Jurisdiction system favors utility owners by reducing competition
By Victoria Davis and Rebecca R. Bibbs
Residents of northern Madison County supply their homes’ electricity through utilities powered by Indiana Michigan Power, while the southern half of the county uses electricity supplied by Vectren.
This occurs because Indiana is divided into multiple utility territories or jurisdictions, as they sometimes are called where a specific power and/or gas company is assigned. Indiana happens to be split into five electric territories including Indiana Michigan Power, Duke Energy, Indianapolis Power & Light, Northern Indiana Public Service Company (NIPSCO) and Vectren.
Utilities often are referred to as “natural monopolies” because the infrastructures are so expensive to build and maintain there’s very little opportunity for entry into the industry by new players.
Depending on the area of residence, customers are given an electric service provider, but some companies allow their customers to choose their own providers through a retail choice system. With a handful of options available, customers sometimes wonder whether being split into multiple territories helps or harms competition and pricing.
“We have a program called ‘The Choice Program,’ which opens up competition,” said NIPSCO External Communications Representative Kathleen Szot. “They still would get a bill coming from NIPSCO, but the actual product is from a different provider. It’s a great element to have choice, but each provider has their own pricing.”
In Indiana, nine utilities are run by municipalities, six are investor-owned and five are wholesalers.
About 11 gas suppliers have been split into territories as well. Like electric companies, many are members of the Indiana Energy Association. Some of the larger service providers are Vectren and NIPSCO. Where customers reside and the company they choose directly reflects gas pricing.
“We have been the number two lowest gas cost in the state of Indiana for the last two years,” said Szot. “That’s something not everyone knows. We have two main gas lines in our area so the gas doesn’t have to travel as much causing extra expenses.”
However, gas companies operate a little differently when it comes to having the option of choosing a provider.
Angeline Protogere of Duke Energy said Indiana does not have an option for residents to choose their gas service provider.
“The territories have been set for decades, but the Indiana Utility Regulatory Commission sets the pricing,” she said. “Our rates are not priced like they are on a competitive market.”
In addition to setting pricing, the IURC helps companies measure their efficiency.
“The state in recent years has set energy savings targets,” said Szot. “It’s something we are expected to track and report back to the state regulatory group. It helps us to measure how well we are doing.”
Efficiency incentives for businesses
Though there’s little competition in the utility field, companies do try to offer incentives that can reduce costs for business customers. Here are some ways companies can save on their utility costs:
Indiana Michigan Power: Its Commercial and Industrial Rebates Program offers $45 for commercial clothes washers, 10 cents per square foot for cool roofs and $2-$5 for compact fluorescent light bulbs.
Indianapolis Power & Light: This company offers a variety of “prescriptive rebates” for lighting, compressed air usage, non-lighting and pumps to its customers through its Business Energy Incentive Program. IPL also offers custom incentives for companies willing to implement energy efficiency projects and technologies.
Vectren: Business owners can take advantage of natural gas service equipment rebates, such as $500 – $5,000 for a natural gas boiler and for commercial kitchen equipment, such as $500 for an ENERGY STAR steam cooker or gas fryer.
Check with your utility providers to learn what incentives they may offer.