For decades, Indiana’s energy landscape has operated under a vertically integrated system with state-regulated utilities generating and distributing electricity to customers in their assigned regions.
But two bills from Republican lawmakers could change that dynamic by allowing businesses, and potentially individual households, to get their electricity from a provider other than their local utility company.
Consumer control over buying or producing power—sometimes called energy choice or energy deregulation—is not new, but it’s not been widely discussed in Indiana so far.
And it’s not clear whether it will be this year, either. Neither bill has been scheduled for a hearing in what is expected to be an unusually short session. But advocates of the legislation aren’t likely to give up, even if the bills don’t move over the next six weeks or so.
Business groups believe a proposed Senate bill would lower their energy costs through the basic principle of supply and demand. If businesses have more options for buying energy, competition will lower prices, they say.
And large users, such as advanced manufacturers and data centers, say if they’re able to bypass the state-regulated—or incumbent—utility in their assigned service area to buy power, that utility won’t need to invest in big infrastructure builds, keeping prices lower for everyone else.
Abby Foster is vice president for policy and advocacy for the Retail Energy Advancement League, or REAL, which represents a collection of energy companies that work in natural gas, nuclear and renewables. She said the Northern Indiana Public Service Co. has allowed large users to shop for their own power in some cases, but codifying such agreements is the next step.
“This is already happening in Indiana,” Foster said. “But our members would like more certainty than what the regulatory process can offer. So in order for this to truly be enough certainty for them to come and invest and build and serve these customers, it really needs to be in statute.”
The Indiana Energy Association, which represents the state’s investor-owned utilities, has a different take. IEA President Danielle McGrath said energy-choice policies can lead to unpredictability for companies and utilities alike.
“It definitely is creating more risk and uncertainty when we really need a period of stability,” McGrath said.
Wholesale energy
Language outlining energy-choice policy sits in Senate Bill 272 and House Bill 1276, carried by Sen. Stacey Donato, R-Logansport, and Rep. Cindy Ledbetter, R-Newburgh, respectively.
Donato’s bill would allow businesses that use more than 1 megawatt of power a year to buy energy from a “competitive electricity supplier,” beginning in July 2027. The utility managing that service area would have to distribute the purchased electricity through its transmission lines with no added fees.
The bill would cap the percentage of third-party energy sales allowed within an incumbent utility’s territory. It would set an initial cap of 20% of the utility’s sales from the prior year, excluding any sales for customers using more than 75 megawatts, but allow the Indiana Utility Regulatory Commission to amend the cap.
The proposed legislation mirrors an energy-choice law Michigan passed in 2008 where, according to Foster, demand for wholesale energy purchases reached the state’s 10% cap within two years.
Data from the Michigan Public Services Commission shows 5,514 customers took part in the energy-choice program in 2024, and all of Michigan’s regulated utilities were at or near their 10% cap for alternative electric sales that year.
“If Michigan’s any story of what we can expect, customers are going to want to avail themselves of this,” Foster said. “And for every megawatt that’s procured from a third party, that’s one less megawatt that the utility, who gets to charge all ratepayers, has to build.”
If energy demand for outside power supplies exceeds the state’s cap, a queue system would kick in, and third-party electricity suppliers would have to register with the IURC.
Legislation from Ledbetter goes even further, allowing residential customers to also seek electric service on the open market.
Ledbetter’s House Bill 1276 would require investor-owned utilities to decouple their costs of generation from the costs of distributing electricity and charge customers only for what they use. Customers who don’t want to shop around would stay with their default utility.
Ledbetter said the intent of her bill is to drive down costs with a free-market approach.
“With us shutting down coal and converting everything to natural gas and going to renewables, the consumer has to pay for those costs, and those costs are getting high,” she said. “So if we go to free-market electricity, much like with cellphones, we will see those costs eventually come down.”
Both bills have been sent to their respective utility committees. Senate Utility Chair Eric Koch, R-Bedford, wouldn’t tell IBJ what bills will be scheduled yet this session. House Utilities, Energy and Telecommunications Committee Chair Ed Soliday, R-Valparaiso, said he has no plans to schedule Ledbetter’s bill for a hearing.
New energy paradigm
Anne Becker, a director at Indianapolis-based law firm Lewis Kappes, said during the IBJ’s Future of Energy Summit on Nov. 21 that businesses she works with are constantly thinking about their energy costs.
“‘Should we expand in Indiana?’ ‘What’s the cost of electricity in Indiana?’” Becker said at the event. “It’s a huge component to their costs. ‘Can we put something behind the meter on our property?’ All this stuff goes into the equation.”
Data from the Indiana Office of Energy Development shows Indiana’s electricity costs rose higher than the national average from 2002-2016 but below the national average from 2017-2023. A Lawrence Berkeley study published in December found Indiana’s electricity prices decreased from 2019 through 2024 when inflation is not considered.
But cost isn’t the only factor. Many large ratepayers are looking for “bespoke” energy plans that are diversified for resiliency or to meet environmental goals.
Foster, the vice president of REAL, said the proposed new model is a win for ratepayers large and small. With utilities building power plants to serve the demand of large manufacturers and data centers, the cost of that infrastructure investment can be passed on to consumers. But if those large users were responsible for their own power needs, utilities—and remaining ratepayers—would be off the hook, Foster said.
Under the current structure, she said, “If these data centers at the end of their power-purchase agreements with the utilities no longer need this generation, or say, new technology comes out that makes data centers super-efficient, and they don’t need the amount of capacity, the ratepayers in Indiana are the ones that pick up that bill.”
Foster and Becker pointed to NIPSCO, which created the subsidiary GenCo last year to facilitate large-load customers in its service area exploring their own energy options.
Kristina Wheeler, a partner at business law firm Bose McKinney & Evans, said that arrangement helped one of the biggest companies in Indiana.
“Kudos to NIPSCO for allowing their customers above 10 megawatts to go to the market for power. It kept our client, U.S. Steel, operating in Gary, Indiana,” Wheeler said at the IBJ Future of Energy Summit. “It was beneficial to a lot of other major users and existing businesses in northern Indiana.”
A spokeswoman for NIPSCO declined to comment for this story.
Not that simple
But Indiana’s regulated utilities and consumer advocacy groups say deregulation legislation will raise rates for most customers.
Citizens Action Coalition Executive Director Kerwin Olson said it takes years to plan and hundreds of millions of dollars for utilities to build their energy grid to serve their territories, meaning individual businesses packing up and leaving the grid is “just not as simple as people want it to be.”
Olson said that if large users don’t have to pay for electricity through their area utility, the cost of a power plant that was built 15 years ago to serve that very customer could then be passed along to everyone else.
“You build these massive systems to serve all of your customers, and then with 30 days’ notice, a huge customer can just leave that system and not pay anything,” Olson said of the proposed legislation. “They’re still using the grid. They’re still connected to the system. What portion of those costs are they going to be responsible for moving forward?”
Indiana Energy Association President McGrath agreed, saying energy-choice policies create volatility. Because regulated utilities are required by law to serve customers in their territories, she said, businesses buying energy on the wholesale market but still connected to the existing grid would still need to be served in an emergency.
“If something does go wrong, those businesses are still going to count on us to meet their needs, but that comes at a cost,” McGrath said. “If you don’t have the appropriate parameters in place and that customer comes to us, but there isn’t sufficient capacity, what do they do? What do we do?”
McGrath said Illinois and Ohio have both adopted energy-choice programs for residential ratepayers, but prices haven’t come down. She cited a study conducted by Ohio State University in 2024 that found 72% of offers for electricity on the residential retail market were more expensive than if the household had stuck with their default utility.
In Illinois, she said, the state’s Office of Attorney General has filed a string of lawsuits against retailer energy providers that the state says have used deceptive marketing practices to sign people up for their more expensive rates.
Ledbetter said she’s not concerned about residential users figuring out a new energy marketplace because her bill would allow customers to stay with their current utility provider if they choose.
“Also, there is a built-in educational portion for consumers that the IURC will develop to help keep them safe as it relates to those matters,” she said.
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