SB 386 – Cost Securitization for Electric Utility Assets
Authored by Sen. Eric Koch (R-Bedford)
Sponsored by Rep. Ed Soliday (R-Valparaiso)

This bill creates a pilot program for CenterPoint Energy (Vectren). It provides that an electric utility that has certain qualified costs associated with an electric generation facility that will be retired from service within 24 months and are equal to at least 5% of the electric utility’s total electric base rate may file a petition with the Indiana Utility Regulatory Commission (IURC) to issue securitization bonds, collect securitization charges and encumber securitization property with a lien and security interest. If the IURC approves such a petition, the IURC will issue a financing order providing for the amount of qualified costs to be recovered by the electric utility and the period for collecting securitization charges not to exceed 15 years.

Chamber position: Support

The latest: Testimony was taken in the House Utilities, Energy and Telecommunications Committee on Monday, but no vote occurred. The committee will vote on it at the next committee meeting, which is expected to be on March 22.

Indiana Chamber action/commentary: Several witnesses testified in support of the bill with only one witness testifying in opposition. The Indiana Chamber testified in support, saying that securitization is an alternative method for addressing the stranded cost associated with the shutdown of electric generating plants. The Indiana Chamber Foundation’s energy study (Powering Indiana’s Economic Future) has a section that addresses securitization of stranded assets (pages 188-196). The study notes that other states have promulgated securitization legislation and that securitization is a well-known approach to addressing stranded costs (or other extraordinary costs) in the U.S. It has been used to recover stranded costs associated with the electricity markets, financing environmental control equipment and, more recently, paying for storm recovery costs. While lowering the financing cost of a rate base asset by enhancing the credit, securitization can also help lower rates in the present by extending the repayment period. This can be a win-win for ratepayers and utilities. Customers should see lower prices as a result of lower financing costs and utility companies get access to funds to invest in new generation technologies that will provide service into the future.

Resource: Greg Ellis at (317) 264-6881 or email: gellis@indianachamber.com