Retail Unbundling - Indiana

Status: The state has one pilot unbundling program for residential customers.

Overview: Indiana has one pilot unbundling program for residential gas customers, which is operated by Northern Indiana Public Service Company (NIPSCO)--the largest local distribution company in the state. The program, called "NIPSCO Choice," has been in existence since April 1998 and is open to 610,000 residential and 50,000 commercial/industrial customers, although enrollment caps limit participation to 150,000 residential customers and 20,000 commercial customers. Originally the program was open to 50,000 residential and 1,500 commercial/industrial customers and was scheduled to end on May 31, 2000. The eligibility numbers were increased in August 1998 and then again in April 1999. NIPSCO estimates that all its customers will have access to unbundled service by January 1, 2005. In June 1999, 6,004 residential customers (4 percent of eligible) and 4,297 commercial and industrial customers (21 percent) were participating. As of July 27, 2000, 12,704 residential customers (8 percent) and 3,759 commercial and industrial customers were participating. Enrollment has dropped since then, with NIPSCO reporting that 10,463 residential customers and 3,718 business customers were participating as of July 2001 and 10,001 residential customers in October 2001. As of November 2001, three of the four suppliers (Columbia, Energy USA, FirstEnergy Solutions, and Nicor Energy) participating in the pilot were not accepting any new residential customers; only Nicor Energy was offering new deals.

Citizens Gas and Coke Utility (Citizens) filed a request for an alternative regulatory plan in November 1999, which if granted, would allow its customers to choose their gas supplier. The program would be phased in over a 6-year period, with choice available to all large commercial and industrial customers (using more than 50,000 therms) in the first and second years, remaining commercial and industrial customers in the third year, and residential customers in years 4 through 6. A decision regarding the request had not been made as of November 2001.

EIA State Profile: In 2000, Indiana had 1,590,925 residential and 195,005 commercial customers. They consumed 160 and 90 billion cubic feet of natural gas, respectively. The average prices paid for natural gas purchased from local distribution companies by residential and commercial customers were $6.42 and $5.74 per thousand cubic feet, respectively. The average city gate price in the state was $4.03 per thousand cubic feet.

Eligibility/Participation in Retail Choice Programs:

Status as of October 2001: Number of Customers



Customer Type
Total 2000 Eligible Participating
Total Percent of 2000 Total Total Percent of Eligible Percent of 2000 Total
Residential 1,590,925 610,000 38.3 10,001 1.6 0.6
Commercial 195,005 50,000 25.6 3,784 7.6 1.9
Total 1,785,930 660,000 37.0 13,785 2.1 0.8

Sources: Total 2000: Energy Information Administration, Natural Gas Annual 2000 (November 2001). Eligibility and Participation: Utility Regulatory Commission of Indiana (October 2001).



Indiana: Legislative and Regulatory Actions on Retail Unbundling

Summary: The Indiana General Assembly passed legislation in 1995 that gives the Indiana Regulatory Commission authority to allow a utility's request for alternative rate regulation if it is found to be in the public interest. Northern Indiana Public Service Company (NIPSCO), the largest local distribution company in the state, filed for alternative rates in December 1995 for a 2-year pilot choice program and some optional service offerings. The pilot program was approved in the fall of 1997 and began in April 1998. Citizens Gas and Coke Utility (Citizens) filed for alternative rates in November 1999, which would allow all its large commercial and industrial customers (using more than 50,000 therms) immediate choice of gas suppliers. The program would be phased in over a 6-year period, with choice available to remaining commercial and industrial customers in the third year, and residential customers in years 4 through 6. A decision regarding the request had not been made as of November 2001.

Regulatory and Legislative Actions

Legislation 10/95 Alternative Utility Regulation. Indiana Code 8-1-2.5, Chapter 2.5 "Alternative Utility Regulation." Gives the Indiana Regulatory Commission authority to allow a local distribution company's request for alternative rate regulation if it is considered to be in the public interest. In approving retail energy services, the commission may establish rates and charges based on market or average prices, price caps, index-based prices, and prices that use performance-based rewards or penalties.
Regulatory Actions 10/99 Request by Citizens Gas and Coke Utility for Alternative Regulatory Plan (Cause No. 41695). Citizens proposed an unbundling plan, which would be phased in during a 6-year period. Choice would be available to all large commercial and industrial customers in the first 2 years, the other commercial and industrial customers in the third year, and residential customers in phases during the next 3 years. Citizens would remain one of the supplier choices and would act as the supplier of last resort.
10/97 Approval of NIPSCO Alternative Regulatory Plan. The commission approved NIPSCO's request for new service offerings and a pilot unbundling program for residential customers, as specified in a settlement agreement (May 1997) between NIPSCO and several interested parties. The pilot will be limited at first to certain residential customers in the South Bend area and 1,500 small commercial/industrial customers in order to assess the issues raised by unbundling and to minimize any transition costs. The company hopes eventually to expand the program systemwide. NIPSCO will retain its merchant function during the transition period with an evaluation of its future role to be made within 6 years. The settlement includes a gas cost incentive mechanism that rewards or penalizes NIPSCO for its gas supply purchase performance when compared to a market benchmark. The agreement also includes standards of conduct for transactions with marketing affiliates. NIPSCO will continue as the supplier of last resort.
6/97 Rejection of Indiana Gas Co.'s Proposed Pilot. The commission denied Indiana Gas Company's request for approval of a 2-year pilot choice program for 34,000 residential and small commercial customers because the request was made under a 30-day filing procedure that precludes a hearing.

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File last modified: 06/19/2002