The Indiana Utility Regulatory Commission (IURC) has not yet ruled on NIPSCO’s request for a proposed increase in residential customers’ electric rate of 14.34 percent, but the company is already signaling its intention to file a second, brand-new, electric base rate case in 2010.

The Northern Indiana Public Service Company “anticipates filing another electric base rate case during 2010,” its parent company, NiSource Inc., said in its third-quarter earnings statement released last week.

In justifying a second case, NiSource cited “the effect of increased pension expense” due—as the utility reported in its 2008 Form 10-K filing with the U.S. Securities and Exchange Commission—“to the deterioration in the value of plan assets” last year following the global economic crash.

NiSource also cited reduced demand especially among its industrial customers, similarly due to the weak economy. For the first nine months of 2009, industrial demand totaled 5,723.4 gigawatt hours compared to 7,294 in the year-ago period, a drop of 22 percent. NIPSCO’s industrial customers—who account for only 1 percent of the utility’s customer base—consume 53 percent of the utility’s generated electricity.

On Wednesday the Chesterton Tribune asked NIPSCO to comment on the perception that a second rate case, filed specifically to address current and presumably transitory economic conditions, would in fact be a permanent solution to a temporary problem, locking in higher rates for customers long after the utility’s pension plan assets had recovered and industrial electric demand rebounded. NIPSCO released this statement in response::

“Pension expense is very volatile, substantial in nature, and outside of NIPSCO’s control. There are a number of companies across the company who are currently experiencing the effects of increased pension expenses, which are a direct result of the downtown in the economy. Since 2006 NIPSCO’s annual pension expense has increased by a total of $55 million and these are costs the company has been absorbing since that time.

“While nothing has been decided at this time, we are looking at different approaches for the recovery of these costs that would protect both our customer and the company from temporary swings in these costs. This approach is directly aligned to NIPSCO’s ongoing commitment to balance the needs of all stakeholders.

“Ultimately, the Indiana Utility Regulatory Commission makes the final decision in any changes to our rates.”

NIPSCO did note that “the price for NIPSCO’s electricity is 5 percent below the national average.”

While NiSource was at it, the company also announced last week the likelihood of NIPSCO’s filing a natural-gas rate case next year.

“NIPSCO also has plans underway for the filing of a gas rate case, the company’s first since 1987,” NiSource said. “The filing is expected to be made in 2010, with new rates anticipated to be effective in late 2010 or early 2011.”

For its part NIPSCO stated that the “costs NIPSCO customers pay for natural gas are the lowest in the state.”

In 2008 NIPSCO proposed a two-phase hike of 15.5 percent in residential customers’ electric rate enacted over approximately two years. It then changed its plans, however, proposing instead a single-phase hike of 14.34 percent which would increase the utility’s annual revenues by $85.7 million.

If the IURC were to grant NIPSCO’s revised petition, residential customers would se an immediate increase of 14.34 percent, raising the average monthly bill by $12.76, from $81.68 to $94.44.

One thing has not changed in the revised rate case, though: residential customers would still shoulder the greatest part of the hike, as the overall rate increase, when spread among NIPSCO’s residential, commercial, and industrial customers, would total only 9.8 percent.

Of NIPSCO’s approximately 457,976 customers—as of August 2008—nearly 88 percent were residential. But residential customers consume only 20 percent of NIPSCO’s generated electricity.

For its part the Indiana Office of Utility Consumer Counselor (OUCC) is actually recommending a $135.2 million reduction in NIPSCO’s annual revenues, to be achieved not by a slash in the rate paid by customers but by the expiration of monthly residential rate credits totaling $55 million per year, as ordered by the IURC in a 2002 investigation of NIPSCO’s electric rate; and by the expiration of special contract rates for certain industrial customers.

“Due to these two factors, base electric rates paid by NIPSCO residential customers would remain at or near their current levels under the OUCC’s recommendations,” the OUCC said earlier this year.

The OUCC is also recommending, among other things, significant decreases in NIPSCO’s requested cost recovery for depreciation, return on investment, aging workforce expenditures, and gasoline/diesel fuel; and an authorized return on equity of 10 percent, as opposed to NIPSCO’s request for a 12-percent return. At the moment NIPSCO’s authorized return on equity is 9.06 percent as permitted by the IURC in its last electric rate order for NIPSCO, issued in 1987.

Posted 11/5/2009