NIPSCO has filed plans for a $1 billion electric system modernization with state regulators, a move that could lead to 1 percent annual electric bill hikes for customers later this decade.
Much of the improvements would consist of replacing the utility's aging infrastructure such as poles, underground wires and substation transformers in order to increase system reliability, according to two documents filed Friday with the Indiana Utility Regulatory Commission.
"What we are first and foremost is a basic gas and electric utility," NIPSCO CEO Jim Stanley said at a briefing Tuesday at The Times offices in Munster. "And our customers expect us to deliver that basic service first and foremost."
Senate Bill 560, passed earlier this year by the Indiana General Assembly, allows utilities to pay for basic infrastructure improvements through what are called "trackers," which are essentially surcharges tacked on customer bills.
The legislation was fiercely opposed by consumer groups, who contended it would lead to utilities coming forward with "shopping lists" of improvements while eliminating checks and balances on what they can charge.
"We were afraid this would become a way to nickel and dime customers to death," said Jerry Polk, a utilities attorney for the Citizens Action Coalition.
Polk said the Citizens Action Coalition will soon be talking about NIPSCO's plans with other consumer groups and NIPSCO's large industrial customers.
Since NIPSCO is the first utility in the state to come forward with such a plan under Senate Bill 560, it will be precedent setting, Polk said.
Stanley said NIPSCO realizes customers will have concerns and the utility will be listening and responding to those concerns.
The entire plan will be subjected to an Indiana Utility Regulatory Commission review process. The commission could approve the plan as is, reject it, or ask for changes in the plan.
Stanley said NIPSCO does not expect an order in the case until next year, with actual work on the upgrades to commence about mid-2014 if approval is won.
NIPSCO estimates customers will only see a slight increase of about 0.5 percent in bills in 2015 and then about 1 percent annual increases after that through 2020 due to the system improvements. That means the cumulative increase would be between 5 percent and 6 percent.
NIPSCO's most recent rate case, concluded in December 2011, hiked an average residential customer's bill 4.5 percent. That case also contained provisions that had the potential for a further 1.7 percent increase.
On Tuesday, Stanley said the 2011 rate case did not contain the kind of substantial, system-wide improvement plan NIPSCO has now laid before regulators.
"It hits every county we serve," the NIPSCO chief said. "It literally touches every county."
The plan submitted to regulators Friday deals only with NIPSCO's electric service. The utility plans to submit a natural gas modernization plan to regulators later this year.
NIPSCO has 457,000 electric and 786,000 natural gas customers in northern Indiana. It is a subsidary of Merrillville-based NiSource Inc., which also owns utilities in six other states as well as a gas transmission business serving 16 states.
The improvement plan will replace 450 miles of underground electric cable, rebuild 500 miles of electric circuits and replace 75 substation transformers and 900 circuit breakers. That work alone will account for $795 million in spending.
Much of that equipment is more than 40 years old with some more than 50 years old. NIPSCO has hired international engineering firm Black & Veatch to evaluate which parts of the utilities electric system is most at risk of failure and that is where improvements will be targeted, Stanley said.
NIPSCO estimates the construction and other work involved will directly and indirectly create 1,200 jobs during the seven-year life of the project.
The modernization program will not aim to build a so-called "smart grid," Stanely said.