INDIANAPOLIS - The Indiana Office of Utility Consumer Counselor says it has reached a settlement agreement with Citizens Energy Group and industrial customers regarding the utility's pending sewer rate case. If approved, the agreement would save customers more than $25 million per year.

The utility initially requested an increase of about $87 million in annual operating revenues to upgrade its century-old sewer system. Under the agreement, Citizens will receive an increase of about $61.3 million. 

The increase will be implemented in two phases. Residential customers will see an average wastewater bill increase of $8.50 per month in 2016 and another $2.50 per month in 2017. 

Citizens Energy Group says the agreement will allow the utility to continue with its federally-mandated projects to eliminate sewer overflows. It will also be able to continue eliminating failing septic tanks in central Indiana.

"We recognize rate increases are never popular. But this request includes major remediation projects that are required to meet certain obligations imposed under a federal consent decree," said Indiana Utility Consumer Counselor David Stippler. "Having identified as many cost savings opportunities as possible for customers, the OUCC achieved a reasonable settlement that ensures Citizens’ continued compliance with the federal consent decree while taking further necessary steps to improve the city’s environment for decades to come."

The agreement also establishes a crisis fund to assist income-eligible customers with their wastewater bills. Citizens will contribute $100,000 to the fund each year from non-rate revenues.

The agreement still requires approval from the Indiana Utility Regulatory Commission. The settling parties are expected to file testimony supporting the agreement later this week.