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The Indiana Regulatory Commission would be involved in all phases of the expansion of natural gas distribution under the provisions of Senate Bill 560.

Oversight built into natural-gas plan

On Feb. 19 The Journal Gazette published an editorial expressing concern about Senate Bill 560 – a bill aimed at expanding natural gas service to rural areas, providing an energy discount to large customers seeking to expand in Indiana and making changes to improve and update the utility regulatory process.

Specifically, the editorial takes issue with a provision that allows natural gas and electric utilities to seek timely recovery of costs associated with improving or replacing aging infrastructure needed to distribute natural gas or electricity to customers. Unfortunately, the editorial ignores the extensive oversight the Indiana Utility Regulatory Commission retains when it comes to utility rates and charges.

Here is how the bill would work: A utility could propose a seven-year infrastructure plan to improve or replace transmission, distribution and storage facilities. The IURC would conduct a public review, and affected parties would have the opportunity to comment on the plan and lodge objections to it.

If, after hearing from all sides, the IURC determines the plan is reasonable and approves it, the utility would go back to the IURC up to twice a year and petition to recover its costs through a regulatory tool called a “tracker.” This is another stage of detailed review by the IURC and interested parties. If the IURC finds the costs are unreasonable or unnecessary, it can reject them.

The Journal Gazette calls trackers a “deregulatory move,” which is not true. As is the case with any tracker, a utility could not recover a penny under SB 560 without explicit prior IURC review and approval. In fact, this proposed legislation provides the IURC with increased ability to review a utility’s infrastructure plans prior to implementation – a review that typically does not occur under traditional rate case processes.

SB 560 requires a utility to submit to a rate case within seven years. The lack of such a provision in previous tracker legislation has been the major objection of consumer groups and large industrial customers. Importantly, its inclusion in SB 560 prompted some opponents – including some major industrial customers – to withdraw their objection to the bill.

SB 560 will also help Hoosiers who need access to low-cost natural gas. The bill contains an important economic development tool to encourage businesses to expand and grow. It also provides an orderly process for utility infrastructure investment without compromising IURC authority to protect customers from unnecessary or unreasonable utility rates and charges.

Indiana’s energy costs have risen as a result of our historic reliance on coal-fired electric generation colliding head on with what many of us believe is excessive and unnecessary environmental overreach by the Obama administration. Indiana’s utilities have been forced to spend more than $5 billion to comply with these regulations – costs that are passed directly on to consumers. SB 560 cannot eliminate these federal mandates, but it can help many Hoosiers by giving them greater access to low-cost natural gas.

Sen. Brandt Hershman is a Republican from Buck Creek. He wrote this for The Journal Gazette.

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