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Electric utilities battle over annexing territories

January 6, 2015

When it comes to annexing nearby land, the city of Greenfield has a proposition that officials say sells itself.

Joining the city typically means a 22-percent increase in local taxes, but that's offset by a 33-percent reduction in electric bills from Greenfield's electric utility, Mayor Chuck Fewell said. As a result, most of Greenfield's annexations have been voluntary, he said

The city-owned electric utility is a big advantage in Greenfield's economic development efforts, Fewell said, but Greenfield and 71 other communities that own utilities worry they're about to lose that advantage. Sen. Mike Crider, whose district includes Greenfield and most of Hancock County, filed a bill that would eliminate municipal electric utilities' ability to take territory from rural electric cooperatives and investor-owned utilities.

“To me, it's kind of a basic fairness issue,” Crider said. He filed the bill Dec. 30, and he said it's not yet been assigned a number. The 2015 session would be a second go-around for the utility territory issue, which didn't receive a hearing in the last session. Senate Utilities Committee Chairman Jim Merritt said he expects to hear Crider's bill this year.

State law requires the municipals to compensate their competitors. However, “it's not market value at all,” said Scott Bowers, government relations director for Indiana Electric Cooperatives. If a municipal utility were to pick up a Home Depot store that pays $2,000 a month for electricity, for example, he said the losing utility would be compensated at most $10,200, the equivalent of $170 a month for five years.

Municipal utilities have picked off some big commercial and industrial customers, Bowers said, and that has implications for customers throughout the territory. “It adversely impacts our affordability,” he said. “It makes a lot of the state less attractive for economic development.”

Electric utility territories were set by a 1980 state law. When high-load customers leave the pool, the remaining customers have to shoulder the cost of generating and transmitting power, Bowers said. Rural electric cooperatives already are covering a wide area for relatively few customers, an average of eight per mile of line, he said.

Most of the land Greenfield has annexed is not developed, but one of its recent annexations included two of Duke Energy's commercial customers—a refrigerated beverage distributor and a John Deere dealership. Greenfield paid Duke $135,000 for the annexed land east of the city along U.S. 40, Utility Director Mike Fruth said.

Investor-owned utilities and the rural co-ops can also swap territory, but state law requires them to reach a mutual agreement. “It's like a normal business transaction,” Bowers said. “Both of them have the opportunity to sign off on the agreement. Both of them have the ability to walk away from the agreement.”

The bill Crider filed simply removes language from the existing statute that allows municipal utilities to bypass that process.

The Indiana Municipal Power Association thinks that, without the present-day exception, municipal utilities wouldn't be able to expand their territory at all. Electricity is just one of the services some cities and towns can offer annexed residents and businesses, said Carolyn Wright, government relations director for IMPA.

“Should we or should we not be allowed to provide all of our municipal services to citizens?” she said.
 

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