317-232-5923
Electric rates include a number
of components, including costs
for fuel, environmental compli-
ance, regional transmission, and
other factors.
Monthly electric utility bills
reflect these components and the
customers usage.
Budget billing and energy
efficiency tools can help you
manage electric bills year-round.
UNDERSTANDING
Electric Rates Electricity Prices:
The Basics
Electric utilities in Indiana
generate most of their
electricity at power plants
that they own and
operate. However, they may
also purchase power in the
competitive national
wholesale market. Costs for
coal and other fuels that are
used at electric generation
plants may vary based on
market conditions, while
power costs in the competi-
tive wholesale market will
vary from day to day based
on supply and demand.
What determines my monthly bill?
Usage Driven largely by weather
Electric bills for most residential and small business consumers
usually peak in the summer due to increased
demand for air conditioning, although
customers who use electricity for heat may
see their highest bills during the winter.
Monthly usage is measured in kilowatt
hours (kWh).
Costs Several components are
included in your electric rates:
Base rates:
Cover basic infrastructure costs, including operation and
maintenance of utility-owned generation plants, transmission lines,
substations and distribution infrastructure.
Pay for employee salaries and other general business expenses.
Can only be changed through a legal proceeding before the
Indiana Utility Regulatory Commission (IURC), in which the
Indiana Office of Utility Consumer Counselor (OUCC) represents
customer interests.
Important Note:
The information in this fact sheet
applies only to electric utilities
that are regulated by the Indiana
Utility Regulatory Commission
(IURC). Some utilities, including
municipal electric utilities and
Rural Electric Membership Coop-
eratives (REMCs), may withdraw
from IURC jurisdiction by
following processes that are
defined in Indiana law. Rates
and charges for these utilities are
determined solely at the local
level and are not subject to OUCC
review or IURC regulation. Fuel costs:
Pay for the coal, natural gas, renewable energy and other sources
from which your utility generates power. (Coal accounts for
approximately 95% of electric generation in Indiana.)
Can be passed through to customers on a dollar-for-dollar basis
in compliance with Indiana law:
- Utilities may not profit on these pass-throughs.
- Utilities must receive IURC approval and OUCC review
before passing these costs to consumers. These reviews are done
quarterly, semi-annually or annually for individual utilities
under the states Fuel Adjustment Clause (FAC) process.
Purchased power costs:
Pay for recovery of electricity purchased on the competitive
wholesale market.
May be necessary if a utilitys generation is not sufficient to meet
demand.
May be recovered through the FAC process or through a
separate tracker, which allows for incremental rate adjustments
without changing the utilitys base rates. IURC approval and
OUCC review are required.
Regional transmission costs:
Pay for the costs of regional transmission operators (RTOs),
which control flows for the power grid over large geographic areas.
- The RTO serving most Indiana electric utilities is the Midwest
Independent Transmission System Operator (Midwest ISO),
based in Carmel, Indiana.
- Midwest ISO manages the grid over portions of 15 states and
a portion of Canada.
- Midwest ISO and other RTOs have been formed in recent
years to help ensure a reliable transmission grid for all utilities
and throughout larger regions.
- One major Indiana electric utility, Indiana-Michigan Power,
is served by PJM Interconnection, based in Valley Forge,
Pennsylvania.
Are recovered through FAC or other scheduled filings that
require IURC approval and OUCC review. Utilities are not
allowed to profit on RTO cost pass-throughs.
Environmental compliance costs:
Pay for federally mandated pollution control equipment at
coal-fired generating facilities in Indiana. Federal rules require electric utilities to meet specific guidelines
regarding sulfur dioxide (SO2), nitrogen oxide (NOx) and
mercury emissions.
Indiana law allows utilities to recover the costs of clean coal
technology through rates following OUCC review and IURC
approval.
- Proposed technology must reasonably comply with federal
guidelines before being approved.
- Ongoing construction costs may be submitted, reviewed and
approved for recovery through incremental rate adjustments
twice each year.
- Adjustments are restricted to clean coal technology
construction only.
Demand side management (DSM) programs:
Allow consumers to voluntarily work with their utilities to
modify their electrical usage during peak periods.
Reduce overall expenses, reduce the possibility of blackouts, and
encourage energy efficiency.
Include efforts by large industrial customers and air conditioning
direct load control programs for residential customers.
Taxes:
The Indiana state sales tax of 6 percent applies to electric usage,
regardless of your service provider.
How can I manage my
electric bill?
Energy efficiency
The OUCCs Reduce Your Summer
Electric Bill and Reduce Your Winter
Energy Bills fact sheets offer tips that can
help you use less electricity and save more
money throughout the year.
Energy efficiency improvements including new insulation, a
programmable thermostat, and a variety of other options will help
pay for themselves. You may also qualify for state and federal income
tax relief by making these investments. Customers of several Indiana electric utilities can also receive bill
credits by signing up for direct load control (DLC) programs. By
installing small switches on participating customers central air
conditioners, these programs allow utilities to better manage their
power supplies on peak demand days. Customers who sign up experi-
ence little or no discomfort as their units are cycled for brief periods
of time. More information is available from the OUCCs A Small
Switch fact sheet.
These fact sheets and all other OUCC publications are available at no
charge on the agencys Website (
www.IN.gov/OUCC
) or by calling
the agency toll-free at 1-888-441-2494.
More detailed information on energy efficiency is available from the
U.S. Department of Energy (
www.energysavers.gov
) and the Alliance
to Save Energy (
www.powerisinyourhands.org
).
Budget bill
The OUCC encourages consumers to enroll in budget billing,
which offers consistency from month to month and can
help with managing higher summer electric bills.
Programs will vary slightly among utilities but
generally follow six basic steps (these same
steps apply to natural gas utility budget billing
programs):
1. Your electric usage and costs are estimated
for a set period, usually a year or six months.
2. The estimate is then divided by the number of
months in the budget period.
3. You pay the set monthly amount throughout the budget period.
4. Utilities may reserve the right to make a mid-term adjustment
to budget billing based on market conditions, to help prevent
unusually large increases at the end of the period.
5. When the budget period ends, the utility calculates the
difference between how much power you have actually used and
how much you paid for under the budget program.
6. You receive credits if you have overpaid or will be billed if you
have underpaid. Any underpayment will usually be factored into
the next budget period and spread out over time. The Indiana Office of Utility Consumer Counselor (OUCC) is the state agency that represents utility
consumer interests before regulatory and legal bodies. To learn more, visit
www.IN.gov/OUCC
.
3/07
What if I have trouble paying my electric bill?
Arrange a payment plan
If you receive a bill that you may have difficulty paying, contact your
utility immediately. Utilities will generally work with customers who
face financial hardships, but the customer must:
1. Contact the utility as quickly as possible.
2. Follow through on any agreed payment
arrangement.
3. Immediately contact the utility about any
changes that could affect the arrangement.
Financial assistance
Households with incomes at or below a certain
percentage of federal poverty guidelines usually
125 percent can receive winter heating and limited
summer cooling assistance from the states Energy Assistance
Program. This amount was increased to 150 percent for the 2005-06
and 2006-07 heating seasons. More information is available by call-
ing 1-800-382-9895. Many utilities and township trustees also offer
energy assistance.
Disconnection
Anyone who is receiving or is eligible for and has applied for state
Energy Assistance Program funds may not have his or her electric
or natural gas utility service disconnected between December 1 and
March 15, under Indiana law. However, customers remain responsible
for paying their bills and should contact their utilities immediately
if they anticipate payment problems. The OUCCs Utility Service
Disconnection fact sheet offers more information on consumer rights
and responsibilities.