Chesterton Tribune

OUCC to water company on proposed rate hike: Nuts

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Indiana-American Water Company’s proposed rate hike of 6 percent for Northwest Indiana customers should be rejected, the Indiana Office of Utility Consumer Counselor (OUCC) has recommended to the Indiana Utility Regulatory Commission.

More: IAWC’s rates should actually be decreased, to reduce the utility’s annual operating revenues by $8.02 million.

So the OUCC concluded in testimony filed before the IURC on Wednesday.

The OUCC is the agency which represents the interests of Hoosier consumers before state and federal utility regulators.

IAWC’s Proposed Rate Hike

In May—almost exactly one year after IAWC enacted a rake hike of 27.06 percent for Northwest Indiana residents—the company filed a petition before the IURC seeking another rate hike, this one of 6.19 percent. If approved as requested, this most recent rate petition—the sixth in the last nine years—would increase the bill for the average Northwest Indiana household using 4,800 gallons per month by $2.58 per month, from $38.94 to $41.52.

The proposed rate hike would increase IAWC’s annual operating revenues by $18.95 million or an overall 9.7 percent, although the specific rate impact would vary among communities and classes of customers.

OUCC’s Response

The OUCC’s general position: the proposed rate hike should be rejected; and rather than issue an order approving the requested 9.7 percent increase in IAWC’s annual operating revenues, the IURC should in fact slash the company’s operating revenues by 4.1 percent.

Specific recommendations in the OUCC’s testimony:

•IAWC’s currently authorized cost of equity should be reduced from 10 percent to 8.6 percent. IAWC is seeking an increase to 11.5 percent.

•Adjustments should be made to IAWC’s requested operating expenses, including “recommended reductions to requested increases in chemical, purchased power, and corporate support services costs.”

•IAWC’s request to include fire protection and hydrant fees in base rates should be rejected. “Fire protection is currently a separate surcharge outside of base rates, which makes it simpler to ensure that such fees are recovered without profit to the utility. Placing those fees in base rates would require customers to pay additional sales tax.”

•IAWC’s marketing of the line protection program offered by one of its unregulated affiliates should be modified, “to ensure the program and its promotional efforts provide greater transparency.”

“A review of the evidence in this case shows that (IAWC) does not need additional revenue in order to continue providing safe, reliable service to its customers,” Indiana Utility Consumer Counselor David Stippler said. “The utility should be fully capable of servicing its customers and making any needed infrastructure improvements even with the OUCC’s recommended reduction in operating revenues.”

“During these extremely tough economic times in which many Hoosiers are doing more with less, it is imperative to closely scrutinize all costs and expenses for which any utility seeks increased revenues, including IAWC,” Stippler added.

IAWC has until Oct. 28 to file rebuttal testimony. An evidentiary hearing is scheduled before the IURC on Dec. 5.

“Wednesday’s OUCC filing does not break down the recommended revenue decrease by service territory, but focuses on (IAWC’s) overall revenue requirement,” the OUCC said. “After the IURC issues its final order in the case, the utility will file a tariff demonstrating how it intends to implement the order’s terms, including rates by service territory. The OUCC has the right to object to the proposed tariff if necessary.”

To review the OUCC’s testimony, visit

The Previous Five Hikes

The IURC authorized an 18.25 percent hike in November 2002; a 26.2 percent hike in June 2003; a 1.67 percent hike in November 2004; a 9.9 percent hike in October 2007; and an overall 19.72 percent hike in 2010, the latter shaking out to a 27.06 percent hike for Northwest Indiana customers.

Right now Northwest Indiana customers pay the second highest average monthly rate: Terre Haute customers, $42.53; Northwest Indiana customers, $38.94; Muncie customers, $38.73; Winchester and Warsaw customers, $31.70; and West Lafayette customers, $27.90.



Posted 10/7/2011