Energy costs — and CEO paychecks — remain high even as average Hoosiers struggle to pay bills, according to a new report. Photo from Getty Images.

By Whitney Downard
Indiana Capital Chronicle

INDIANA — In one year’s time, the state’s biggest utility companies disconnected 174,015 Hoosier households, turning off the lights and heat at a time when energy costs are growing faster than Hoosier paychecks.

The numbers come from a new report released by the Community Action Poverty Institute and Citizens Action Coalition earlier this month with a focus on electricity needs, a component of overall energy consumption, and investor-owned utilities.

The report’s authors were highly critical of CEO compensation packages and “lucrative profit margins” at the state’s five biggest utility providers, including: Indiana Michigan Power Company, AES Indiana, Northern Indiana Public Service Company, Duke Energy Indiana and CenterPoint Energy Indiana.

The U.S. Energy Information Adminstration reported that the combined profits of these investor-owned companies was $3.8 billion from residential electricity in 2022, while the average CEO compensation package was $18 million, according to the report.

At the same time, low-income households dedicate 7% or more of their income toward electric costs, on average, and are six times more likely to have their utilities disconnected. In all, just over 13% of Hoosier households were disconnected at least once every year and nearly half, or 48%, of households earning less than $20,000 annually forgo other household needs to pay for electricity.

Additionally, women-led or minority households are more likely to be electricity burdened, meaning they’re more likely to spend a greater portion of their income on utilities.

“We all need a home for our families that can be a safe temperature in summers and winters, and where we can cook and refrigerate food as part of our daily routine. High electricity costs threaten these essential functions by forcing consumers to choose between food, healthcare, and electricity in the midst of both a cost of living crisis and climate change,” said Zia Saylor, a researcher at the Indiana Community Action Poverty Institute. “This publication highlights how high electricity costs exacerbate energy burden and draws attention to policy solutions including statewide affordability assistance and limitations on disconnections.”

Such solutions include expanding energy assistance program funds as well as a state-implemented cap on energy bills at 6% of a household’s net annual income.

A Growing Concern

Last week, lawmakers listed reducing energy costs as one of their key priorities ahead of the 2025 session, which is set to begin in January.

Senate Majority Leader Rodric Bray, R-Martinsville, praised the work of his colleagues in previous sessions but identified ongoing frustrations in regards to energy policy.

“We’ve seen the cost of that power continue to creep up — which we need to keep a very, very close eye on — becaukse we need to make sure Hoosiers can pay their gas bills and their electric bills,” Bray told reporters.

Bray said legislators needed to also keep future power demands in mind.

In May, the U.S. Energy Information Administration ranked Indiana 29th in the nation for its utility expenses, putting it below neighboring states like Ohio and Illinois. Overall, energy costs in the Hoosier State have grown by 33% between 2012 and 2022, compared to the national average of 19%.

Three of the investor-owned companies at the center of the report — CenterPoint, Duke and NIPSCO — have submitted petitions to the Indiana Utility Regulatory Commission for rate increases in 2023 and 2024.

While utility companies are prohibited from disconnecting homes if temperatures dip below freezing, that protection doesn’t apply to during excessive heat events, which can be deadly. Due to changing climate conditions, extreme weather is becoming more common.

Heating and cooling accounts for just under one-third, or 31%, of electricity consumption, according to the report.

While the federal government offers a program to offset energy costs, only an estimated 16% of eligible homes — or 109,750 households — receive support from the Low Income Home Energy Assistance Program due to funding restrictions. Some utilities may also offer their own crisis funding to consumers, with varying qualifying criteria.

Potential Solutions And Recommendations

The burden of such expenses varies by county — an additional concern for lawmakers seeking to address costs, according to the executive director of the Citizens Action Coalition.

”Guaranteeing uninterrupted access to utility services for all Hoosiers, regardless of income or zip code, is a moral imperative for our State. We should strive to adopt policies that lift people up and afford everyone the opportunity to live a dignified life and participate in society in a meaningful way,” said Kerwin Olson in a release. ”As this report displays, Indiana has a long way to go. We are hopeful that policy makers will use this report as a roadmap to begin crafting public policy that ensures the most vulnerable amongst us are protected from loss of these essential services.”

The report recommends expanding the federal energy assistance fund, including reforming the financial eligibility guidelines to capture more energy burdened Hoosiers. State intervention could come in the form of a payment cap at 6% of a household’s net annual income.

Researchers said coupling such a state initiative with existing poverty reduction programming, such as food assistance, would reduce administrative costs and pointed to other states that have already implemented such efforts.

Another initiative adopted by other states: expanding disconnection moratoriums to include other inclement weather. The report concluded by acknowledging the need for further research into energy costs and poverty, including health impacts.