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Utility rate hike called ‘inequitable’

February 20, 2019

HAMMOND – NIPSCO says customer input is an important part of the ratemaking process, and two consumer watchdog organizations are giving a thumbs-down to the utility’s proposal to raise residential electric rates by about 12 percent.

Both the Office of the Utility Consumer Counselor and the Citizens Action Coalition have proposed other options to the state regulatory agency which will determine if and how much NIPSCO rates will rise.

According to the OUCC, NIPSCO’s proposal would raise monthly electric charges for an average residential customer – using 689 kilowatt hours – from $94.54 to $105.96. A residential customer using 1,000 kWh would see their monthly bill rise from $130.96 to $146.07.

But residential bills would not rise under recommendations made by the OUCC, which had nine expert witnesses submit written testimony last week with the Indiana Utility Regulatory Commission, which will conduct a field hearing on NIPSCO’s request in early March.

“Our technical and legal staff has developed a creative solution to the unique concerns NIPSCO has raised in this case,” said Indiana Utility Consumer Counselor Bill Fine. “Our recommendations maintain NIPSCO’s current revenue requirement and provide incentives to industrial customers without shifting costs to other customer classes.”

The OUCC recommends:

• Decreasing the utility’s authorized return on equity to 9.25 percent. NIPSCO’s current authorized return is 9.975 percent, and it is requesting an increase to 10.8 percent.

• Reducing numerous line items, including demolition and decommissioning costs for coal-fired generation facilities, including the Michigan City plant.

• Not allowing remediation costs for solid waste management units to be included in customer rates. Instead, those costs would be absorbed by the company.

• Recognizing new power supply options available to NIPSCO’s largest customers and facilitating cost savings to those customers, while shielding residential and commercial customers from covering those costs.

Also opposing the increase is the CAC, which asked the IURC, in testimony filed last week, to reject NIPSCO’s proposal to shift an “extraordinary amount of costs from the largest industrial customers to everyone else.”

Expert testimony was filed on behalf of CAC by Jonathan F. Wallach, vice president of Resource Insight Inc.

“The company’s proposal would unduly subsidize large industrial customers by shifting recovery of $67-$80 million of embedded production costs to other rate classes,” Wallach said.

In addition, he said many of the costs being shifted to customers are the result of investments made by NIPSCO to serve, in part, the energy needs of industrial customers, including the Michigan City and Schahfer coal-fired power plants, which will be retired in five to 10 years.

NIPSCO is proposing to retire the plants earlier than previously planned and speed up recovering costs related to those plants.

“With the Company’s restructuring proposal, large industrial customers would enjoy the future economic benefits from early retirement of the coal units without having to pay for the near-term incremental depreciation expense associated with early retirement,” Wallach said.

“We applaud NIPSCO for recognizing that a transition from dirty coal to clean energy will lower future costs to customers, but this transition will not be a just one if future savings are not fairly apportioned among all of NIPSCO’s customers,” said Raghu Murthy, an attorney with Earthjustice, outside counsel to CAC.

Wallach recommended rates for the largest industrial customers be maintained at current levels and rates for all other classes be increased by an equal percentage to recover NIPSCO’s requested revenue increase.

“My recommended revenue allocation would substantially reduce the industrial subsidy from the company’s restructuring proposal and provide for a fair allocation of the requested revenue increase,” Wallach said.

Nick Meyer, NIPSCO’s director of external communications said, “Customers have an important voice in the review process.

“While our electric rates are below the national average, we know that any increase matters to customers. Affordability is essential and the goal of this review process is to reach a fair and balanced outcome.”

As part of the rate case, NIPSCO is proposing to increase the monthly fixed customer charge by 22 percent to $17. This is the amount customers pay regardless of how much electricity they use.

“The Company’s proposal would ... disproportionately and inequitably increase bills for the company’s smallest residential customers and result in subsidization of larger residential customers’ costs by customers with below-average usage,” Wallach said.

“... the Commission should reject the company’s proposal to increase the monthly fixed customer charge for residential customers,” Wallach said. “Instead, consistent with long-standing cost-causation and rate-design principles, I recommend that the residential fixed customer charge be set at a cost-based rate of $12.55 per residential customer per month.”

The OUCC recommends keeping the monthly charge at $14.

The next step in the rate case is an IURC public field hearing March 11 at Hammond High School. Rebuttal testimony from NIPSCO is due March 15, with an IURC evidentiary hearing scheduled to start April 16. A final order is expected later this year.

—From staff reports

IURC field hearing March 11

NIPSCO customers who wish to comment on the proposed rate increase can speak an Indiana Utility Regulatory Commission field hearing March 11 in the Hammond High School auditorium at 5926 Calumet Ave. in Hammond. Consumers are encouraged to arrive by 5:45 p.m. for an overview of procedures and the rate case process.

Consumers will be able to speak directly to the commission, under oath and on the record, regarding the case, and submit written comments. While commissioners are not allowed to answer questions, OUCC staff will be available before, during and after the hearing to address questions.