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.”
Why utility cost trackers are controversial
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.”
