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Energy Efficiency Policies and Practices in Indiana

Utility Sector

Utility sector policies are those policies that directly affect the way that the state's electricity and natural gas utilities do business and serve the energy needs of their customers.  These policies include utility forecasting and planning requirements for energy efficiency, requirements for energy efficiency delivery to customers, regulatory mechanisms to determine utility revenues for energy efficiency services, processes for working collaboratively with other utilities and energy stakeholders to advance energy efficiency, requirements for evaluating energy efficiency programs and portfolios, and policies to promote the development of the next generation of energy grids.


Resource Planning

Resource planning in Indiana is regulated under 170 IAC 4-7-1 through 4-7-9. Resource plans in Indiana are submitted by electric utilities every 2 years and cover a 20-year planning horizon. Under 170 IAC 4-7-6(7)(b) utilities are required to "consider alternative  methods  of  meeting  future  demand  for  electric  service.  A  utility  must  consider a  demand-side  resource,  including  innovative  rate  design,  as  a  source  of  new  supply   in  meeting  future  electric  service  requirements."

On April 13, 2015, Senate Bill 412 passed out of the Senate and House, and was sent to Governor Pence who signed it into law on May 6. The bill ties utilities’ demand-side management (DSM) programs to their integrated resource plans, and provides that utilities set their own DSM goals and use independent evaluators for EM&V.

► Overview of Resource Planning policies in the Midwest


Energy Efficiency Standards

Electricity

The Indiana Utility Regulatory Commission ordered in the Phase II Order in Cause No. 42693 on December 9, 2009 that the state's electric utilities file Demand Side Management (DSM) plans that will include proposals and progress for meeting a portion of the state's electricity needs with energy efficiency. Based on previous 3-year average sales, utilities will be required to meet a goal of 0.3% efficiency in 2010, ramping up an additional 0.2% yearly through 2018 (1.9%) and an additional 0.1% in 2019 to reach a total of 2.0% annual energy efficiency in the next 10 years. They also ordered the formation of initial DSM Core Programs to be offered by utilities throughout the state, and a DSM Coordination Committee that will issue RFPs for an Independent Third Party Administrator to oversee the Core Programs, and for an independent administrator to undertake Evaluation, Measurement & Verification (EM&V) for the program offerings.

On March 27, 2014, Governor Pence allowed SB 340 to become law without his signature, which ends the Energizing Indiana program and the state's energy efficiency standard after December 31, 2014.

► Overview of Efficiency Standards policies in the Midwest


Rate Structures & Incentives

With the ending of Indiana's EE standard, it remains to be seen what future legislative action and regulatory rulings will bring to Indiana's energy efficiency policies. The following rules were in effect under Indiana's now-overturned standard.

Cost Recovery

170 IAC 4-8-1 provides the guidelines for cost recovery from energy efficiency programs in Indiana. Costs can be recovered through a rate case via a tracking mechanism, through a periodic true-up, through inclusion of costs in the rate base, or other mechanisms proposed by the utility, a third party, or the commission. 

Lost Revenue Recovery

Lost revenues from the implementation of energy efficiency programs in Indiana are approved on a case-by-case basis. Lost revenues can be recovered as allowed by the Commission under 170 IAC 4-8-6. The utility must propose a mechanism for the lost revenue recovery, which must account for free-ridership and program attribution. Revenue adjustment and lost-revenue recovery mechanisms have been approved for several utilities, but decoupling was rejected for electric utilities by order of the Commission in 2011.

Utility Incentives

Under 170 IAC 4-8-7, utilities can seek Commission approval for DSM incentives, which can include shared net benefits, an allowed greater than normal return on equity, or an adjusted return on equity as a result of program evaluation as performance incentives. Net savings exclusive of free-ridership must be used to measure demand-side savings in order to request an incentive.

Noncompliance Penalties

Indiana's Commission has not established any penalties for noncompliance with utility energy efficiency program requirements.

► Overview of rate structures & incentives in the Midwest


Stakeholder Collaboration

With the ending of Indiana's EE standard, it remains to be seen what future legislative action and regulatory rulings will bring to Indiana's energy efficiency policies. The following rules were in effect under Indiana's now-overturned standard.

Under the Phase II Order in Cause 42693 that established the EEPS for the state, the Commission also required the formation of the Demand Side Management Coordination Committee (DSMCC) to issue RFPs for the selection the statewide program administrator and evaluator, develop program designs, develop a statewide database of program results, and report regularly to the Commission on the status of demand-side programs. Participants in the DSMCC include utilities, the Office of Utility Consumers Counsel, the Citizens' Action Coalition of Indiana, and the Indiana Industrial Group.

► Overview of stakeholder collaboratives in the Midwest


Program Evaluation

With the ending of Indiana's EE standard, it remains to be seen what future legislative action and regulatory rulings will bring to Indiana's energy efficiency policies. The following rules were in effect under Indiana's now-overturned standard.

Evaluation of energy efficiency programs is required by the Commission for any utility that seeks approval for cost recovery, lost revenue recovery, or demand-side management incentives under 170 IAC 4-8.

Cost-Effectiveness Tests

Indiana's Administrative Code specifies the use of cost-effectiveness testing for energy efficiency programs. Under 170 IAC 4-8-4(3)(A), utilities must measure "utility cost, participant cost, and total cost." The primary test used in Indiana is the Total Resource Cost Test (TRC).  The Program Adminstrator Cost Test (PACT), the Participant Cost Test (PCT), and the Rate Impact Measure (RIM) are also used.

Net vs. Gross

Utilities in Indiana are required in 170 IAC 4-8-4(3)(B) to report both Gross and Net savings for energy efficiency programs approved by the Commission. They are specifically required by 170 IAC 4-8-4 to include free-riders in their net calculation. In the Phase II Order in Cause 42693, the Commission specifies that guidelines be developed for including spillover in net savings calculation.

Technical Resource Manual

Indiana's statewide TRM was developed under the auspices of the now-defunct Indiana DSM Coordinating Committee (DSMCC) and filed with the IURC in 2013 in Cause 42693-S1. An updated version 2.2 of the TRM is not currently in use but has been included as an exhibit in testimony in a number of DSM cases before the commission. It can be found as Exhibit NM-21 in the 1/13/2016 Testimony and Exhibits of the Citizens Action Coalition in Cause 43827-DSM 5.

► Overview of efficiency program evaluation in the Midwest


Smart Grid

The Smart Grid Information Clearninghouse identifies the following smart grid projects in Indiana:

Recovery Act-funded smart grid projects that benefit Indiana, as identified on SmartGrid.gov include:

► Overview of smart grids in the Midwest


 

Read the report that accompanies these pages:
Energy Efficiency Policies, Programs, and Practices in the Midwest:
A Resource Guide for Policymakers (2014 Edition)

►more information about the Resource Guide