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EDITORIAL: Push electric deregulation

February 22, 2014

Gov. Pence is smart to begin studying electric utility deregulation, and his trademark cautious, collaborative style could help the state avoid creating more problems than any reform he proposes might solve.

Green energy, particularly solar, is changing the industry faster than just about anyone predicted a decade ago—all at a time when Indiana’s historically low electricity rates are climbing rapidly.

Opening electricity markets typically involves letting customers choose their energy suppliers, while utilities continue to provide the lines delivering the electricity. We want to see the governor and General Assembly pursue that route—potentially giving the state a powerful economic boost. At the same time, those crafting the complex new policies must require safeguards to ensure that consumers and small businesses won’t be stuck with shouldering most of the costs of maintaining existing generating stations and power lines.

As IBJ’s Kathleen McLaughlin reported Feb. 17, the state Office of Energy Development has been meeting with stakeholders with the goal of evaluating the merits of deregulation.

A plan with recommendations is anticipated in June.

Companies that rely on a lot of cheap coal-fired power are complaining that prices have risen to the middle of the pack among states and are projected to rise another third in the next decade.

Utilities blame clean-air regulations, while consumer watchdogs finger over-construction of power plants. But regardless of the cause, the impact is an unacceptable rate disadvantage in the state most dependent on manufacturing.

Pence needs to grasp not only the roots of the rising rate disadvantage, but also the explosive growth of solar energy. Prices of solar panels have fallen to the point where homeowners and some businesses in sunny Western states and pricey Northeastern states are beginning to drain significant revenue from utilities.

Therein lies the crux of deregulation, or restructuring, as the utilities like to call it: Someone needs to pay to maintain the power lines and the power plants for the times the sun doesn’t shine, or the wind turbines don’t turn.

This is no small hot potato.

As Pence’s team decides how to fairly reallocate those costs, big users shouldn’t be allowed to push them disproportionately onto consumers and small businesses. One way to level the playing field would be to allow small customers to aggregate their buying power—imagine cities negotiating rates with multiple utilities.

It won’t be easy for Pence and lawmakers to inject more competition into the system while treating all the players fairly. But that’s part of the job they were elected to accomplish.•

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Send comments on this editorial to ibjedit@ibj.com.

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