NIPSCO customers will get hit with their first charges for big environmental improvements at power plants in May but could actually realize overall savings on their monthly bills because of a rapid drop in fuel costs.
The Indiana Utility Regulatory Commission recently signed off on preliminary cost estimates for the first two phases of the environmental projects, which when complete will cost an estimated $553 million.
But customers will only see charges for about $90 million in improvements starting in May because the utility can only charge for work already completed, according to NIPSCO spokesman Nick Meyer. The improvements are being driven by a settlement the utility reached with the U.S. Environmental Protection Agency early last year.
"We are looking at both current and future regulation coming down the pike with these projects," Meyer said.
Those improvements are paid for by surcharges embedded in customers' bills called "trackers." They are not broken out as line items on a customer's bill.
The new focus on the environmental surcharges, which have been the subject of Indiana Utility Regulatory Commission hearings since March 2011, highlight the effect the little-known charges can have on consumer bills.
In all, the utility estimates it will do $803 million in environmental upgrades at power plants. But there is no way now to project how much future environmental trackers will add to bills, Meyer said.
"With any of these trackers some costs go up and some go down," Meyer said. "And they are spread out over time."
The two environmental surcharges in customers' bills that pay for such improvements now add $1.26 to a typical customer's bill. The two charges will jump to a combined $2.14 in May. The environmental surcharges are adjusted twice a year and must be approved by the IURC.
Currently, those two surcharges and three others, which are not broken out on customer bills, account for about 9.1 percent of a typical customer's bill, according to NIPSCO figures.
Come May, even more variables will come into play, including a decrease in a surcharge that tracks the cost of coal for NIPSCO power plants. Right now, a typical customer pays a surcharge of $3.38 for fuel, mainly coal.
But because of a rapid drop in coal prices since last summer, that charge will actually turn into a 58 cent credit.
However, customers can't holler "hallelujah" just yet. That's because May is when the utility is slated to start charging customers for what is basically a power conservation program for large industrial users under the the IURC's December order approving new NIPSCO rates.
In that ruling, the commission agreed with the utility that the program would have broad benefits for all customers, so the costs can be spread out over all customer classes.
How much that charge will be can only be determined once the utility sees how many industrial customers sign up, Meyer said. But testimony submitted in the rate case shows it could hike a typical residential customer's bill by as much as 3.1 percent.
Although the variable surcharges can vary significantly during the year, it's important to remember the largest determinant of a customer's bill is how much electricity they use, and that's something customers have some control over, Meyer said.
Right now the usage charge on a typical customer's bill accounts for about 78 percent of the total. The base customer charge of $11, now broken out on bills, accounts for 12.8 percent more.
Last year, the utility greatly expanded its customer conservation programs, such as appliance buy-backs, energy audits and others.