Indiana's electricity rates will surge nearly a third over the next 10 years, driven upward by new federal pollution restrictions on coal-fired power plants, the costs of new plants and other factors, a Purdue University research group predicts.
The report by the State Utility Forecasting Group projects that Indiana's electricity rates will increase by 32 percent from 2013 to 2023. That spike is expected to lead to an unprecedented flattening in demand for electricity in Indiana, with demand growing on average less than 1 percent — about 0.74 percent — each year over the next 20 years, according to the report.
"As electricity gets more expensive, people tend to use less of it, much like any other commodity," Douglas Gotham, director of the Purdue-based research group, said Tuesday.
He said the growing embrace of energy efficiencies through utility-sponsored conservation programs will also help hold down Indiana's demand for electricity in the decades ahead.
The reports finds that the projected surge in electricity rates will be sparked in part by the U.S. Environmental Protection Agency's first rules aimed at controlling mercury and other toxic air pollution from coal-fired power plants.
Indiana gets nearly 80 percent of its electricity from such power plants.
The idling of older power plants, the costs of extending the lives of other plants and bringing new plants online will also contribute to expected rise in Indiana's electricity rates, Gotham said.
The utility forecasting group's new report is its first to quantify the potential impact of the EPA's new regulations on Indiana's electricity rates in the decades ahead, said Danielle McGrath, a spokeswoman for the Indiana Utility Regulatory Commission.
The report, which includes projections of Indiana's energy needs through 2031, was presented to the IURC on Dec. 20, and was released publicly on Monday.
McGrath said the state-funded forecasting group is staffed by Purdue researchers and is required to prepare a detailed report every two years on Indiana's future electricity needs for review by state regulators, lawmakers and others.
She noted that while the report predicts electricity rates will increase by 32 percent over the next 10 years, the IURC must review utilities' request for rate increases on a case-by-case basis before that panel decides whether or not to approve rate hikes.
"While this document does give us projections, no costs are passed along to customers until a case actually comes to the commission for review and is approved," McGrath said.
Kerwin Olson, executive director of Citizens Action Coalition of Indiana, said he's pleased the new report acknowledges the role energy efficiency plays in reducing demand for electricity. But he said there's even greater potential for more investment both in energy-efficiency equipment and renewable energy sources such as solar power that could ratchet demand further down.
"I don't necessarily agree that electricity rates have to increase in such dramatic fashion, considering the advances in technologies and the potential that still exists for efficiencies and renewables," he said.