As currently written, the legislation would have little impact on utility planning, but that could change with amendments.
Correction: The Indiana NAACP has participated in the state energy task force planning process, though it is not a formal member. An earlier version of this story misstated the group’s affiliation with the task force.
An Indiana bill moving through the legislature would place unprecedented new burdens on utilities before they could close coal-fired power plants.
But under amendments proposed in the past week, it’s unclear if the bill would have any impact at all on utility resource planning.
That is not necessarily a relief to clean energy advocates, citizens groups, industrial customers and others who oppose it. Rather, it makes some worry that the bill is a “Trojan Horse,” in the words of Citizens Action Coalition executive director Kerwin Olson, that could become more insidious with revisions after it is passed, namely the removable of a July 2021 sunset provision currently in the bill.
HB 1414 would require utilities get approval for coal closures from the state regulatory commission, and order that plants can only close because of federal mandates unless it’s proven that closure is in the public interest.
No coal plants are slated for closure before the July 2021 sunset date, except for one that has an exemption in the bill. Hence the proposal would have no apparent impact.
But opponents worry the sunset provision is meant to assuage concerns over the bill, while still leaving the door open for future legislation or last-minute amendments to remove it.
Republican state Rep. Edmond Soliday, sponsor of the bill, has framed the current version (with the sunset) as creating a “pause” on plant closures until a state energy task force finishes a report due next year.
But Olson says it “begs the question: what are we pausing? It doesn’t pause anything if the sunset date is real since it wouldn’t affect closures in the next year.”
The Indiana Energy Association that represents the state’s utilities has opposed the bill. But advocates also worry that legislators and coal industry interests supporting the bill are trying to sweeten the deal for individual utilities so that they will support it.
Amendments have offered extra payments for coal plants ready to provide power, by paying for coal stored onsite and offering extra return on investments for “reliable capacity electricity generation” defined in a way to basically mean coal plants: plants that have a capacity factor of at least 50% and an availability factor of 70%.
“One of their big interests is to have only coal plants defined as reliable, which is absurd,” Olson said.
The increased return on investment for coal plants, and forcing utilities to continue relying on costly coal power, will raise rates for customers, opponents of the bill say.
The organization Advanced Energy Economy, which represents commercial and industrial companies supporting renewable energy, energy storage, energy efficiency and other “advanced” options, is among the opponents of the bill.
“It sets a really dangerous precedent; it truly interferes with the free market,” said AEE state chair Caryl Auslander. “Decisions being made by utilities should determine what is best for them as a business and what is best for their customer base.”
Clean energy and environmental justice advocates are also opposing the bill, since keeping coal plants open would disproportionately impact the low-income, minority communities that tend to be located near them. The Indiana NAACP, which has participated in state energy task force proceedings and is an ardent backer of clean energy, was among those testifying against the bill.
Indiana ranks second nationally in coal consumption, behind only Texas, and eighth in coal production. Indiana power plants primarily use Indiana coal, with coal accounting for almost two-thirds of the state’s energy, even though the number of coal plants has shrunk from 26 to 13 since 2010.
Utilities Vectren, NIPSCO, Duke and Indiana Power & Light have all announced plans to close multiple coal plants in coming years. Duke announced plans to close nine units by 2038; NIPSCO plans to retire all of its five units within a decade (four of them in five years); and Vectren plans to close three of its four units by 2024. (Most coal plants are home to multiple units). The utilities have all announced plans to build new natural gas, solar and/or wind generation.
Vectren, NIPSCO and Duke referred questions to the Indiana Energy Association, which, in response to questions from the Energy News Network, said, “Given the bill is still very much in flux, we will continue to monitor any new developments to determine the impact on our member companies and position on the bill.”
The Indiana Coal Council did not respond to a request for comment.
The bill passed the state House committee on utilities and energy that Soliday chairs on Jan. 22, with a 9-4 vote along party lines. A full House vote is expected this week.
A reliability crisis?
Proponents of the bill say it is meant to ensure energy reliability. But before closing a coal plant, utilities already must seek approval from the relevant regional transmission organization (RTO) — MISO or PJM — to ensure reliability won’t be affected.
“You can’t remove a resource before you get a thumbs up from the RTO,” Olson said. “This whole nonsense about reliability concerns is completely unfounded. If there were serious concerns about grid integration and reliability, utilities would be raising these issues. It’s a manufactured crisis, by the coal industry, that the lights are going to go out.”
The Indiana Utility Regulatory Commission already reviews any plant closure plans as part of the utilities’ integrated resource plans, or IRPs. IRP review is “a very robust, participatory, stakeholder-driven process,” Olson noted during his testimony during a House committee hearing Jan. 22.
Experts said they think it is rare to give a state regulatory commission additional power to approve or deny a utility’s plans to close a coal plant.
Indianapolis Power & Light spokesperson Courtney Arango explained that the utility went through the IRP process regarding its plans to close two units at its Petersburg plant in 2021 and 2023. The closures would not be affected by the bill because of an exemption for closures already laid out in IRPs.
“The bill as passed out of committee is not a version we support because we believe the current IRP process works well, as it requires utilities revisit their generation portfolios every three years,” Arango said. “Economics, cost-to-customer and reliability are the primary drivers of our IRP. The IRP process resulted in a preferred portfolio that offers the most economical option and provides safe, reliable and affordable power.” She added that the planned Petersburg closures “provide cleaner, greener energy solutions for our customers.”
She added that “the bill as passed out of committee limits IPL’s ability to maintain flexibility with its integrated resource plan.”
The IRP process is detailed but informal and collaborative, whereas the process that the bill would create before the regulatory commission is more akin to a trial. Olson and Auslander said it is risky to open up such “adversarial proceedings” before the commission, wherein the coal industry can make their case and it’s up to advocates or utilities to rebut them.
The bill says the state regulatory commission can only approve a coal plant closure if it is mandated by an existing (not anticipated) federal law, or in the “public necessity and convenience.” Advocates and utilities could argue that with natural gas and renewables becoming cheaper than coal, not to mention the health and environmental impacts of coal, plant closures would indeed be in the public interest. But they’d have to present costly experts and evidence to make that case, while the coal industry would bring its own evidence, and the commission would have binding power to decide the outcome.
“Big Coal has been very active at the IURC [Indiana Utility Regulatory Commission] in recent years,” Olson said. “They would have the opportunity to present their case, litigate, and bog down the system, potentially slowing the transition [to cleaner energy] and costing customers a ton of money.”
Inhibiting renewable development
In Indiana as nationwide, utilities have increasingly invested in renewable energy, and natural gas, as a cheaper and cleaner option than coal. But the bill could inhibit utilities’ ability or desire to invest in renewables, if the sunset is removed and the law forces them to continue to rely on coal or offers them extra incentives to do so.
The day after the House committee hearing on the bill, AEE released a study showing that businesses want to be able to purchase renewable energy from utilities or generate their own under rate structures that make it worthwhile. Under scenarios modeled by the firm Wood MacKenzie that did the study for AEE, there will be an “estimated demand for renewable energy from large energy users ranging from 1.7 GW to 3.6 GW over the next 10 years.”
The coal plant bill directly counters this goal, Auslander said, since it could curb utilities’ investments in renewables and their motivation to support customers generating their own clean energy.
The study notes that Anthem, the health insurance company headquartered in Indianapolis, has committed to achieving 100% renewable energy, as has Walmart. Other Indiana companies that have set ambitious renewable energy goals include Berry Global, Best Buy, Cummins, Eli Lilly and Co., General Motors, Salesforce, Skjodt-Barrett Foods, and Unilever, the study says. And AEE predicts companies would choose to locate new headquarters, distribution centers or factories in Indiana if vibrant clean energy options are available.
The AEE study predicts over $5 billion in investments could be generated and 25,000 jobs created if utilities institute rate structures conducive to renewable energy and offer large customers more options to purchase renewable energy, whether directly through utility-owned generation or as renewable energy credits.
“That’s real dollars,” Auslander said. “If we don’t meet that demand, our concern is that investment will go someplace else.”