Indiana regulators approve $71 million rate increase for AES

The Indiana Utility Regulatory Commission on June 17 gave AES the nod to raise electricity rates enough to earn an additional $71 million each year, a decision that drew reproof from Indiana lawmakers who called it another blow to cost-burdened consumers. 

The approved rate represents less than half of the $192 million increase that AES initially requested.  It’s also less than the $91 million increase proposed in an October settlement agreement between AES, the city of Indianapolis and major electricity consumers like Kroger and Walmart. 

But the new rate is still significantly more than what the Indiana Office of Utility Consumer Counselor, the state agency representing ratepayers in the case, recommended in September. The OUCC’s proposal would have capped AES’s annual operating revenue at $21 million less than the current level. 

The rate increase authorizes AES to earn a total of nearly $2 billion each year, or an estimated $384 million in profit.

The higher base rate comes as a double whammy for Indianapolis-area households, who are already paying more for electricity this summer after AES temporarily raised rates to account for higher-than-anticipated fuel costs during last winter’s storms. The increase also arrives against the backdrop of inflation, which rose to a three-year high last month, and surging gas prices due to the war in Iran. 

Gov. Mike Braun wrote in a Wednesday post to X that he was “deeply disappointed” by the IURC’s approval of the rate increase. 

“Hoosiers have spent years tightening their belts and making tough financial decisions,” Braun wrote. “It’s time for utility companies to do the same.” 

The IURC’s decision also drew fire from the other side of the aisle. In a June 17 news release, five Democrats representing Indianapolis in the state Senate – J.D. Ford, Andrea Hunley, La Keisha Jackson, Fady Qaddoura, and Greg Taylor – chastised Indiana’s Republican supermajority for failing to rein in rising utility costs. 

“Hoosiers pay more. Monopoly utilities collect more. And the leaders in the super-majority who promise affordability over and over again show those are just empty words,” the news release said. “Instead, they continue to defend a system that takes more and more out of our paychecks.” 

The consumer advocacy group Citizens Action Coalition also slammed the rate increase. Ben Inskeep, CAC’s program director, said the decision left him “less optimistic that this commission is willing to do things differently and to actually hold utilities accountable.” 

He said the IURC should have penalized AES for issues that plagued customers after the utility updated its billing system in 2023, including duplicated withdrawals for the same monthly bill. 

The rate increase will take effect in two phases, with rates going up in July 2026 and January 2027. AES officials anticipate the hikes “will be less than $5 per month per phase” for a household that uses 1,000 kilowatt hours of electricity per month, according to a Wednesday news release from the utility. 

“The IURC’s decision reflects a thorough, transparent process and balances the need for continued investment in the electric system with a focus on customer affordability,” the news release stated. 

Under a state law that Braun signed in February, AES cannot ask for another increase to its base rate until January 2030 — though electricity bills could still go up for other reasons, like the fuel adjustment charge hitting consumers this month. 

Three members of the five-member IURC signed off on the rate increase: Andy Zay, David Veleta, and David Ziegner. Commissioner Bob Deig dissented. Commissioner Anthony Swinger recused himself from the decision because he worked on the AES rate case for the OUCC before he was appointed to the IURC by Braun in January. 

“None of this was taken lightly,” Zay, the IURC’s chair, said at the Wednesday hearing, adding that the commission and its staff had carefully weighed concerns about affordability. The commissioners did not go into further detail at the hearing. 

But the commission’s order shows some of the debates that played out during the rate case. One point of contention was AES’s authorized return on equity — that is, how much the utility can earn each year in profits. Other disputes hinged on how AES forecasts its operating expenses. 

The OUCC accused AES of including more than 100 “phantom hires,” vacant positions it did not necessarily intend to fill in its calculations. Last year, AES said that the rising costs of vegetation management, or trimming trees around power lines, also drove the need to raise rates. The OUCC recommended keeping vegetation management costs flat. 

One factor that’s not driving higher prices? Data centers. 

AES does not currently provide service to any data centers and did not include them in its calculations, AES president Brandi Davis-Handy said in testimony before the IURC. 

Tilly Robinson is a Pulliam fellow for the Indianapolis Star. She can be reached at tilly.robinson@indystar.com.