Indiana consumers are significantly impacted by the continued operation of uneconomical coal plants. Despite the availability of cheaper energy sources like wind and solar, Indiana utilities persist in running coal plants, leading to higher costs for ratepayers. This situation reflects broader trends in the electricity market, where rules frequently allow utility-owned plants to operate even when they aren’t the most cost-effective option for customers.
Over the years, studies have consistently shown that uneconomic coal dispatch results in substantial financial burdens for ratepayers. For instance, Indiana ratepayers paid $338 million due to uneconomic coal power from 2021-2023, second only to Louisiana. This trend is exacerbated by the lack of restructured energy markets in many regions, allowing vertically integrated utilities to recover their costs from customers, even when operating at a loss.
Impact on Renewable Energy
The NRDC report highlights that Indiana’s R.M. Schahfer plant alone cost ratepayers over $100 million from 2021-2023. Additionally, ongoing rate cases, such as Duke Energy’s proposal to increase reliance on its Gibson and Cayuga plants, could further inflate costs. Duke’s plants alone added $29 million and $7.6 million in uneconomic dispatch costs in 2023. The Citizens Action Coalition’s Ben Inskeep criticizes this practice, pointing out the adverse effects on both consumer costs and the growth of clean energy.
“This has been a problem plaguing Indiana coal plants for many years, it’s costing our consumers in Indiana millions of dollars and it’s one of the factors driving rates higher and driving clean energy off the grid,” said Ben Inskeep, program director for Citizens Action Coalition in Indiana. “It’s a tale of utilities making bad decisions as part of their profit motive and then utility regulators failing to hold them accountable as they’re supposed to. Certainly utilities should be operating their plants efficiently and economically, and when they fail to do so, they shouldn’t be getting cost recovery.”
Proposed Solutions
Experts advocate that merchant coal plants rarely operate at a loss, unlike vertically integrated or publicly-owned plants that recover costs from ratepayers. By preventing regulated utilities from recouping costs for uneconomic dispatch, state utility commissions could reduce the financial burden on consumers. Michigan’s utility commission has set a precedent by prohibiting such practices in a recent rate case involving Indiana Michigan Power.
Grid operators like MISO may play a crucial role by refining market management and avoiding unnecessary coal plant dispatch. Recommendations include multi-day markets and deeper analysis of power needs, aiming to align supply and demand more effectively. These measures could incentivize the development of renewable energy projects by providing accurate pricing signals.
Fuel delivery contracts also contribute to the problem. Utilities often burn excess coal due to minimum purchase agreements, even when it’s not profitable. Revising these contracts could mitigate the issue, especially as many contracts are set to expire soon, offering a chance for renegotiation.
Duke Energy argues that coal supplies ensure reliability and manage market volatility. However, experts like Inskeep hope that state regulators will deny requests to increase coal-fired generation and the associated cost recovery from ratepayers. He emphasizes the need for utilities to transition swiftly to renewable energy sources to avoid justifying past financial decisions that keep expensive coal plants running.
