Indiana’s electric rates expected to rise in the next five years

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Indiana’s electric rates are rising faster than some neighboring states and will likely increase significantly over the next five years.

But how much that will affect consumers’ bills is unknown.

Rates — the cost of electricity per kilowatt hour — have been rising for the past 10 years, said Doug Gotham, director of the State Utility Forecasting Group, a state-funded research group at Purdue University that does a forecast every two years.

“Over the next five years, I would expect the electric prices to increase faster than inflation and then level out and keep track with inflation after that,” he said.

Between 2004 and 2014, Indiana residential customers using 1,000 kilowatt hours saw bills increase an average of 55 percent to $105.87 from $68.37, according to an Indiana Utility Regulatory Commission report. Bills include both the rate and variable costs.

There are two main reasons for the rise in costs — the Environmental Protection Agency‘s clean air regulations coupled with Indiana’s dependence on coal-generated power and the state’s aging infrastructure.

In the past 15 years, the EPA has implemented emission standards that are difficult for coal-generated plants to meet, Gotham said, explaining that Indiana relies on coal for about 80 percent of the state’s electricity generation. In comparison, the nation as a whole relies on coal for nearly 40 percent of its power needs. Indiana had the eighth highest energy-related carbon emissions in the country in 2011, according to the U.S.Energy Information Administration.

While natural gas is also a relatively low-cost fuel and is cleaner than coal, other states can take advantage of that more than Indiana can, he said, because more of their plants are gas-generated.

Currently, the EPA regulation with the biggest impact is the Mercury and Air Toxin Standard (MATS), Gotham said. “In order to achieve reductions in mercury you have to put in equipment that will reduce the emissions. You have to spend a lot of money on emission controls or shut down the plant.”

Originally published on indianaeconomicdigest.com

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