NIPSCO challenged on rate hike request

2013-11-12T15:00:00Z 2013-11-13T10:18:08Z NIPSCO challenged on rate hike requestBy Keith Benman, (219) 933-3326

INDIANAPOLIS | Lawyers for consumer groups jousted with NIPSCO executives Tuesday at a hearing gathering evidence on the utility's request to undertake $1 billion in electric improvements and implement a cumulative 6 percent rate hike to pay for them.

The hearing on NIPSCO's July request was the first before the Indiana Utility Regulatory Commission under Senate Bill 560. Passed in the last session of the General Assembly, the legislation allows the state's utilities to propose improvement plans along with surcharges on customer bills to pay for them.

Other large investor-owned utilities sent observers to the seven-hour hearing on the second floor of the PNC Center, as the NIPSCO case could set the pattern for more to come.

Lawyers representing some of Northwest Indiana's largest employers, including U.S. Steel, had some of the toughest questions for NIPSCO.

Nikki Gray Shoultz, of Bose McKinney & Evans, representing U.S. Steel, wanted to know if plans NIPSCO has outlined for increasing yearly spending on the project, reaching $237.9 million in 2020, are set in stone or could change. She was particularly concerned about any potential increases.

Timothy Dehring, NIPSCO senior vice president of transmission and engineering, acknowledged only the 2014 plan for spending $75.2 million is firm. After that the new legislation appears to allow for changes, which he said is ultimately for the good of customers.

"Things change in an electric system and its appropriate we have a plan that is dynamic and that can react to those changes," Dehring said.

NIPSCO will have to go to the Indiana Utility Regulatory Commission every six months to get approval for the customer surcharges, called "trackers," that will pay 80 percent of the improvement project's cost.

Those surcharges would increase a typical residential customer's electric bill by just 0.4 percent in 2015, according to NIPSCO. But those bill hikes will increase each year until a final 1.7 percent increase is levied in 2020. The cumulative hike in a typical residential customer's bill by then would be just above 6 percent.

Some large NIPSCO industrial customers in addition to U.S. Steel also are concerned about NIPSCO's contention about flexibility in the plan.

Jennifer Terry, of Lewis & Kappes, which represents some of Northwest Indiana's largest industries, peppered Frank Shambo, NIPSCO vice president of regulatory affairs, with questions. She wanted to know if there is really any limit to what NIPSCO can charge customers for improvements.

Shambo pointed out the new law limits the impact allowed on customer bills to just 2 percent of NIPSCO's annual retail revenues.

But during a recess, Terry said NIPSCO is basically interpreting the law to mean the utility can pile the allowable increases on top of each other year after year during the seven-year span, taking annual cost recovery past the $200 million mark.

The large industrial customers interpret that portion of the law to mean the impact can be 2 percent of annual retail revenues in any one year, with no piling on year after year. That would amount to about $30 million in annual cost recovery.

NIPSCO CEO Jim Stanley, interviewed during a recess, agreed there is a wide gulf between NIPSCO's interpretation of the law and that of some industrial customers. He said ultimately it will be up to the Indiana Utility Regulatory Commission to decide the correct interpretation of the law.

The increases that were the subject of Tuesday's hearing would affect only the electric portion of a customer's bill. NIPSCO has filed a separate case in order to undertake $713 million in improvements in its natural gas system.

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