Regulators shoot down Indianapolis Power & Light’s extreme fixed charge increase

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While utility attempts to increase fixed charges during the second quarter of this year were the topic of focus earlier this week, a settlement has been reached on one of the first concluded cases during the third quarter.

On December 21, Indianapolis Power & Light (IPL) submitted a general rate increase petition, which included a proposal to raise the fixed charge on residential customers 63%, from $17 per month to $27. The $17 charge was already the highest in the state among investor-owned utilities, and $27 would have been one of the highest charges seen by pv magazine staff in the nation to date.

Yesterday, the utility and The Indiana Office of Utility Consumer Counselor, along with a handful of additional involved parties reached a settlement which does not include the proposed fixed charge increase.

This is a rare win in a state which is weak for distributed solar. Low residential fixed charges are one of the factors that keep residential solar economically viable, since these are fixed monthly charges that can not be reduced by net metering.

Speaking of net metering, Indiana recently passed Senate Bill 209. The bill essentially guts net metering effectivity within the state, establishing a phaseout of the policy by July 2022, or whenever eligible installed capacity reaches 1.5% of peak summer load.

Furthermore, IPL’s residential rate design is founded upon declining-block kilowatt hour (kWh) charges. Ben Inskeep, energy analyst at EQ Research, described this system as “regressive rate design”, given that it incentivizes consumption of more power by decreasing the price-per-kWh the more energy that is consumed.

Residential solar is attractive in states where electricity prices are high. Rooftop solar is supermodel-level attractive in Hawaii, where the price of electricity is 29.5 cents per kilowatt hour, more than double the national average of 12.9 c./kWh. Indiana’s electricity, however, comes in a full cent lower than the national average at 11.9 c./kWh. That, coupled with the recent gutting of net metering in the state does a number on the attractiveness of rooftop solar.

While this settlement provides relief in the sense that it keeps residential solar at its current viability, that is by no means a hopeful statement. “All in all, the recent framework has limited Indiana’s residential solar market,” Inskeep told pv magazine.

Unfortunately, there is no reason to look for a rebound on the horizon.