Indiana Utility Regulatory Commission Publishes Report by CA Energy Consulting Experts
Categories: Performance-Based Ratemaking, Rate Design
May 9, 2025 - Nicholas Crowley, Dan McLeod, Andis Romanovs-Malovrh, and Corey Goodrich
The Indiana Utility Regulatory Commission (IURC) commissioned Christensen Associates Energy Consulting (CA Energy Consulting) to author a report to evaluate the reasonableness of performance-based regulation (PBR) for the state’s electricity suppliers. The study addresses Multi-Year Rate Plans (MYRPs) including indexed revenue formulas, and Performance Incentive Mechanisms (PIMs). These are, with minor exceptions, the primary PBR tools used by electric utilities in North America. The report considers what PBR tools may be appropriate for Indiana given the organization of the electric utility industry in the state.
As part of the research, CA Energy Consulting reviewed PBR frameworks across North America, as well as Great Britain and Australia. Some differences exist between Indiana and most other jurisdictions that have implemented PBR. For example, most utilities that operate with an indexed cap MYRP are distribution-only utilities. Vertically integrated utilities, like the investor-owned utilities (IOUs) in Indiana, generally have larger, lumpier capital investments that may not readily align with an indexed approach to rate regulation. The participation of Indiana’s generation assets in wholesale markets also complicates the prospects of indexed caps, given the interaction of market-based remuneration for energy and an indexed cap. A forecasted MYRP approach may be more feasible and would constitute an incremental change from a forward test year approach, which is already permitted in the state.
The work involved engagement with Indiana utility stakeholders in the form of a workshop and two surveys to obtain feedback about the need for, and feasibility of, potential changes to the state’s current regulatory structure. Regulators in other jurisdictions also provided feedback about their experience with PBR. The research team developed hypothetical scenarios illustrating how PBR tools might work.
The team’s recommendations to the state of Indiana can be found in the CA Energy Consulting report.