By KEVIN NEVERS

Residential electric customers of the Northern Indiana Public Service Company—as distinct from industrial and commercial customers—apparently would shoulder the greatest part of a two-phase rate increase, under a comprehensive rate case filed on Friday with the Indiana Utility Regulatory Commission (IURC).

According to a statement released on Friday by NIPSCO, in the first phase of the rate hike—which would reflect the company’s increased operating and maintenance costs—the average residential customer currently paying $81.68 per month would pay $88.92, an increase of $7.24 or 8.86 percent.

Yet, NIPSCO said, the overall increase across all customer categories in the first phase would be only 2.76 percent. In short, industrial and commercial customers—who consume fully 74 percent of the electricity generated by the company—would evidently pay something less in the first phase, roughly the same, or marginally more than they do now. NIPSCO, however, did not specify how the rates would change for its industrial and commercial customers.

Then, in the second phase of the hike—which would reflect the addition of the Sugar Creek Generating Station in Terre Haute, purchased by NIPSCO earlier this year for $330 million—the average residential customer now paying $88.92 per month would pay $94.82, an increase of $5.90 or 6.64 percent.

The overall increase across all customer categories in the second phase would be 9 percent, NIPSCO said. Again, the company did not specify how the rates would change for its industrial and commercial customers in the second phase.

“With this filing, NIPSCO has made a concerted effort to balance the interests of our residential, commercial, and industrial customers,” said Eileen O’Neill Odum, Group CEO for Northern Indiana Energy. “We are keenly aware of the challenges facing our residential customers in managing their monthly energy budgets, and we have taken steps to moderate the level of increase they will experience. We also realize that in a competitive global market, the cost of energy to our industrial and commercial customers must be fairly priced.”

Under the proposal, the first phase would increase NIPSCO’s revenues by around $24 million; the second phase, by around $81 million. The cost of the Sugar Creek facility may not be reflected in the company’s rates until it is deemed “used and useful” by NIPSCO’s customers, and that 535-megawatt generating station will not be available to NIPSCO until June 2010 at the latest.

Of NIPSCO’s 457,076 customers, 400,991 or 87.73 percent are residential; 52,815 or 11.55 percent are commercial; and 2,509 or 0.55 percent are industrial. But residential customers consume only 19.89 percent of the 17,813.1 gigawatt hours of electricity generated by the company, while commercial customers consume 21.19 percent and industrial customers consume fully 53.02 percent.

NIPSCO said that it could take 12 to 18 months for the IURC to issue an order in the rate case and gave this tentative schedule:

•Jan. 6-23, 2009: hearing on NIPSCO’s case-in-chief.

•Early 2009: public field hearing, date to be determined.

•July 12, 2009: NIPSCO files rebuttal testimony.

•July 27-Aug. 7, 2009: final hearing.

•Fourth quarter 2009-first quarter 2010: expected IURC decision.

•August. 2009-early 2010: first-phase hike to take effect.

•On or before June 2010: second-phase hike to take effect.

In addition to the proposed two-phase rate hike, the statement said, NIPSCO is proposing to reduce the number and complexity of rate categories. “These redesigned rate structures will promote more efficient use of energy. The company is also proposing more rate incentives for customers to shift their usage from peak to off-peak hours.” NIPSCO said.

Some History

Although the IURC has not issued an electric rate order for NIPSCO since 1987—when the company last filed a comprehensive base-rate case—in 2001 it did enter into a settlement with NIPSCO under which the company credited customers’ bills at least $225 million over 49 months. That settlement followed a mandatory periodic review in which the IURC determined that NIPSCO’s operating income in 1999 was around $23 million higher than the maximum allowable under the 1987 order and that its rate of return was 10.63 percent, a point and a half higher than 9.06 percent allowed by that order.

IURC staff initially recommended an 11.6 percent across-the-board reduction in electric rates, then agreed to the customer credits, which saved the average residential customer approximately $50 per year over the life of the settlement.

At the same that IURC staff were recommending an 11.6 percent across-the-board decrease in electric rates, though, NIPSCO was maintaining that it deserved a 24-percent increase to reflect a fair return on the fair value of its assets.

Posted 9/2/2008