Indiana lawmakers are considering a shift to performance-based ratemaking as utilities work to meet growing energy demand and legislators search for ways to curb rising customer bills.
The discussion comes after major providers such as NIPSCO, Duke Energy, and AES Indiana rolled out rate increases averaging 17.5% statewide in 2024 and 2025. As lawmakers also aim to attract energy-hungry data centers, utilities are updating aging infrastructure and exploring options like solar power and small nuclear reactors. At the same time, legislators are looking for faster relief from high utility bills.
“Hoosiers deserve reliable and affordable utilities and have been burdened by excessive and unnecessary utility rate increases for too long,” Gov. Mike Braun said in a release.
Braun recently replaced three members of the five-member Indiana Utility Regulatory Commission, which regulates the state’s largest energy companies. He said the move would “ensure that Indiana has exceptional utilities without saddling families and businesses with excessive prices.”
For decades, Indiana has relied on a cost-of-service model that allows investor-owned utilities to recover expenses and earn a regulated return on equity through rates approved by the IURC.
Critics argue the system gives utilities little reason to control costs, since approved spending can often be passed on to customers.
Performance-based ratemaking
Performance-based ratemaking, commonly known as PBR, would link utility earnings more closely to outcomes such as affordability, reliability, and storm recovery.
Utilities have shown cautious openness to the idea, especially multiyear rate plans, while voicing concerns about overly complex incentive systems. Consumer advocates, however, warn that poorly crafted legislation could allow utilities to earn extra profits for meeting responsibilities they already have.
Lawmakers are expected to introduce legislation in the House that would create three-year rate plans and a limited set of performance measures focused on pricing, reliability, and recovery from severe weather. The proposal may also include expanded help for low-income customers and protections against summer shutoffs.
Democrats on the utilities committee have expressed interest but continue to press for more immediate ways to ease utility bills.