Report: Indiana electricity demand flat, rates to rise 32 percent

December 30, 2013

WEST LAFAYETTE, Ind. - Analysts are predicting a 32 percent increase in electricity rates for Indiana by 2023 and an unprecedented stagnation in electricity demand over the next two decades.

"This is something we've never seen before: essentially no growth in electricity for the rest of the decade," said Douglas Gotham, director of the State Utility Forecasting Group (SUFG), a state-funded panel of researchers based at Purdue University.

Electricity demand is projected to grow at an annual average rate of 0.74 percent over the next 20 years.

New projections are contained in a report forecasting the state's energy needs through 2031 prepared by the SUFG for the Indiana Utility Regulatory Commission (IURC). Gotham reported the findings to the IURC on Dec. 20.

Adjusting for inflation, electricity rates are expected to rise 32 percent by 2023. Three factors are attributed to the projected increase. New rules under the U.S. Environmental Protection Agency's Mercury and Air Toxics Standards will impact rates. The new standards will especially impact coal-fired power plants, which emit mercury and other pollutants. Other factors are costs associated with the resources required to meet future electricity demands and capital costs associated with additions to electricity-generating plants and modifications to extend the lifetimes of plants.

"We have had some units being retired and some are being switched over to natural gas instead of coal, while larger units are being retrofitted with pollution controls, and all of that costs money," Gotham said.

As of 2012, about 78 percent of the electricity used in the state is from coal-fired power plants.

Higher costs will drive down usage. Another factor leading to stagnant growth in demand is a push toward increasing energy efficiency through utility-sponsored conservation programs.

Electricity consumption is projected to grow 15 percent through 2031, from 107,000 gigawatt hours to about 123,000 gigawatt hours. A gigawatt is 1 billion watts. One gigawatt hour is the constant use of one gigawatt for an hour, or enough energy to serve the annual needs of about 90 average-size Indiana homes.

The forecasting report was prepared by Gotham; Paul Preckel, a Purdue professor of agricultural economics; and analysts Tim Phillips, Marco Velastegui and David Nderitu.

The panel used a system of sophisticated mathematical models to predict future trends for the state's residential, commercial and industrial power users. Projections of electricity demand are based on the estimated impact of manufacturing output and employment, commercial employment, population, energy prices, and other factors.

The Purdue-based group prepares the reports about every two years to predict Indiana's future electricity requirements.

A copy of the report is available on the State Utility Forecasting Group's website at http://www.purdue.edu/dp/energy/SUFG/

The forecasting group does not make recommendations. The studies are done in accordance with a state law enacted in 1985 to provide the state regulatory commission with an impartial projection of electricity consumption and peak demand. This is the 14th full report compiled by the group.

The forecasting group is housed within Purdue's Energy Center, which is part of the university's Discovery Park.

Writer: Emil Venere, 765-494-4709, venere@purdue.edu

Sources: Douglas Gotham, 765-494-0851, gotham@purdue.edu

Danielle McGrath, IURC public information officer, 317-232‐2297, dmcgrath@urc.IN.gov

Note to Journalists: A copy of the report is available from Darla Mize at the State Utility Forecasting Group, 765-494-4223, dmize@purdue.edu. It is also available online at http://www.purdue.edu/dp/energy/SUFG/