Dive Brief:

• Rural electric cooperatives and some investor-owned utilities (IOUs) are incurring animosity from the 72 municipally owned electric utilities (munis) in Indiana for blocking their growth, the Fort Wayne Journal-Gazette reports.
• A 2002 change in law allowed the munis, which have 7% of Indiana's electricity customers, to ask the Indiana Utility Regulatory Commission for service territory in land annexed into their communities. Cooperatives grew 14% from 2001 through 2012 and munis grew only 2.8%. 28 communities out of 72 served by munis have since sought territory changes for purposes of annexation.
• Cities that annex territory must compensate the existing provider, buy the infrastructure, and compensate for five years of growth. Indiana legislators are looking for a new formula to compensate existing providers because the takeover provision discourages coops and IOUs from investing in infrastructure in undeveloped areas.

Dive Insight:

Cooperatives are member owned, provide electricity to rural consumers, and control about 80% of Indiana’s electric customers. For-profit, investor-owned utilities like Duke Energy, AEP, and NIPSCO control most of the rest.

Many cities expect to obtain electricity more reliably and at a lower cost through a municipally-owned provider. They also accuse the cooperatives and IOUs of taking a “monopolistic” approach by attempting to control customers who otherwise would join them.

Last year, State Sen. Mike Crider (R-Greenfield) proposed a bill to address the annexation issue, but it was never taken up. He told the Journal-Gazette he will try again in 2015.

“I think what we are seeing is really a result of tax caps,” Crider told the local paper. “Cities are looking to improve their tax base, so they seek to annex, and electric service is a result of that. I think the annexations have happened enough that if you are a rural electric or investor-owned, it’s a concern. They feel like if they don’t do something, it could get out of hand.”

The Journal-Gazette reports Crider has not settled on final language for the bill, but that it likely will involve ending annexation or devising a new formula to compensate existing electric providers.