operation (i.e. financial risk) onto the backs of Indiana natural gas ratepayers. In order to garner support for the plant, they made promises to build the plant in Indiana (creating Indiana jobs) and to use Indiana coal. The project is called Indiana Gasification, LLC.

In 2008, when it became clear that Leucadia could not secure land contracts or Indiana coal contracts, the rules were changed again. Legislation passed in 2008 allowed the plant to be built outside of Indiana and not to have to use Indiana coal, but still to receive Indiana tax credits and to still keep Indiana ratepayers on the hook to assume all of the financial risk and liability of the plant.

Despite these obvious attempts to force the construction of the plant, by the end of 2008, all three Indiana natural gas utilities (Citizens Gas, Vectren, and NIPSCO) had withdrawn from negotiations to purchase the gas from Leucadia.

So now we get SB423. This bill changes the rules of the game again. It requires the state, via the Indiana Finance authority (IFA), to enter into those 30 year contracts for the syngas, forces utilities to deliver it, and forces ratepayers to pay for it. This bill essentially makes the State of Indiana (through the IFA) an unregulated energy utility. The project supporters put a $2.2 billion price tag on the project that gas ratepayers in Indiana would be forced to pay. This bill is the epitome of socializing the risk and privatizing the profits, as ratepayers assume the risk of the plant and then assume all costs, and Leucadia siphons Indiana ratepayer dollars out of Indiana. This bill will dramatically increase natural gas bills, and those customers who have Duke for electricity and Vectren for gas, will be doubly impacted, paying for Edwardsport on their Duke bill and Indiana Gasification, LLC on their Vectren bill.

SB423 was first heard in the Senate Utilities Committee. Normally, this committee room is packed to the hilt with utility lobbyists and other polluters, but not this hearing. The room was so empty you could have heard a pin drop. Outside of the OUCC, IURC, and developers of the project, I think there were maybe 3 people other than myself present. Can anyone say greased pig? After Sen. Hershman, the project developers, the Coal Council, and the consumer counselor (yes, I did say consumer counselor) testified how great this bill was, CAC voiced the only opposition to the legislation. Despite reminding the committee members that the gas utilities go in every 90 days for cost review of their purchases, and that this bill would not allow any review of cost for 30 years, and that it is unthinkable to expose Indiana natural gas ratepayers to the same risk that Indiana electric ratepayers face due to upcoming carbon regulations, the bill was deemed a great deal for the consumers of Indiana and moved out of committee with unanimous support 10-0. SB423 met no opposition on the Senate floor and moved unanimously 48-0.

The House hearing was held less than 2 weeks after passage from the Senate. As it turns out, Leucadia, the project developers, needed the legislation by Mid-March to apply for their federal loan guarantees, and our elected officials were quick to comply. The hearing in the House had many more attendees, including Bill Rosenberg the economic guru behind this project. Thanks to Mr. Rosenberg’s excruciatingly long testimony, the hearing was continued until after lunch. CAC was joined by Sierra Club and a few others in voicing opposition to the legislation, but despite our efforts, the lone no vote in committee came from Rep. Dvorak and the bill was moved 10-1. Rep. Pierce did give a spirited explanation of his yea vote, pointing out the hypocrisy of “free market” proponents and how their support of this bill was in contrast to those principals. He also pointed out how disingenuous it is for those same legislators to voice opposition to renewable energy legislation because of their position that it was not the role of government to pick winners and losers, when SB423 clearly picked a winner. He continued and espoused his frustration over the speed by which any legislation relating to coal is moved through the General Assembly with minimal opposition.

Rep. Pierce gave similar testimony before the full House on 3rd reading and despite SB423’s status as a greased pig, Rep. Crouch, Rep. Murphy, Rep. Soliday and others felt compelled to speak to the greatness of this legislation and urge their fellow legislators to support the bill. I can only surmise that efforts by CAC and Valley Watch in opposing this legislation and encouraging members to contact their legislators resulted in many phone calls, e-mails, and letters. Rep. Murphy said so much when he mentioned in his testimony that we have all received many e-mails regarding this bill. Nevertheless, the bill was passed 90-8, and signed into law just 8 days later by the Governor.

However it was discovered in the last week of the session that the way the bill was written, it rendered the coal gasification tax credit useless. This credit is necessary to make the plant financially viable and to make the use of Indiana coal an affordable option. The reason the tax credit is useless is that the IFA is not defined as a taxpayer, and the gasification credit is funneled somehow through the sales tax and utility receipts tax. Therefore, a mad dash by the Coal Council to get an amendment inserted into a bill was underway. The first place they put it, thanks to Sen. Hershman, was HB1447 or the massive 500+ tax matters bill. They also inserted it into the conference committee report of SB420, again thanks to Sen. Hershman. Unfortunately for the interested parties, HB1447 was never voted on in the House and died, and SB420 also died. We fully expect an attempt to move this amendment will be tried in the upcoming special session; CAC will be on guard.

Please thank Rep. Dvorak for his lone no vote in committee, and his no vote on 3rd reading, and holding firm to his commitment to protect Indiana ratepayers and Indiana’s environment. Also contact Gov. Daniels and let him know that his continued support of coal is undermining the economy of Indiana, driving up the cost of energy, and further eroding the quality of Indiana’s environment and the overall health of Hoosiers.

Votes:

• 2-12-09: SB423 passed out of the Senate Utilities Committee unanimously, by a vote of 10-0.
• 2-24-09: SB423 passed out of the Senate unanimously, by a vote of 48-0.
• 3-5-09: SB423 passed out of the House Utilities Committee by a vote of 10-1.
• 3-16-09: SB423 passed out of the House (with no amendments) by a vote of 90-8.

Good Bills

HB1348: Energy conservation codes and standards

Authors: Rep. Dvorak (D), Rep. Pierce (D), and Rep. Ruppel (R)
Sponsors: Sen. Gard (R) and Sen. Tallian (D)
Status: Vetoed by the Governor

Summary: Authored by Rep. Ryan Dvorak (D, South Bend), and joined by co-authors Rep. Pierce and Rep. Bill Ruppel (R, N. Manchester), requires the Fire Prevention and Building Safety Commission to adopt the most recent edition of the (1) International Energy Conservation Code as published by the International Code Council; or (2) American Society of Heating, Refrigerating, or Air-Conditioning Engineers Standard 90.1; for commercial structures before July 1, 2010. The bill originally required the commission to update both the residential codes and the commercial codes, but the language requiring residential codes was removed in the House Environmental Affairs Committee, primarily due to opposition by the Home Builders. After amendment, the bill met no resistance in the House, passing out of committee unanimously 11-0, and on 3rd reading before the full house 91-0.

HB1348 was sponsored in the House by Sen. Gard, and co-sponsored by Sen. Tallian. The House version would have required the commission to adopt any subsequent versions of the code within 18 months of being updated. That language was removed in the Senate Energy and Environmental Affairs Committee, and the bill passed unanimously 8-0, after amendment. The full Senate then moved the bill by a vote of 47-2. Rep. Dvorak concurred with the Senate language and the bill was adopted by the House unanimously 96-0. However, HB1348 has since been vetoed by Gov. Daniels.

It is disappointing that residential buildings were removed from the legislation. Just as the utilities refuse to change their behavior and have enormous influence over legislation, the Home Builders are exerting themselves, and thwarting efforts to make Indiana a better, cleaner, and more sustainable place in which to live. Nevertheless, this bill is a very positive step in the right direction, as Indiana has operated on very outdated commercial energy codes for years now, wasting an enormous amount of energy, money, and resources. Buildings consume nearly 50% of our energy, and account for almost a third of our CO2 emissions.

Please call Rep. Dvorak and thank him for his continued and committed leadership to improve Indiana’s environment.

Votes on HB1348:

• 2-4-09: HB1348 passed out of the House Environmental Affairs Committee by a vote of 11-0.
• 2-17-09: HB1348 passed out of the House by a vote of 91-0.
• 3-23-09: HB1348 passed out of the Senate Energy and Environmental Affairs Committee by a vote of 8-0.
• 4-2-09: HB1348 passed out of the Senate by a vote of 47-2.
• 4-27-09: The House concurred with the Senate amendments by a vote of 96-0.
• 5-11-09: Vetoed by Gov. Daniels

HB1669: Geothermal conversion loans

Authors: Rep. Michael (D), Rep. Moses (D), Rep. Niezgodski (D), and Rep. Frizzell (R)
Sponsors: Sen. Gard (R), Sen. Tallian (D), and Sen. Errington (D)
Status:Ready for enrollment into Indiana law

Summary: HB1669 establishes the Geothermal Conversion Revolving Fund for the purpose of making loans to school corporations that: (1) install a geothermal heating and cooling system in a new facility; or (2) install a geothermal heating and cooling system that replaces a conventional heating and cooling system. HB1669 was first heard in the House Commerce, Energy, Technology, and Utilities Committee and was voted out unanimously. However, due to a tight budget and fiscal restraints, the committee did amend it by changing the date of the fiscal impact to the next biennium, avoiding adding it to the 2009 Budget. Despite removing the fiscal, it was still referred to Ways and Means, but was quickly moved unanimously. The bill also received unanimous support on the 3rd reading vote in the House 94-0.

The bill was sponsored in the Senate by Sen. Gard, Sen Errington, and Sen. Karen Tallian (D, Portage). The only no vote on the bill the entire session came during the vote in the Senate Energy and Environmental Affairs Committee by Sen. Gary Dillon (R, Pierceton), who confusingly said he supported it but was voting no. The bill also moved out of Appropriations unanimously, and on 3rd reading before the full Senate,. Rep. Michael dissented on the bill so language offered by Sen. Connie Lawson (R, Danville) regarding energy savings contracts for political subdivisions could be added to the bill. The language extends the length of an energy savings contract from the current 10 or 15 years, to 20 years, allowing more expensive efficiency measures to be included, such as new HVAC systems. The conference report on HB1669 passed both Chambers unanimously and is now eligible for Gov. Daniels to sign into law.

HB1669 represents everything the General Assembly should be doing: 1) Job creation – Not only will these systems be installed in Indiana, but one of the largest manufacturers of geothermal pumps in the country is in Ft. Wayne. 2) Protecting taxpayers – Geothermal saves a significant amount of money on utility bills, and thus will save taxpayer dollars, as the pay back period on many geothermal systems is less than 3 years. 3) Climate Change mitigation – By reducing the use of fossil fuels, Indiana is taking a positive step, by reducing CO2 emissions. And 4) Energy independence – We are reducing the need for imported natural gas, and instead moving towards clean, renewable, and homegrown energy.

This bill was the result of very hard work by the DePauw Environmental Policy Project, a collection of faculty and students from DePauw University interested in environmental policy in Indiana. Professor Kelsey Kauffman and her students worked tirelessly at the Statehouse, testifying in committees and talking to legislators in the hallways and in their offices about this bill and other environmental challenges facing our State. One of the early highlights of the session came when this bill was first heard in House committee. The DePauw students were present en masse, and after all the testimony for the bill was concluded, Chairman Moses challenged anyone who wanted to step forward and walk by the all the DePauw kids who worked so hard on this bill for the last 12 months, and tell them why you oppose their bill. Understandably, no one accepted the Chair’s offer. DePauw should be very proud of what of Professor Kauffman and her students accomplished.

Please call Rep. Michael and thank her for her leadership on this issue, and her perseverance in seeing this bill through.

Votes on HB1669:

• 1-22-09: HB1669 passed out of the House Commerce, Energy, Technology and Utilities Committee unanimously, by a vote of 10-0.
• 2-9-09: HB1669 passed out of the House Ways and Means Committee unanimously, by a vote of 17-0.
• 2-17-09: HB1669 passed out of the House unanimously, by a vote of 94-0.
• 3-16-09: HB1669 passed out of the Senate Energy and Environmental Affairs Committee by a vote of 7-1.
• 4-9-09: HB1669 passed out of the Senate Appropriations Committee unanimously by a vote of 9-0.
• 4-15-09: HB1669 passed out of the Senate unanimously by a vote of 50-0.
• 4-29-09: After surviving Conference Committee, HB1669 passed the House unanimously by a vote of 93-0.
• 4-29-09: After surviving Conference Committee, HB1669 passed the Senate unanimously by a vote of 49-0.

Click here for the good bills that died in the 2009 session.

Click here for the bad bills that died in the 2009 session.