Chesterton Tribune



OUCC to water company: Don't raise rates, lower them

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Indiana-American Water Company (IAWC) is currently seeking its seventh rate hike since 2002 and one which, if approved, would increase its annual operating revenues by $19.6 million (and incidentally raise the rate of an average Northwest Indiana residential customer by more than 17 percent).

The Indiana Office of Utility Consumer Counselor (OUCC) has something to say to that: Nuts.

Far from endorsing IAWC’s proposed 9.8 percent increase in annual operating revenues, the OUCC is actually recommending a 5.5 percent decrease in those revenues, that is, a cut of $11.4 million per year.

On Friday the OUCC filed its testimony before the Indiana Utility Regulatory Commission (IURC).

The OUCC--the state agency representing consumer interests in cases before the IURC--has conducted a technical and legal review of IAWC’s request over the last three months. Its key recommendations include the following:

ĄReducing IAWC’s currently authorized cost of equity from 9.7 percent to 8.6 percent. IAWC is asking that its cost of equity be increased to 10.8 percent in this case.

ĄUsing more realistic projections of customer growth, declining usage, and property tax expenses than those included in the utility’s testimony.

ĄMaking numerous adjustments to the company’s requested operating expenses. Examples include recommended reductions to requested increases in business development, management, planning, rental, marketing, payroll, and depreciation expenses.

ĄContinued reduction of non-revenue water and implementation of industry benchmarking standards, consistent with performance recommendations the OUCC is making in other water rate cases.

“The analysis by our attorneys and technical staff in this case shows that a revenue reduction is warranted,” said Indiana Utility Consumer Counselor David Stippler. “The revenue requirement the OUCC is recommending will ensure sufficient funds to address IAWC’s operational and infrastructure needs, and to address the utility’s obligation to provide safe and reliable service to all of its customers.”

IAWC has until May 28 to file rebuttal testimony. An IURC technical evidentiary hearing, at which IAWC may cross-examine witnesses for the OUCC and other parties, is scheduled to start on June 23 in Indianapolis and continue into July.

Friday’s OUCC filing does not break down the recommended revenue decrease by service territory, but focuses on the utility’s overall revenue requirement. After the IURC issues its final order in the case, the company 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.

IAWC is a wholly owned subsidiary of New Jersey-based American Water Inc., providing service to approximately 290,000 residential, commercial, and industrial customers throughout Indiana. The utility’s current base rates and charges were approved in June 2012 and have since been raised through distribution system improvement charge (DSIC) adjustments in December 2012 and December 2013 to repair or replace aging infrastructure.

Under IAWC’s proposed rate hike, the average residential customer’s bimonthly bill in Northwest Indiana would increase from $67.81 to $79.48 or--on a monthly basis--from $33.90 to $39.74, a spike of 17.21 percent.

Last month, the Chesterton Utility Service Board voted unanimously to join three other municipalities--Gary, Schererville, and West Lafayette--in an intervention in IAWC’s case before the IURC. Ted Sommer, a CPA with the Service Board’s contracted financial consultant, London Witte Group, said that the rationale for the intervention is the new state law under which IAWC filed for its rate hike. That law permits a utility to seek an increase based on future test years, in other words, on the company’s future projected costs.

“This is the first time anyone has done this,” Sommer told the Chesterton Tribune at the time. “And it’s a little scary. We’re doing what we can to put together findings to ensure that the precedent set is the best possible one from the perspective of the consumer.”


Posted 5/5/2014