State regulators approved NIPSCO's plan Monday for $1.07 billion in electric system upgrades and gradual rate increases that could reach a cumulative total of 6 percent by 2020.
The improvement plan is the first approved by the Indiana Utility Regulatory Commission under Senate Bill 560, which was passed last year by the General Assembly.
“Electricity powers our everyday lives and our future depends on having a safe, reliable and affordable source of energy,” NIPSCO Chief Executive Jim Stanley said shortly after the order was issued.
In testimony filed in the case, NIPSCO estimated customers will see about a 0.5 percent increase in bills in 2015 and then increases will average about 1 percent per year through 2020. Those increases will pay 80 percent of the cost of the improvements.
Among projects those bill increases would pay for are the replacement of 450 miles of underground electric cable, rebuilding 500 miles of electric circuits, and replacing 75 substation transformers and 900 circuit breakers.
“We’re planning for the future today through smart investments and replacing critical parts of our electric system to help ensure a more modern system for homes and businesses across northern Indiana," Stanley said.
The modernization plan also includes $70 million for economic development assistance, which the IURC said could include the replacement of outdated street lamps with high-efficiency LED lighting in communities across NIPSCO's territory.
That plan was proposed by a group of Northwest Indiana communities. Those were Valparaiso, East Chicago, Munster, Schererville, Dyer, Highland, Griffith and Winfield.
Since filing its plan for electric system modernization, NIPSCO has followed up with another for improving its natural gas transmission system. Southern Indiana natural gas utility Vectern Corp. has filed a similar request.
NIPSCO has 457,000 electric and 786,000 natural gas customers in northern Indiana. Monday's order applies only to the electric portion of a customer's bill. NIPSCO is a subsidiary of Merrillville-based NiSource Inc.
NIPSCO electric rates are the second highest among Indiana's five large investor-owned utilities, according to the most recent IURC bill survey. However, NIPSCO rates have had the smallest increases of any of those utilities over the last decade, going up just 30 percent during that time.
The rate increases approved Monday will be embedded in bills as a surcharge called a Transmission, Distribution and Storage System Improvement Charge.
The surcharges will be reset every six months subject to IURC approval. Those surcharges are calibrated to recover 80 percent of the $1.07 billion cost of the improvement plan.
NIPSCO can recover the other 20 percent of its costs for the improvements through a base rate case, which it is required to file with the IURC sometime during the seven-year term of the improvement plan. Any rate increase, or decrease, coming about as a result of that case would replace the increases granted Monday
NIPSCO's last electric rate increase was granted in late 2011. The utility was able to raise residential electric rates 4.5 percent with a further increase triggered if industrial customers took advantage of a discount plan aimed at conserving energy.