NIPSCO has proposed creating a spinoff company called GenCo to finance new data center capacity that would not be subject to the same regulation the gas and electric utility itself is.
Consumer advocates have raised concerns about NIPSCO's plans to launch what some call a "regulation-light" company to bankroll more electric capacity for large-load data centers. They worry that GenCo could negotiate rates without public scrutiny, putting existing ratepayers at risk if the data centers close earlier than planned.
"Some of our concerns about this novel approach include the overall lack of transparency, the removal of critical IURC oversight and the likelihood of special treatment being given to data centers with higher utility bills resulting for residential customers. While NIPSCO is presenting this as a benefit to its other customers, NIPSCO's proposal really appears to be about cutting backroom deals with big tech data centers for special rates and terms that will be kept out of sight from the public," Citizens Action Coalition Program Director Ben Inskeep said. "NIPSCO’s parent company and its shareholders stand to earn huge profits under this scheme from building new dirty power plants with minimal oversight to serve these energy-guzzling facilities. Hoosier families served by NIPSCO already pay the most expensive electric bills in the state, so we can't afford to get this wrong."
Merrillville-based NIPSCO is asking the Indiana Utility Regulatory Commission to let it create a GenCo subsidiary that would not serve retail customers but would enter into contracts with individual data centers to provide power. NIPSCO said the arrangement would protect existing customers from shouldering the cost of financing new data centers.
"NIPSCO GenCo believes that its declination of jurisdiction petition filing with the IURC is positive for Indiana and NIPSCO’s customers. This petition establishes a framework to serve future mega-load customers in northern Indiana with speed and flexibility, while protecting NIPSCO’s existing customer base, maintaining NIPSCO’s financial integrity and supporting local economic development," a NIPSCO spokesperson said.
Indiana regulates utilities, determining how much they can charge because they are monopolies that are not subject to the market pressures that would otherwise keep down prices. Rate hikes only get approved after lengthy public approval processes in which the Indiana Office of the Utility Consumer Counselor, interested parties like steel mills and other large companies and the general public can weigh in.
GenCo would negotiate long-term contracts directly with the data centers or other large-load users that would buy the power. NIPSCO said there would still be some state review.
"If NIPSCO is successful in negotiating such an agreement, it would be filed with the IURC in a separate proceeding, at which time all interested parties would have an opportunity to participate," the company said. "The IURC is the ultimate decision-maker on whether any retail service contract is just and reasonable and in the public interest."
Attorney Shaw Friedman, who represents the LaPorte County Commissioners, said existing NIPSCO customers could be put at risk with little reward.
"NIPSCO has been selling itself on Wall Street as a data center darling and touting the fact that it will need to build some $5 billion in capital expansion to serve these data centers," Friedman said. "While NIPSCO can claim they will ringfence all risks of the new entity from NIPSCO, no one believes that can be done, as GenCo currently has no assets, no staff, nothing. Everything will have to come from the parent corporation."
Inskeep expressed concerns that, under the proposal, it would not be public how much data centers were paying GenCo for electricity and that larger-volume customers could benefit from lower rates.
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