Why It Matters
Indiana households face potential shifts in their monthly electricity costs as state regulators prepare to transition from a legacy pricing model to a performance-based framework. The Indiana Utility Regulatory Commission (IURC) is currently examining how utility profits, risk structures, and existing charges will align with the new system approved by lawmakers earlier this year.
What Happened
The IURC has launched two distinct investigations to address concerns over electricity affordability and regulatory consistency. One probe focuses on changes in utility risks and regulated profits, while the other examines how existing rate adjustment mechanisms, known as trackers or riders, will function under the new regulatory structure.
This regulatory shift follows the March approval of House Enrolled Act 1002 by Governor Mike Braun and state legislators. The legislation replaces a system where utilities generally waited at least 15 months after their last request before filing for a base rate increase. Under the new framework, base rates are set and scheduled for increases over a three-year period. Utilities may earn more or less revenue depending on their performance regarding affordability metrics and post-outage service restoration.
Duke Energy, which serves the largest customer base in the state, is required to petition first under the new setup by mid-December. Other major utilities, including CenterPoint, AES, NIPSCO, and I&M, have recently seen base rate approvals or are operating on rates dating back to 2024.
Regulators are also scrutinizing specific charges that appear on customer bills. All residential customers pay a flat service charge regardless of usage, ranging from $11 for CenterPoint customers to $17 for AES customers. Additionally, utilities utilize trackers to recover costs between base rate cases, including capital expenditures for infrastructure and operational costs for fuel.
By the Numbers
$71 million — Base rate increase approved for AES in June, now under reconsideration by regulators.
80% — Percentage of Indiana electricity customers served by five large investor-owned utilities.
15 months — Minimum time between base rate hike requests under the outgoing regulatory system.
Three-year period — Duration for setting base rates and scheduling increases under the new system.
Mid-December — Deadline for Duke Energy to petition first under the new setup.
$11 to $17 — Range of flat service charges paid by residential customers, from CenterPoint to AES.
80% — Percentage of transmission, distribution, and storage system improvement charge (TDSIC) costs recovered from the tracker.
Zoom Out
The structure of Indiana electricity bills reflects a complex mix of base rates, flat fees, and variable trackers. Five large investor-owned utilities operate as monopolies in their respective service areas in exchange for submitting to state regulation. These companies use trackers to recover costs that fluctuate between formal rate cases.
Capital trackers include the transmission, distribution, and storage system improvement charge (TDSIC), which funds infrastructure plans spanning five or seven years. The TDSIC statute was enacted in 2013, when Sarah Freeman served as a staff attorney at the Legislative Services Agency. Another capital tracker supports demand-side management, paying for efficiency measures such as new lights and appliances.
Operational trackers include the fuel adjustment clause, which allows utilities to pass through fuel cost changes to customers every three to six months. Utilities do not profit from these fuel adjustments; they are strictly passthrough costs. Other operational trackers account for participation in regional transmission organizations and energy bought or sold on regional markets.
CenterPoint Energy also includes several charges related to securitization efforts to retire generation plants. Additionally, Indiana’s 7% sales tax applies to utility service as a passthrough to customers. The IURC released an affordability report in July, highlighting the need for transparency and cost control.
What’s Next
Duke Energy must file its initial petition under the new performance-based rate structure by mid-December. As the largest utility in the state, its case will likely set precedents for how regulators evaluate affordability and service restoration metrics. The IURC’s ongoing investigations into utility profits and tracker integration will inform how future rate cases are adjudicated.
Sarah Freeman, who left the IURC last year after nine years as a regulator, now works as a principal for the Regulatory Assistance Project. Her background in both regulatory enforcement and legislative drafting provides context for the complexities of the current transition. The commission must balance utility revenue requirements with consumer protection goals as it implements House Enrolled Act 1002.