Environment and Utilities

Watchdogs wishing for tough IURC: Consumer, biz groups hope Daniels picks commissioner who'll say 'no' to utilities

June 20, 2005

Industrial and consumer interests say Gov. Mitch Daniels needs to fill a pending vacancy at the Indiana Utility Regulatory Commission with a regulator "able to say no" to utility companies.

The IURC has too often allowed utilities to pass on increased costs for fuel or purchased power, for example, through so-called tracking mechanisms rather than through traditional rate cases that take into consideration offsetting reductions in other costs, they complain.

"It's important to be able to say no to the utilities," said Jack Wickes, counsel for Indiana Industrial Energy Consumers Inc., which represents big electric customers such as General Motors Corp., Eli Lilly and Co., and Rolls-Royce.

"How about some backbone and chutzpah as for standing up to utilities?" said Jerry Polk, an attorney who represents Consumer Action Coalition, a local utility watchdog group.

Daniels said last week that candidates to fill the IURC vacancy have until June 29 to toss their names into the hat. A bipartisan nominating committee will weigh the replacements for the expiring term of William McCarty, who also chairs the commission.

"The chairman has done a very good job and balanced the interests with a great deal of integrity," Wickes said.

The interests of the administration appear to be mixed.

Polk said Daniels, a Republican, has cast himself as "pro-development." That would seem to portend a concern for less-burdensome utility rates.

"The work of the IURC is closely tied to Indiana's future economic growth, more jobs and higher incomes for the average Hoosier," Daniels said last week. Among key issues driving growth, he said, are competitive prices and adequate access to broadband Internet.

But customer groups also note that Daniels is a former director of IPALCO Enterprises, the parent of Indianapolis Power & Light Co., later acquired by Arlington, Va.-based AES Corp.

"From what we've seen from other state agencies, it looks like the trend is companies being [regarded as] clients rather than regulated companies," Polk said. "You don't see judges looking at people coming before them as customers of the justice system."

Wickes said utilities have found too sympathetic an ear with the commission when it comes to recovering increased costs for everything from natural gas to pollution control equipment through the use of "trackers."

The concept, implemented to give utilities quick relief from volatile price fluctuations, dates to the 1970s during a time of rapidly rising gas costs. The use of trackers has proliferated since then as an alternative to the traditional rate case that gives an exhaustive review of a company's financial situation. The industrial customers Wickes represents have fought against trackers that do not allow cost reductions to be weighed against increases being sought.

The less scrutiny, the less incentive utilities have had to control their costs, Polk said.

Often, "there was no tracker that favored the consumer perspective," said Anne Becker, former Indiana utility consumer counselor. "There was no symmetry in the tracking process."

Angeline Protogere, spokeswoman for Cincinnati-based Cinergy Corp.'s Indiana utility operations, said trackers also can be used to pass back revenue to customers. The mechanisms also are a way to phase in costs such as environmental compliance rather than hitting customers with a lump sum.

She also counters customer complaints that utilities get off easily with the use of trackers; the commission still reviews those costs.

Former consumer counselor Becker said the new commissioner will have any number of other issues to deal with, ranging from the impact of electricity deregulation to a revolution in the telecommunications landscape. That includes new competitors to traditional phone companies. Some electric utilities offer voice and broadband over their electric lines. Cable companies, such as Comcast, are already offering phone service in this market without IURC oversight.

Those issues have spawned threats to the IURC's regulatory authority. Earlier this year, legislation in the General Assembly would have blocked the commission from setting pricing and terms on basic phone service and stripped its leverage over broadband services.

SBC Communications, which backed the legislation, said it needed a break to help it survive a tidal wave of new competitors that eroded its market share.

The commission also remains one of a handful nationwide without statutory authority involving the merger of utility holding companies, an issue underscored lately with the proposed merger of PSI Energy parent Cinergy with Charlotte, N.C.-based Duke Energy.

"This stuff is not going away with the naming of a new chair," Becker said. "There will be a lot of tough issues that the new chairman will have to confront."

Typically, the person named commissioner has been a lawyer, and often with experience as a state legislator, noted Michael Mullett, an attorney who represents utility customers in rate cases.

The terms of two other utility regulators appointed by former Gov. Frank O'Bannon-Judith Ripley and David Hadley-expire next year.
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