State agency opposes most of I&M rate hike request

Local News

INDIANAPOLIS, Ind. (WANE) A state agency that represents consumer interests in Indiana has released its review of Indiana Michigan Power’s request for a $172 million rate hike. The Indiana Office of Utility Consumer Counselor (OUCC) believes I&M should only be granted an increase of less than $2 million.

The OUCC filed its three-month technical and legal review of I&M’s plan on Tuesday with the Indiana Utility Regulatory Commission (IURC). I&M announced its request for a rate increase on May 14, 2019. The IURC is expected to make a ruling on the request in March of 2020.

The rate increase request is part of what I&M calls the Innovate Indiana plan. The new rates would be phased-in over three steps, with the first occurring in spring 2020, the second on June 1, 2020 and the third in early 2021. After taking full effect, the monthly increase would be $21.11 for a residential customer using 1,000 kilowatt hours of electricity per month.

One of the factors the OUCC considered is the fact I&M received a $96.8 million rate increase in May of 2018.

“I&M is a financially sound utility, and the rate increase it received last year appears to be sufficient to cover its needs,” said Indiana Utility Consumer Counselor Bill Fine.

The following determinations were made by the OUCC and were included in Tuesday’s filing:

  • I&M’s monthly residential customer charge should remain at $10.50. The utility proposes raising the charge to $15.00.
  • The declining block rate structure I&M proposes should be denied. Reducing the cost per kilowatt hour (kWh) once usage reaches a certain level would discourage energy efficiency. Along with a higher customer charge, a “bulk discount” would send the wrong pricing signals to residential customers.
  • The utility’s authorized return on equity should be set at 9.1 percent, instead of the 10.5 percent it requests.
  • I&M has not presented a sufficient cost benefit analysis to support charging all customers for automated metering infrastructure (AMI), or “smart meter,” deployment. More than 60 percent of the utility’s existing meters are not at the end of their useful lives.
  • I&M’s evidence on its proposed transmission and distribution projects falls short of the level of data and detail that would be required if I&M were seeking to raise rates gradually through a long-term infrastructure plan. Such plans, authorized by state law, allow for incremental rate increases over a five-to-seven-year period.
  • OUCC staff recommends further study to determine how the costs of certain multi-state transmission projects should be recovered from ratepayers.
  • Rate recovery of proposed environmental upgrades at the Rockport Generating Station should be denied. The upgrades are not needed to maintain compliance with current federal rules. They can also be revisited later when more information is available on the Rockport Unit 2 lease, which is set to end in 2022. The OUCC does not object to any environmental projects the Commission has previously approved.
  • Ratepayer contributions to the Cook Nuclear Decommissioning Trust Fund should be discontinued. Current Nuclear Regulatory Commission reports show the trust is fully funded.
  • Requested annual rate recovery of more than $23 million for employee incentive compensation plans should be denied. The OUCC’s analysis shows that the plans are structured to use ratepayer money either to pay employee bonuses or boost shareholder returns, depending on whether employees meet performance targets. Similar incentives for I&M’s sister utilities in Texas and Oklahoma have been denied

According to the OUCC, more than 500 written consumer comments were included in the filing and 56 I&M customers testified at IURC public hearings held in July.

I&M has until September 17 to file a a rebuttal.

Tracy Warner, spokesman for I&M, issued the following statement, adding that it would be the utility’s “only comment at this time:”

“I&M is committed to providing our customers with continued exceptional service. We welcome the public process and the opportunity to hear from our customers and stakeholders on our recent Innovate Indiana rate review filing. We are reviewing the testimonies submitted and will provide our response within the framework of the public IURC rate review process over the next few months.”

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