Electricity rates are expected to increase 32 percent by 2023 but demand is predicted to be largely stagnant, according to a State Utility Forecasting Group report released today.
The rate increases predicted over the next decade are being attributed largely to the investments energy companies must make to meet new environmental standards such as caps on mercury emissions.
Evansville-based Vectren Energy’s rates have already jumped between 25 and 30 percent over the past decade because the company made major upgrades to its facilities between 2000 and 2010.
“[We spent] about $410 million in pollution control equipment, so we are well ahead of others in terms of environmental compliance,” Vectren spokeswoman Chase Kelley says.
Other energy groups are making similar investments now.
Duke Energy recently built a coal gasification plant in Edwardsport and is considering retrofitting one of its coal processing units in Terre Haute.
Indianapolis Power and Light is building an entirely new natural gas plant in Martinsville to replace a coal plant that company officials say would be too costly to upgrade.
Indiana’s electricity rates have historically been some of the lowest in the country. But because Indiana’s energy comes largely from coal-fired power plants and coal plants face some of the biggest regulatory changes, Indiana’s electricity rates are increasing faster than the national average.
“So we’re kind of losing that relative advantage in low electricity rates,” State Utility Forecasting Group director Doug Gotham says. “We’re still below the national average but we’re not in the top ten for lowest electricity prices anymore.”
But Citizens Action Coalition Executive Director Kerwin Olson says the projections assume the state will not make further investments in alternative energy, which could provide additional long-term savings.
“As long as we aimlessly wander down the same old energy path paved with coal, coal, and more coal, Indiana will continue to experience frequent and significant increases in the cost of our energy,” Olson says.
The report also indicates demand for electricity is expecting to increase 0.72 percent per year.
Gotham says that is because people tend to use less energy when prices go up, and Indiana residents are buying more energy efficient appliances.