OUCC Responds to I&M Rate Increase Proposal

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The AEP subsidiary is headquartered in downtown Fort Wayne. The AEP subsidiary is headquartered in downtown Fort Wayne.
INDIANAPOLIS -

The Indiana Office of Utility Consumer Counselor has responded to a proposed electric rate increase by Fort Wayne-based Indiana Michigan Power. The OUCC is recommending approval of an increase that would generate less than half of the new annual operating revenues I&M is seeking.

Under I&M's proposal, the utility would rise the monthly residential charge from $7.30 to $18.00, which would generate $263 in new operating revenues. The OUCC is recommending capping that increase at $8.30.

I&M announced the proposed rate increase in July. The utility says, if approved by the Indiana Utility Regulatory Commission, the increase would be phased in over two years. I&M plans to use the money generated through the increase to make system improvements, including the replacement of poles, overhead lines and underground lines.

The utility is also requesting an increase in its authorized return on equity from 10.2 percent to 10.6 percent. The OUCC is recommending reducing that number to 8.65 percent. Other OUCC recommendations include:

  • Denial of I&M’s requests to shorten its depreciation periods for new meters and for Unit 1 at the utility’s Rockport Generating Station.
  • Reducing various line items pertaining to the utility’s operating expenses including personnel costs, nuclear decommissioning funding, and vegetation management.
  • Reducing the number of extra charges through trackers on consumers’ bills while seeking further Commission review of escalating costs related to transmission projects. 
  • Denying newly proposed trackers and denying the continuation of certain existing trackers, which allow the utility to adjust rates for specific items between general rate cases.

"Through the use of our technical and legal resources over the last three months, we have calculated recommendations that, if approved, will provide I&M with the revenue it needs to ensure safe, reliable service for its Indiana customers," said Indiana Utility Consumer Counselor Bill Fine. "Our testimony reflects a careful, thorough review of the evidence and additional information obtained through the discovery process."

The OUCC's testimony filed with the Indiana Utility Regulatory Commission includes written comments from more than 2,700 I&M customers as well as public comments made last month at hearings in South Bend, Fort Wayne, and Muncie. South Bend Mayor Pete Buttigieg also released a statement citing concerns about the proposed increase.

"Our focus is twofold: affordability issues and climate concerns," said Buttigieg. "Many residents would be strained by the proposed rate increases, and South Bend industries that depend on affordable power will find it more difficult to compete if rates are too high. We also consider it increasingly urgent to see better investment in cleaner and renewable sources of energy. We need utilities to step up, especially at a time when the community is already beginning to feel the effects of climate change."

I&M has until December 6 to file rebuttal testimony with the IURC. The commission will begin its evidentiary hearing on January 16 in Indianapolis and is expected to make a ruling on the proposal in the spring.

In testimony filed late Tuesday, the OUCC recommends:

Limiting the increase in I&M’s flat, monthly residential customer charge to only $1.00. I&M is proposing to raise the monthly residential charge from $7.30 to $18.00. The OUCC’s recommendations would cap that amount at $8.30. In its testimony, the OUCC notes that the utility’s proposed customer charge increases would discourage energy efficiency and disproportionately affect low-volume customers, while violating the ratemaking principle of gradualism.

Reducing I&M’s authorized return on equity to 8.65 percent. The utility’s current authorized return is 10.2 percent, and it is requesting an increase to 10.6 percent in this case.

The OUCC’s exhibits include written comments from more than 2,700 I&M customers. More than 100 I&M customers spoke at the IURC’s public field hearings in South Bend, Fort Wayne, and Muncie last month.

The utility’s rebuttal testimony is due December 6, 2017 with an IURC evidentiary hearing scheduled to start on January 16, 2018 in Indianapolis. While evidentiary hearings are open to the public, participation is typically limited to attorney and Commission questioning of technical witnesses who have filed testimony on behalf of the case’s formal parties. The Commission’s order is expected in spring 2018.

I&M provides electric utility service to approximately 460,000 customers in 24 northern, northeastern, and east-central Indiana counties. 

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