AES Indiana reaches agreement to raise electricity rates 7.3%

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Electric utility AES Indiana has reached a settlement agreement that would raise monthly rates next year by approximately 7.3% for the average residential customer but would clamp down on the utility’s disconnection practice and offer other consumer protections.

AES Indiana, formerly known as Indianapolis Power & Light Co., announced the agreement Wednesday evening before the Thanksgiving holiday. The agreement, signed by consumer groups and a wide assortment of large customers, still needs approval from state regulators.

The utility said it plans to use the money for what it called rising operational costs, tree-trimming and other needs.

“We have a commitment to our customers and community to ensure safe, reliable electricity at an affordable price,” Ken Zagzebski, the utility’s president and CEO, said in written remarks. “This agreement is a critical step forward to make certain the necessary investments continue, creating meaningful reliability improvements in how we serve our customers.”

The deal, if approved by the Indiana Utility Regulatory Commission, would raise monthly rates by $9.52 or approximately 7.3% for the average residential customer using 1,000 kilowatt hours a month, the utility said. That’s less than its initial proposal, submitted in June, that would have raised rates by about $17 a month, or 13%.

The utility’s initial proposal provoked widespread objections, including from more than 40 customers who attended two field hearings.

Citizen Action Coalition of Indiana, a utility watchdog group, had criticized AES Indiana for seeking a rate hike just two years after the utility got approval to spend $1.2 billion to upgrade its local energy grid. That approval set the stage for the approval of seven straight years of rate increases to pay for the improvements.

The consumer group also faulted AES Indiana for disconnecting more households across the state in recent years than any of its peer utilities.

In response, AES Indiana has agreed not to disconnect service for any residential customer on Fridays, Saturday, Sundays and eight holidays (New Year’s Day, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, the Friday after Thanksgiving, Christmas Eve and Christmas Day).

It also agreed that it would not charge for a remote disconnection with newly installed “smart meters,” and would charge only $3 for a remote reconnection. The utility had wanted to charge $8 for a remote disconnection and another $8 for a remote reconnection, according to Citizens Action Coalition.

“We are pleased with the proposed settlement and believe that it reflects a positive outcome for customers that may not have been achieved through litigation,” Kerwin Olson, the group’s executive director, told IBJ in an email.

The utility also agreed to waive disconnection and reconnection fees for low-income home energy assistance program customers once per rolling 12-month period. It also agreed to waive the late-payment charge on a late bill once per rolling 12-month period for any customer.

In addition, AES Indiana will hold the fixed charge for residential bills at $17 a month, instead of increasing it to $25 for most residential customers, as it originally proposed. Fixed charges are applied to customers regardless of how much electricity they use.

The utility agreed to meet with Citizens Action Coalition and OUCC regarding education and outreach practices for Medical Alert and Medical Hold Programs, including the service status of these customers during system-wide outages.

The deal, if approved, would increase the utility’s total annual revenue by $72.9 million or 4.6%, according to the Indiana Office of Utility Consumer Counselor, a state agency that represents all consumers in cases before utility regulators. That’s a sharp cut from its original request that would have increased annual revenue by $134.2 million, or 8.4%.

“The settlement agreement offers a fair resolution if approved by the Commission,” the OUCC said in a statement. ” It allows a much lower increase than what AES requested, but will provide the utility with the revenues needed for improvements to its distribution, transmission, and customer service systems.”

The utility had said the request was its first base rate increase request in five years and came as a result of “inflationary impacts” on operations and maintenance expenses, investments in reliability and enhancements to customer systems. Base rates allow utilities to recover the cost of investments in infrastructure and operating expenses.

The proposed agreement was signed by AES Indiana, the city of Indianapolis, grocery retailer Kroger Co., discount retailer Walmart, jet engine maker Rolls-Royce Corp., Citizens Action Coalition, the Office of Utility Consumer Counselor, and the AES Indiana Industrial Group, which represents large industrial customers.

State regulators will review the settlement agreement next month and are expected to issue a ruling in early 2024. If approved, the new rates would go into effect next summer.

AES serves about 500,000 customers in central Indiana. It is a unit of Arlington, Virginia-based AES Corp.

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16 thoughts on “AES Indiana reaches agreement to raise electricity rates 7.3%

    1. I’m all for nuclear power,. but let’s not spread disinformation. The per-MWh production of wind and solar is pretty cheap (median price in the US, about $50 per MWh and $56 per MWh, respectively). The median price per MWh on coal and nuclear is $88 and $69, respectively (sourced from the International Energy Agency). Obviously, the big advantage that nuclear has over wind and solar renewables is its ability to scale very quickly.

    2. Your cited price of wind and solar does not take into account the redundancy that needs to be built into the power grid when they don’t produce power.

      When you take into account the need for backup natural gas turbines to offset the unreliability of wind and solar, they cost magnitudes more for electricity.

    3. A.R., yes, you are correct. Either continuing existing gas turbines or building new ones, those costs are not included when the cost of solar and wind are estimated.

      In reality, when you add the requried backup generation to the cost of unreliable sources of energy like wind and solar, they cost multitudes more than quoted.

      Just one of the many “inconvenient truths” of unreliable energy sources.

    4. But you assume a lot of infrastructure would have to be built as backup to wind/solar but as AR notes most of that already exists. So, how can adding a much lower cost primary source of energy to an existing higher cost secondary source of energy make it more expensive than current? Agree that nuclear would also offer a lower ongoing energy cost vs current (still higher than wind or solar) but that is where you really get into the very expensive additional infrastructure cost.

    5. Greg,

      Gas turbines require ongoing maintenance, fuel, and at some point, replacement. As electricity needs increase, adding more wind/solar will require more redundant backup. The problems that afflict unreliables like wind and solar don’t go away just because you add more unreliable capacity, existing turbines can only increase capacity so much to compensate for unreliability. Also, gas turbine lifetimes are only so long.

      If you say “we can add 100 units of wind/solar with no additional gas turbine use”, the gas turbines output would still have to be increased by an ill-defined amount for redundancy. If capacity isn’t increased, then the utility customers will suffer from brownouts and blackouts.

      And it truly is unpredictable how much electricity can be produced by wind/solar, because weather is unreliable in both cloud cover and wind speeds. And wind turbines and solar themselves need maintenance and replacement. Wind power suppliers like Siemens did not realize how much their turbines would fail. Solar panels need to be replaced every few years because of loss of efficiency.

      And with more “investment” in wind and solar at the expense of fossil fuels, fossil fuel costs go up, not down due to scarcity. Backup electricity generation costs will continue to go up and would need to be factored into the cost of the unreliables (which is currently not being done for political reasons).

  1. The remote connect/disconnect fees are a joke. With a smart meter, all it takes to turn a meter off or on is a keystroke from comfy desk at the AES Indiana Service center. I will admit, it might take a few minutes to set up the billing information on a new connection, but isn’t that the cost of doing business?

    But my recent experience with the call center has been dismal. There were a few days last week I was unable to speak with a live person. One call was 30 minutes of hold music, followed by 15 minutes of dead air (but not disconnected), before I hung up.

    I sure hope they get the call center problems fixed before we get any bad weather!

    1. There are no more “comfy desks at AES.” All the CSR’s work from home now so even more savings to AES. The last time I called them was a few weeks’ ago and I waited over an hour to speak to someone. Unfortunately I work for a property management company and I have to call the utility companies quite frequently. AES needs to institute a call back system like the one used by Citizens Energy so customers don’t have to wait on hold forever and a day!

  2. Their profits should hurt just like our pockets already hurt from inflation. I’m figuring out my grocery tabs with the same money and more expensive costs, why can’t they figure out. They always figure out a way to make more profit to keep the money flowing.

  3. Remarkable how so many people don’t understand the costs to build, maintain, expand, and protect utilities (electric, gas, water, sewer, and communications). Apparently they believe these conveniences just magically happen, immune natural disasters, inflationary pressures, and aging. When any one temporarily is knocked out of service, all they can do is complain while questioning why rates have to be increased. So much for critical thinking and logic!

    1. I think the issue is more so why does it cost on average $100/1,000 ft to operate a home in Indianapolis…

    2. Yeah, this isn’t why people are mad. People are mad because service quality has worsened while profits at AES have taken a big jump. Those AES executives are practically rolling in cash while they literally can’t keep the lights on. We’re sick of seeing the rich get richer at everyone else’s expense.

      Personally, for natural monopolies like utilities, I think profit motive should be removed from the equation entirely. There’s no cost benefit to the end-user, since there is no competition to drive down prices (although, even if there were, it isn’t a guarantee that prices would decrease. Ex. Texas) or incentive to provide better service. Things like roads, railways, water, sewer, and electricity are best handled by the public sector.

    3. A.R., that’s why we should ditch wind and solar, they cost a fortune and they do nothing to reduce the costs of electricity, but in reality make the costs far higher.

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