The Indiana Office of Utility Consumer Counselor is objecting to Northern Indiana Public Service Co.'s plans to recover costs from a more than $1 billion infrastructure improvement initiative. The OUCC says it agrees with most aspects of the effort, but its analysis shows the proposed rate recovery mechanism does not accurately reflect NIPSCO's need for additional revenue. October 13, 2013

News Release

(Indianapolis, Ind.) – The Indiana Office of Utility Consumer Counselor (OUCC) does not object to most aspects of Northern Indiana Public Service Company’s (NIPSCO’s) proposed seven-year electric infrastructure replacement plan. However, the OUCC believes NIPSCO’s proposed methodology for recovering the plan’s $1.07 billion in costs should be denied.

The OUCC’s recommendations are included in testimony filed with the Indiana Utility Regulatory Commission (IURC) this afternoon.

NIPSCO’s request is the first to be filed under a new Indiana law (Senate Enrolled Act 560) approved earlier this year.

• The law allows an investor-owned energy utility to seek IURC approval of a seven-year infrastructure improvement plan.

• If the plan is approved, the utility may then adjust rates every 6 months, subject to IURC and OUCC review, to recover 80 percent of the project costs as they are incurred. (The remaining 20 percent must be deferred until the utility’s next base rate case, which must be filed before the end of the seven-year period.)

• The rate increases – under a new Transmission, Distribution, and Storage System Improvement Charge (TDSIC) mechanism – may not exceed two percent of the utility’s total annual retail revenues.

In IURC Cause No. 44370, NIPSCO is seeking approval of its seven-year “Electric Infrastructure Modernization Plan.”

• Capital improvements throughout NIPSCO’s electric service territory in the $1.07 billion plan include new transmission and distribution lines, new substations, upgrades to existing lines and substations, and replacement of aging poles, transformers, line equipment and other infrastructure.

• Under the case’s compressed timeframe, the OUCC has reviewed the plan and believes most aspects are reasonable and will benefit NIPSCO’s customers. However, the OUCC is recommending denial of NIPSCO’s request to use budgeted economic development funds for other purposes.

• The OUCC also recommends several reporting requirements to be adopted and used throughout the seven-year period.

• Under Indiana law, the IURC must issue a final order on the plan by February 14, 2014.

In IURC Cause No. 44371, NIPSCO is seeking establishment of the methodology for calculating future rate increases for the plan’s project costs.

• According to NIPSCO’s testimony, annual rate increases through the TDSIC mechanism would average 0.9 percent each year over the seven-year term, with the first increase of 0.4 percent taking effect in 2015 and the last annual increase of 1.7 percent being implemented in 2020.

• The OUCC’s analysis shows that NIPSCO’s proposed rate recovery mechanism will overestimate the utility’s need for additional revenue between rate cases, overcharge customers for capital expenses, and not accurately measure NIPSCO’s transmission and distribution rate base investment growth as it relates to investments whose costs are already embedded in base rates.

• The OUCC’s analysis also shows that NIPSCO’s plan inflates the estimate of base rate growth and proposes cost allocators that are contrary to those required by statute.

An IURC technical evidentiary hearing in both cases is scheduled to start November 12, 2013 at the PNC Center (101 W. Washington St.) in Indianapolis. While evidentiary hearings are open to the public, participation is typically limited to attorney and Commission questioning of expert witnesses who have filed technical testimony on behalf of the case’s formal parties.

The proposals in these cases would not affect NIPSCO’s natural gas utility’s system, service or rates. NIPSCO is seeking approval of a seven-year natural gas infrastructure replacement plan in IURC Cause No. 44403. The natural gas case was filed recently, with the OUCC scheduled to file testimony on January 10, 2014.

(IURC Cause Nos. 44370, 44371)

The Indiana Office of Utility Consumer Counselor (OUCC) represents Indiana consumer interests before state and federal bodies that regulate utilities. As a state agency, the OUCC’s mission is to represent all Indiana consumers to ensure quality, reliable utility services at the most reasonable prices possible through dedicated advocacy, consumer education, and creative problem solving.

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