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Indiana politicians got thousands in gifts while pushing solar policy

Indiana politicians got thousands in gifts while pushing solar policy

With Senate Bill 309 enacted, what is the affect on solar energy in Indiana?

Kelly Wilkinson/IndyStar

It may sound like the life of a top CEO or a major celebrity. But in fact, it’s all in a day’s work for some Indiana legislators.

An IndyStar review has found that as the general assembly was considering crucial energy legislation, utilities and their political action committees poured millions into the general assembly in the form of gifts, entertainment, campaign contributions and lobbying.

Gifts and entertainment? Check. During the 2015, 2016 and 2017 reporting periods, investor-owned utilities and the organization that represents them spent more than $109,000 entertaining Indiana General Assembly legislators. More than $32,000 was spent entertaining members of the Senate and House committees focused on utility legislation.

 Campaign contributions? Check. Since the latest net metering policies were enacted in Indiana in 2011, political action committees representing Indiana’s five investor-owned utilities have poured nearly $1.7 million into state candidates.

Lobbying? A big check. From 2014 to the first half of 2017, utilities spent $2.78 million on lobbying. More than $530,000 was spent in the first reporting period of 2017 alone, which included the 2017 legislative session and the months leading up to it.

But if money played any role in the passage of a crucial solar energy bill, so did words. One word in particular. Mimicking what has become a national strategy, utility leaders in Indiana, with the support of some Republican lawmakers, strategically rebranded net metering from an “incentive” to a “subsidy.”

The issue at hand was a bill whose most controversial provision was to phase out net metering — the practice of requiring utilities to compensate customers who produce more energy than they consume, usually from rooftop solar panels. The passage of that bill, Senate Bill 309, has thrown Indiana’s burgeoning solar installation industry into a pit of uncertainty.

“In the hallways, the lobbyists for the energy supply and utilities were telling legislators, ‘Oh, it’s a huge subsidy and all we’re doing is subsidizing these wealthy people who can install,’ which is far from the truth,” said Sen. Mark Stoops, D-Bloomington, who voted against SB 309. “That whole question of whether it was subsidized was blown out of proportion and was not accurately represented.”

Some would argue that net metering reflects Hoosier values, given it is a state founded on the pioneer principle of self-sufficiency. For the private homeowner who can make the investment, rooftop solar can mean relying less on the utility’s grid for electricity, saving money on bills and earning tax credits from the federal government. It also helps the environment by producing clean energy.

But while some view rooftop solar as an innovative technology that is revolutionizing the electric industry, others fear it could change the way customers rely on the grid, inviting the end of the era of utilities’ hold on how homeowners get their electricity.

The disruption that energy self-generation could cause to the industry is not likely to materialize instantaneously, but utilities are taking the long view. In each of their SEC filings, Indiana’s investor-owned utilities — Duke, Indiana Michigan, Indianapolis Power & Light, NIPSCO and Vectren — list a form of self-generation or distributed generation among the ways that the companies could lose revenue.

For several years, Indiana believed in the value of incentivizing rooftop solar. The state implemented net metering in 2005, and in 2011, under Republican Gov. Mitch Daniels, the Indiana Utility Regulatory Commission moved to make more solar customers eligible for the credit.

But then things changed. A 2013 report written for the Edison Electric Institute, a national organization representing investor-owned utilities, called distributed solar generation one prominent example of a “threat to the utility model.” A year later, the conservative American Legislative Exchange Council used information from the EEI to craft model legislation to phase out net metering.

In 2015, Indiana legislators took their first shot at doing away with the program.

“I knew this was a push nationwide through the American Legislative Exchange Council, and energy companies and utilities were framing this as a subsidization issue,” Stoops said. “Pretty much a cut-and-paste ALEC bill with cut-and-paste ALEC arguments going on across the country, and Indiana was happy to play along.”

It would have allowed utilities to set their own rates and apply charges to customers who generate their own power. As in the case of SB 309, critics called that bill premature, and said that getting rid of net metering when Indiana’s solar industry was in its infancy was like “killing a fly with a sledgehammer.”

At least 50 people appeared at a February 2015 committee hearing to speak out against HB 1320, far outnumbering those who came in favor of the bill. Yet only eight opponents to the bill were allowed to speak before Rep. Heath VanNatter, then vice chair of the committee, cut public comment short.

VanNatter’s treatment of the public comment process presented a procedural problem for the bill. According to those familiar with the process, Indiana House Speaker Brian Bosma, R-Indianapolis, declined to bring it to the floor for fear of a procedural boondoggle. So they left the bill where it was.

It would be two years before the next fight over net metering would be waged. In the meantime, Indiana utilities and the organization that represents them, the Indiana Energy Association, targeted lawmakers.

VanNatter, who still serves on the House Committee on Utilities, Energy and Telecommunications, was the top recipient of gifts and entertainment furnished by utilities. During the 2015, 2016, and 2017 reporting periods, he was treated to roughly $5,300 worth of meals, Colts games and other entertainment including at least one WWE match, which he and his son attended in March. Members of his family also were top recipients. In all, he and his family were recipients to nearly $8,500 in treats in a two-and-a-half year period. VanNatter, R-Kokomo, declined a request to be interviewed about gifts he received.

VanNatter also was a top recipient of campaign contributions. Since 2011, his campaigns received about $42,000 from PACs representing Indiana utilities. Other top recipients are also notable to the net metering process: Koch, author of the first anti-net metering bill, received more than $34,000 from utility PACs, as did Sen. James Merritt, R-Indianapolis, the current chair of the Senate Utilities Committees. Sen. Brandt Hershman, R-Wheatfield, author of SB 309 and former member of the Senate Utilities Committee, received at least $61,000.

The heavy presence of lobbyists was felt in the state house.

“(There’s) no question, the utility lobby greatly overstated the potential impact that customer generators were having on the grid from an electricity rate perspective,” said Jesse Kharbanda, executive director of the Hoosier Environmental Council. “Secondly, you have much greater access by the utility lobby to key decision makers than any other stakeholder groups — we were outnumbered.”

That said, lobbying is commonplace on any number of issues before lawmakers. So, too, are gift-giving and donating to lawmaker campaigns. Also, net metering certainly wasn’t the only issue of consequence for the energy industry from 2015-17, though it was a significant one.

“From a lobbying standpoint, I would tell you that it’s really important for people to engage in the legislative process,” said Mark Maassel, president of the utility lobby group Indiana Energy Association, who testified in favor of the solar bill earlier this year. “We saw this as an important issue so the answer is yes, we did engage.”

Still, it was hardly a slam dunk for proponents of the bill. Homeowners, small business owners and environmental advocates staunchly opposed the bill, testifying at hearings that went on for as long as six hours. When the bill was finally brought to a vote, it won in the House by only 13 votes — a slim margin for Indiana’s Republican-ruled House of Representatives.

Members from Green Alternatives Inc. install a solar panel system in Carmel, Tuesday, October 31, 2017.(Photo: Kelly Wilkinson/IndyStar)Buy Photo

“It becomes inherent in the calculations that people without solar are paying more than people who do have solar, in terms of really paying for the cost of the grid,” said Maassel.

It’s true that people who don’t generate their own energy pay for some of the immediate costs that net metering customers don’t. But studies suggest that when a market isn’t overly saturated, the cost shifts are in fact minimal.

“Whether net metering really accounts to cost-shifting will depend on the rate structure and the high levels of penetration,” said Kerwin Olson, executive director of consumer advocacy group Citizens Action Coalition. “But in the state of Indiana we are nowhere near that — not even close.”

In Arizona, a favorite example cited by Maassel, Hershman and other proponents of the bill, the solar industry is much more developed. There were 84,750 net metering customers in that sunny state at the end of 2016, compared to Indiana’s 1,116.

Hershman and Massel concede that Indiana isn’t in the same boat as other states, and they emphasize that it was the rate of growth that makes them believe now was the time to act.

Despite the small size of Indiana’s solar industry, the cost-shift or subsidy was the main issue backers of the bill brought to the floor, and pro-utility resources backed their claims. A 2016 paper from the pro-utility EEI — which was among the information Hershman provided to IndyStar when asked about his research behind the bill — put it this way: “(T)he intent of net metering was to incentivize early adopters, not create huge subsidies from one group of customers to another.”

“If really you put pen to paper in Indiana right now and asked, ‘Are these people really not paying their fair share?’ I think it’s so marginal it’s not even worth looking at,” Olson said. “(It would amount to) maybe a nickel a year.”

While the argument over cost-shifting and subsidies took center-stage last March, it became apparent that there was another issue backers were advocating for: certainty in the utility market.

In March, Maassel told the general assembly, “Our industry is in the midst of a very significant transition.”

Rep. Matt Pierce put it another way.

“This bill is a classic example of an entrenched old industry trying to do all it can to hobble a new and emerging industry,” the Bloomington Democrat said, “because the new industry will mess up its business model.”

That business model is slow to change course, according to Allyson Mitchell, director of sustainability with Prosperity Indiana, a group that foster economic development at the community level.

“Utilities are titanics, and they don’t shift their business model well. Their entire model is based on the idea that the more energy that is demanded, the more they need to build things and the more that increases their bottom line,” Mitchell said. “From our perspective, 309 is another way of keeping the barriers to self-sufficiency and self-reliance in place.”

According to a study by the Lawrence Berkeley National Lab’s Electricity Markets & Policy Group, the real drivers of changes in electric retail prices are capital expenditures — which can include investments in new power plants or even solar farms. Even when the Lab projects a 10 percent penetration rate for net-metered solar power (Indiana’s penetration rate is less that 1 percent), it accounts for less of a cost-shift than capital expenditures.

Even before the first anti-net metering bill was brought into consideration in 2015, the IURC had a built-in mechanism for revisiting and reviewing the credit offered. The rules stated that, once net metering hit a certain level of saturation, the commission would review the policy.

They did this once before, in 2011. At the time, the commission traveled across the state to gather information about net metering. They concluded that it was in the state’s interests to expand the program and allow more people to take advantage of the incentive.

“The whole purpose of taxpayers funding the IURC is to develop a sound data-driven approach to public policy,” said Kharbanda with the Hoosier Environmental Council.

Net metering would not have its day in court — and the fact that no study was done on the status of net metering in Indiana concerned some lawmakers and opponents of the bill.

“A study is necessary when there are questions around a particular issue. In my particular viewpoint, if you look at the economics of net metering, it is very clear that there is a subsidy,” Maassel said. “The general assembly is in the ideal spot to say that this the kind of signal we want to send, this is the kind of encouragement we want to send. It’s not based strictly on economics, it’s based on the policy of Indiana and that’s fine.”

Hershman said lawmakers did study a range of resources when crafting the policy, including news articles and a Government Accountability Office report on net metering, materials he provided to IndyStar upon request. But when asked about certain components of the bill, like how he reached the rate structure for net metering that will be in effect after the grandfathering period comes to a close, he responded with a verbal shrug.

“It was entirely arbitrary,” he said. “It’s a public policy decision, as is everything else.”

Emily Hopkins covers the environment for IndyStar. Contact her at (317) 444-6409 or emily.hopkins@indystar.com. Follow them on Twitter: @_thetextfiles. IndyStar’s environmental reporting project is made possible through the generous support of the nonprofit Nina Mason Pulliam Charitable Trust.

SOURCE: IndyStar.com

BY:  , IndyStar Published 6:00 a.m. ET Nov. 6, 2017 | Updated 8:55 a.m. ET Nov. 6, 2017

LINK: https://www.indystar.com/story/news/2017/11/06/solar-panels-law-passed-lobbyists-net-metering/820792001/

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