Indiana utilities want ratepayers to fork out for small nuclear reactors

Yahoo

19-03-2025

Indiana legislators are considering multiple bills to promote small modular nuclear reactors, including a controversial provision that would let utilities charge ratepayers for projects that may never be built.
Such allowances, referred to as 'cost trackers,' are widely used by utilities to recover early-stage project costs as well as variable or unexpected expenses between rate cases, such as fuel costs or grid repairs. But critics argue that with a technology as untested and expensive as SMRs, utilities could charge customers hundreds of millions of dollars for a reactor before they even file concrete plans to deploy one.
At a state House committee hearing last week, supporters of SB 424 argued that Indiana needs nuclear to meet voracious power demand from planned data centers and to reduce emissions. Opponents of the bill argued that regardless of one's opinion on nuclear power, the cost recovery provision unfairly saddles ratepayers with expenses for a nascent and untested technology.
'This bill has absolutely, absolutely nothing to do with one's feelings about nuclear power and where energy is going,' Kerwin Olson, executive director of the Citizens Action Coalition, the state's primary consumer watchdog organization, said during the hearing. 'This has everything to do with who we believe should assume the risk of something that is so risky.'
Aerospace manufacturer Rolls-Royce, with a major plant in Indianapolis, is among the companies developing SMRs, but they are still considered years away from deployment. A federally funded SMR project in Idaho was canceled in late 2023, as the company NuScale Power said the cost of building the reactors had soared to over $9 billion.
Indiana Michigan Power (I&M) President and Chief Operating Officer Steve Baker said the utility hopes to locate an SMR on the site of a coal plant in Rockport, Indiana, that is scheduled to close by 2028.
'That site checks all the boxes,' he said, noting that the utility has applied for a $50 million federal grant in partnership with the Tennessee Valley Authority that would be used for permitting and pre-construction costs of an SMR. 'If you think about where the utility industry is headed, you think about customers' desires for sustainable power, you think about the resource adequacy needs that we have on the grid, all roads point you toward nuclear.'
Cost trackers allow utilities to recoup dollars as they are being spent rather than wait for the lengthy processes where commissions review and approve rates every few years.
At the hearing, Baker said I&M needs this real-time cost recovery throughout the planning process instead of after SMR construction is actually approved or underway. Without this provision, he said, the utility would have to rely on bonds and pass the interest payments on to ratepayers.
A 2024 report by the Edison Electric Institute, a utility trade group, said cost trackers have been used or permitted in 38 states, including Indiana. The Edison report notes, 'Cost trackers have been used for many years to recover large volatile costs like those for generation fuels. In recent years, they have also been used to compensate companies for rapidly rising costs such as those related to capital expenditures.'
The practice has faced opposition in other states when relied on for constructing large, expensive power plants, but advocates say that such cost recovery for an SMR is especially problematic given the massive and potentially ballooning costs. Duke Energy — which serves Indiana — pushed for a law allowing cost trackers in North Carolina in 2021, while a citizen watchdog group argued the measure could cause massive rate increases.
At the March 11 hearing in Indiana, Rep. Matt Pierce — a Democrat who voted against the bill — expressed concern that if the utility spent $100 million investigating the technology and decided not to go forward, the ratepayer would bear the whole burden of the failed project while utility shareholders bore none. 'Is it a problem where a corporation can go do something, and there's no downside if they're making bad decisions?' he asked.
Pierce also asked Baker if the utility would object to an amendment saying that funds would be returned to ratepayers if an SMR project was ultimately not pursued. Baker said the utility would not support such an amendment.
The chair of the House utilities committee, Republican Rep. Edmond Soliday, said that utilities should be able to keep costs recovered during the planning process even if an SMR is never built, noting the possibility that 'the antinuclear community will kill all these projects.'
Baker and Soliday argued that the bill contains safeguards for ratepayers, including that the utility cannot earn a rate of return on the SMR planning costs if the project is canceled, unless certain conditions are met. For example, a utility could still turn a profit if it is needed 'to avoid harm to the public utility and its customers' or if the decision to scrap a planned SMR 'was prudently made for good cause.'
Olson railed against these conditions, saying he couldn't see how a utility would be harmed by foregoing profit for an SMR that was never built.
'It's one thing to have a tracker for construction costs when an actual project is planned,' Olson told Canary Media. 'But it's another to basically give utilities a cost tracker to even think about SMRs. That could be hundreds of millions or billions of dollars for something that may never ever happen.'
He added that since the recent push for SMRs is driven by energy demand from planned data centers, 'not only are the utilities getting this, they're getting it at the behest of these big tech billionaires.'
Under the Indiana bill heard March 11 and a larger bill (HB 1007) with identical language about cost recovery, a utility must file with the state Utility Regulatory Commission to confirm an estimate of expected costs to be recovered. But the utility can recoup costs beyond that if the commission decides the overruns are 'reasonable, necessary, and prudent in supporting the construction, purchase, or lease' of SMRs.
'Reasonable and prudent are my least favorite words in the English dictionary, written by lawyers for lawyers,' said Olson.
Indiana Conservation Voters' community and government affairs manager, Delaney Barber Kwon, said during the hearing that her organization also opposes the bill.
'Rate recovery up front without a guarantee of project completion puts Hoosiers at serious risk,' she said, adding that other opportunities like grants, tax credits, and public-private partnerships are already available to utilities that want to develop SMRs.
The cost tracker bill (SB 424) passed the Indiana Senate 34–14 on Feb. 3 and passed the House committee on utilities, energy, and telecommunications with a 10–3 vote at the recent hearing.
HB 1007 — aimed at incentivizing data center development and including the same cost recovery provisions as SB 424 — would also create a tax credit for SMR development. That bill passed the House on Feb. 13 and is now in a Senate committee.
A separate bill (SB 423) would allow two SMR pilot projects in the state and similarly allow utilities to recover costs for those projects before they are actually approved. That bill passed the Senate on Feb. 3 and is now in the same House committee that recently passed the cost tracker bill.
Yet another bill before the House utilities committee prevents local government entities from blocking construction of new generation at the sites of closed power plants or mines (dubbed 'energy production zones'); however, it excludes wind and solar. That means local governments could not prevent an SMR or natural gas plant on these sites but could block wind or solar. At the March 11 hearing, Indiana Secretary of Energy and Natural Resources Suzanne Jaworowski said SMRs are needed to power data centers, industries moving back to the U.S., and 'electrification of our culture,' including the increase in electric vehicles.
'This is proven technology that the U.S. created, the Department of Energy is developing, that is being deployed other places around the world,' she said. 'Russia has a floating reactor. China has SMRs.'
China launched the world's first SMR in late 2023; a floating nuclear power plant in the Russian Arctic went online in 2020.
'This is a great time to be able to start developing the infrastructure to support SMRs,' Jaworowski said.