Indiana Utility Regulatory Commission and Indianapolis Power & Light and Utilities

IPL plan secrecy brings rebuke from watchdog group

December 4, 2006

The state's public access counselor says Indiana's utility regulators failed to make a legal case for keeping information about Indianapolis Power & Light's controversial "Elect Plan" out of public view.

The Nov. 6 advisory opinion of Indiana Public Access Counselor Karen Davis, sought by former IPL Vice President Dwane Ingalls, doesn't require the Indiana Utility Regulatory Commission or the Office of Utility Consumer Counselor to release the records.

But it has caused IPL to seek a protective order from the Indiana Utility Regulatory Commission. It has also emboldened former insider Ingalls to threaten a lawsuit against the agencies to force disclosure.

At stake for IPL is the ability to earn perhaps tens of millions of dollars in additional income through its proposed successor to Elect Plan, known as Empower. IPL is awaiting IURC approval for Empower.

Ingalls alleges such alternative billing plans drive up rates for standard electric ratepayers. He argues that Elect Plan annual reports will make that clear to the public, which has been asked by regulators to comment on the Empower plan before the regulators decide whether to approve it.

Ingalls has alleged a number of IPL misdeeds since he left in 2004. He said he was fired for accusing the utility of funneling excessive cash to its Virginia-based parent, AES Corp., rather than plowing it back into maintenance of the city's electrical system.

Ingalls has periodically met with regulators to offer evidence that he says shows the Elect Plan is not in the public interest because it artificially inflates electric rates for standard customers and allows IPL to exceed its state-mandated earnings cap.

In the past, IPL has broadly denied Ingalls' allegations.

However, on Nov. 17, the utility filed a petition with the IURC that asks that key details of Elect Plan reports remain under wraps. It also filed redacted versions of the annual reports Ingalls seeks.

"At this point, I plan to file a lawsuit on both [agencies] for access, regardless of IPL's petition to protect these records," Ingalls said.

Launched eight years ago after state approval, Elect Plan allows IPL's customers to purchase power at fixed rates for set periods. It also allows certain customers to buy "green" power generated by sources such as wind and solar power.

In exchange for offering customers new power options, and for bearing certain pricing risks, IPL was allowed to shield money earned under the program from an earnings cap set by the IURC.

Records elusive

Both the IURC and OUCC turned down Ingalls' recent requests for copies of Elect Plan annual reports dating to 1999.

The utility agencies contend the reports were protected by trade-secrets laws and by a 1998 confidentiality agreement among the agencies, IPL and consumer groups.

In his appeal to the state's public access counselor, Ingalls disputed IPL's contention that the reports contain trade secrets that would have economic value to competitors.

Davis, in her opinion, said neither utility agency had cited specific exemptions under state public records law that would allow the withholding of all or part of the reports.

"In respect of this requirement, neither the IURC nor the OUCC complied with the legal requirements," Davis wrote.

"I also find that the Utility Regulatory Commission and the Office of Utility Consumer Counselor must establish that the Elect Plan annual reports contain trade secrets and to disclose any part of the Elect Plan annual reports that do not meet trade-secret exemption."

The IURC's next step is to set a prehearing conference on IPL's protective order request, giving all sides another chance to comment.

"We support the IURC's jurisdiction to make this determination because it has considerable expertise in this area and we welcome Mr. Ingalls' input in this process," said Anthony Swinger, spokesman for the OUCC.

In testimony filed with the commission, an IPL executive said releasing certain Elect Plan information would amount to giving away costly marketing strategy the utility developed.

He also said it would give an edge to competitors--chiefly Citizens Gas & Coke Utility, which provides natural gas service to 266,000 customers in Marion County and competes with IPL for home heating customers.

"The gas utilities are competing with the electric utilities for customers," testified Lester Allen, IPL's team leader for marketing and program management.

"Understanding IPL's marketing strategy, and the price elasticity of demand, which is disclosed in the [Elect Plan], would provide economic benefit to natural-gas service providers who compete with IPL."

Ingalls argued that release of Elect Plan information is in the public's interest. He said the utility has not appropriately accounted for expenses he claims were improperly passed on to consumers. Ingalls noted that last year IPL was prepared to return up to $10 million to consumers in its settlement with the OUCC of a case in which it was suspected of passing on to standard customers Elect Plan expenses.

The $10 million, which IPL said was a one-time credit to help winter heating customers, was never made. IPL said the money wasn't paid because the commission couldn't approve the winter heating credits quickly enough.

"It is probable that IPL's annual [Elect Plan reports], which are provided to the IURC and the OUCC, raise additional concerns ... Unfortunately, the [agencies] are holding these reports confidential at IPL's request. The confidential treatment of these reports seems inappropriate and I suggest that they be made public," Ingalls wrote to the IURC and OUCC in September.

Elect Plan participation appears to have grown substantially in recent years. According to the heavily redacted Elect Plan reports IPL filed with the commission last month, the utility had 3,633 residential customers in the plan as of September 2005, up from 1,603 in May 2002. When commercial customers are added to the mix, IPL had 6,996 customers signed up for the Elect Plan, according to the filings.

That's a pittance for a utility with a total of 465,000 customers. But Elect Plan revenue in 2003 alone was estimated to grow to $60 million, according to a confidential IPL business plan obtained by IBJ. Total revenue that year was $832 million.

The plan recommended IPL "continue to provide mechanisms like Elect Plan ... and operate in a manner that does not attract the negative attention of the IURC."

Ingalls said he is frustrated that neither utility agency will look deeper into the Elect Plan issues "when you have a former officer of IPL saying, 'Hey, they're cheating you.'"

New plan

IPL's proposed successor, Empower, would give customers new payment options and access to green power. As with Elect Plan, revenue generated under the program would not be counted toward earnings regulators consider when approving standard rates.

One new aspect is an IPL contribution of up to $5,000 toward a customer's installation cost of photovoltaic solar panels.

IPL also proposes free on-site energy audits and extending a fixed-rate billing plan to the largest industrial electric users as an economic development tool.

But IPL recently told the commission it wished to reach a settlement with the OUCC and consumer groups over Empower. That was after the OUCC said it opposed IPL's plan to exclude certain revenues from the earnings cap. Citizens Action Coalition said it opposed deregulation of rates and charges without a thorough review of IPL's finances, given allegations of abuses under Elect Plan.
 

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