Service territory and TC annexation

Posted on Jun 28 2018 in Southern Indiana Power

Steve Seibert

On May 7, the Tell City Common Council voted to rescind the annexation ordinance that it passed in December 2013. This decision finally marks the end of a four-year-long saga that was filled with as many twists and turns as an afternoon soap opera. Annexation has tax implications for the affected property owners and can also affect Southern Indiana Power’s electric service territory. Preservation of Southern Indiana Power’s territory has always been our top priority. In order for you to fully understand the decisions made by Southern Indiana Power during this process, I must provide you with a little history of the events that have transpired over the past four years.

Southern Indiana Power crews work at a site.

Each of the state’s electric suppliers operates within service boundaries that were established over 30 years ago, and for the most part, these boundaries have worked well. Under an old Indiana law, a city or town with an electric utility could take over the customers and service area of an electric cooperative through annexation. This is the law that was in effect on Dec. 19, 2013, when the city of Tell City voted to annex 1,776 acres into the city limits. The way the law was written at the time, Southern Indiana Power stood to lose approximately 200 members including the new Perry County Memorial Hospital.

On Feb. 13, 2014, Southern Indiana Power, in an effort to mitigate the loss of members, came to an agreement on electric service territory with the city of Tell City. The agreement reduced SIP’s member loss down to 38 and allowed the Tell City Electric Department to serve the new PCMH. The agreement also stated that new commercial and industrial loads within the new city boundary would be shared.

In 2015, the state of Indiana modified the law (SEA 309) concerning annexations and eliminated a city’s ability to take territory. All new electric service territory changes had to be mutually agreed upon. In order to get this legislation passed and changed permanently, Southern Indiana Power was one of four electric providers in the state that agreed to “grandfather” any pending annexations. Newly introduced Senate Enrolled Act 309 requires mutual agreements for electric service territory changes. Since the time the law changed in 2015, Southern Indiana Power had been trying to renegotiate the agreement to remove all uncertainties pertaining to the 38 Southern Indiana Power members, future loads in the area and electric service to the PCMH.

On April 12, Southern Indiana Power and the Tell City Electric Department were finally able to come to an agreement. The new agreement eliminated any loss of current members, kept all electric service territory boundaries in place, and, for a one-time payment of $500,000, allowed the Tell City Electric Department to permanently serve the PCMH. Southern Indiana Power conducted a financial analysis of the agreement and decided it was in the best interest of all cooperative members to accept the terms. As an ancillary benefit to members in the proposed annexation area, Southern Indiana Power hoped that by signing this agreement the city of Tell City would end its annexation efforts. That hope became a reality on May 7.

This agreement is an example of how Senate Enrolled Act 309 can effectively work by preserving electric service territories and encouraging utility providers, municipalities and community partners to work together to reach outcomes that promote fairness and affordability for all electric ratepayers.