Indianapolis’ unexpected way to fight the utility death spiral

by / Monday, 01 September 2014 / Published in Smartgrid-CI Blog

A new car electric sharing program arouse controversy and raises many questions about the evolution of the regulated utility business model.

By PATRICK LEVY

Last week Indianapolis Power and Light received the agreement from Indiana Office of Utility Consumer and from the city’s Mayor to raise fees in order to finance the installation of 200 Electric Vehicle charging stations across Marion County. This roll out is part of an electric car sharing program, based on similar examples already in place with bicycles in many American cities. If IP&L can move forward with this initiative, Indianapolis will be the first American city to offer an electric car sharing program. The debate was controversial in Indiana because the city’s administration supported the program but found that the tax raise asked for by the utility was too high. Both parties finally reached an agreement according to which customers will pay a 28cts a month fee to finance the program (instead of 44cts asked by IP&L in the first place). The agreement still needs to be approved by the Indiana PUC.

But the project remains controversial for some. State Rep Cherrish Prior D-Indiana considers that the consumer and not the tax payer should have to pay for this deal. But this legitimate debate may not be the most interesting part of the story.

With this project, IP&L is going beyond its core business of energy provider in becoming a transportation service operator. This is brand new because so far all the initiatives launched around bicycle sharing were taken by municipalities and the few car sharing initiatives currently running elsewhere are also municipal initiatives as it is the case with Paris (France), the first city in the world to launch a similar program. Despite its name, IP&L is an IOU, owned by the AES Corp. one of the biggest U.S utility companies. Called BlueIndy, this program is actually proposed by the Bolloré Group, the French company that is operating the service in Paris.

This debate raises many interesting questions for the future of regulated utilities:

–          Should taxpayers finance the development of private companies (utility and others) in a new market?

–          Are electric charging stations infrastructure the way roads and bridges are, and in this case who should have the responsibility for implementing them, the utility of the municipality?

–          What are the limits of a regulated utility business diversification?

–          Should regulation go beyond the utility core business?

Diversification of business is a way for utilities to respond to the danger of the death spiral. Indianapolis Power & Light attempt to diversify is an example of what to expect from utilities in the future and many questions about their status and their role will have to be answered along the way.

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