The Indiana House passed 52-41 a controversial bill on Monday that would make it more difficult for utilities in the state to retire their coal plants.
House Bill 1414 prohibits utilities from retiring legacy coal facilities, or any facility considered "a reliable capacity" resource, without securing approval from state regulators. The bill was amended to include a sunset date of May 1, 2021, and cut an earlier provision that would have required the utility to obtain a certificate of public necessity, instead requiring the commission to issue its "findings and conclusions" on the plant's retirement.
The legislation now moves to the Senate and is largely intended to cut the element of surprise from coal plant retirements, Rep. Alan Morrison, R, who cosponsored the bill told Utility Dive. But critics note the bill's expiration date comes before any plants would have the opportunity to go through the retirement proceeding.
Indiana has traditionally relied heavily on coal-fired power, but the fuel's declining economics have led to rapid retirements across the state, consistent with nationwide trends. But in Indiana, the sector's stress is more pronounced — the state is not only a major consumer, but a top 10 coal producer.
Part of the concern is maintaining baseload power for the industrial sector, according to Morrison, and preventing unexpected retirements like the recent 1,070 MW closure of the Merom plant announced by Hoosier Energy in January.
"That took everybody by surprise. Nobody saw it coming," he said. "Right there, we lose another 800 MW, 180 jobs. And what are we gonna replace it with?"
But critics of the bill point out the state already has a comprehensive process in place to retire plants — utilities currently have generation changes happen through their integrated resource plan (IRP) process, which can involve up to a year of planning alongside stakeholders and analysts. Hoosier Energy, for example, only finalized Merom's retirement after its Board of Directors approved its final IRP, which includes a portfolio of new natural gas and renewables, and is expected to save ratepayers $700 million over the next two decades.
The utility also has to secure approval from its independent system operator and regulators must approve rate changes and any new generation associated with the IRP as well.
After all this, utilities "still have that awesome legal obligation to make sure that 365, 24/7 when we flick our light switch, the lights come on," Executive Director of Citizens Action Coalition Indiana Kerwin Olson told Utility Dive. "There are plenty of checks and balances in place that make sure that the lights don't go out, including at the federal level."
The bill is the first step in a broader energy overhaul the state is looking at as part of its energy task force, expected to develop and deliver recommendations by December 2020, to be implemented in 2021, according to Morrison. That task force was borne out of a failed bill that would have suspended construction of new generation until 2021, first introduced by Rep. Ed Soliday, R, who was the original sponsor of HB 1414.
But Olson noted the short-term scope of the bill makes its necessity even less clear.
"If the sunset date is really about letting the task force do their job, well why do we need the bill to let the task force do their job?" he said.
The bill was first introduced in January and amendments in the weeks since also cut a provision that would have tied plant capacity factors to an uptick in return on equity, effectively giving utilities the opportunity to earn more money for running coal more often.
Legislators also changed language to clarify the law would only apply to facilities running as reliability capacity, and add a section to give funding priority to displaced coal workers, though it doesn't include additional funding for those workers.
Another portion of the bill would allow utilities to recover costs for up to 90 days of fuel supply, which critics say just allows utilities to stockpile more coal they don't need. Duke Energy Indiana already has contracts for 120% of its coal through 2020, 2 million more tons than is needed this year, reflecting a continued oversupply caused by poor market conditions for coal.
"Part of what this bill is really all about is wanting to use customers to pay for unnecessary fuel supplies," said Olson.
Duke and other Indiana utilities referred Utility Dive to the Indiana Energy Association for comment.
"Given a significant amendment prevailed last week, we are still reviewing the language and assessing the impact on our member companies," IEA President Danielle McGrath told Utility Dive in an email.