State regulators issued an order Wednesday approving NIPSCO's plans to undertake $713 million in natural gas system improvements, which will lead to rate hikes that could reach a cumulative 10 percent by 2020.
The modernization plan includes replacement of obsolete bare steel pipe, construction of 80 miles of new transmission lines and new service to rural customers. Some of the first projects will start this year.
"Anytime you make improvements to modernize your system, you increase efficiency and reduce risk, so we are moving ahead on both those fronts," NIPSCO spokesman Nick Meyer said.
One of the first projects undertaken this year will be the replacement of a 70-year-old gas transmission pipeline along 112th Street in Whiting that serves industrial customers, Meyer said.
The order issued by the Indiana Utility Regulatory Commission was only the second for a case brought under Senate Bill 560 and the first for natural gas system improvements. Passed in the last session of the General Assembly, the legislation allows utilities to undertake improvement plans and tack surcharges on customer bills to pay for them.
In September, NIPSCO will submit a request to the Indiana Utility Regulatory Commission for bill surcharges to pay 80 percent of the costs of the natural gas system improvements, Meyer said. NIPSCO already has forecast those surcharges will hike bills by about 1 percent next year. After that, surcharges will average about 1.5 percent through 2020.
NIPSCO has estimated an average residential natural gas customer using 72 therms per month would see his or her bill grow from today's $52.22 per month to $57.76 by 2020.
In a separate case in February, the Indiana Utility Regulatory Commission approved NIPSCO's request to undertake $1.07 billion in electric system upgrades and yearly rate increases that could reach a cumulative 6 percent by 2020.
NIPSCO has 786,000 natural gas customers and 457,000 electric customers in northern Indiana.
Intervenors in the natural gas system modernization case that faced off with NIPSCO in an evidentiary hearing before the Indiana Utility Regulatory Commission were the Indiana Office of Utility Consumer Counselor, U.S. Steel, ArcelorMittal USA and BP Products North America.
Some of the opposition centered on what intervenors said was a lack of specificity about individual projects, with NIPSCO only submitting broad categories of spending each year for approval.
The commission made a concession to U.S. Steel, agreeing with the company that the approximately $99 million NIPSCO estimates will be needed to extend rural service should be used only for that purpose.
The order issued Wednesday also requires NIPSCO to submit annual plans for the improvements to the IURC for approval, with intervenors able to participate in that process.
"This is just the first checkpoint in this plan," Meyer said. "This allows us to begin making those investments and begin moving on this plan."
Senate Bill 560 stipulates the utility must file a full-blown rate case by 2020. It can seek to recover the remaining 20 percent of its costs in that case.