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Bill eases path for utilities to boost rates

January 26, 2013
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An 11-page utility bill in the Indiana Senate that a consumer group likens to “a money grab” would hasten and expand a utility’s ability to recover additional costs from customers.

Senate Bill 560 would allow a utility seeking an increase in certain rates and charges to temporarily implement 75 percent of the utility’s proposed increase if the Indiana Utility Regulatory Commission does not issue an order within 300 days, “subject to the commission’s review and determination.”

Hershman Hershman

Ratepayers would receive either a credit or a surcharge after the commission makes its final determination on the proposed rate increase.

A self-implemented, 75-percent temporary increase could have a palpable effect on ratepayers because some proposed increases by electric utilities have been in the range of 22 percent or more, said Kerwin Olson, executive director of Indianapolis-based Citizens Action Coalition.

On complex rate issues, Olson added, “When has the commission ever acted in 300 days?”

He contends the bill is not needed because utilities have ample ability to secure low-interest financing to cover short-term costs.

“Their intention is to increase earnings. This is another example of shifting the risk to the public, forcing Grandma to finance their business plan,” Olson said. “This is a direct assault on ratepayers.”

The sponsor of the bill, Sen. Brandt Hershman, R-Buck Creek, could not be reached for comment.

An assistant to the senator said the bill is being amended, but she did not elaborate.

Indiana Energy Association President Ed Simcox, who is an advocate for utilities, could not be reached for comment.

The bill also would allow utilities under certain situations to use projected financial data for a 12-month period instead of historical data, which is more commonly the basis in rate decisions.

Much of the bill pertains to helping utilities recover costs for making improvements to their electric or gas transmission, distribution or storage networks.

A gas utility would be able to extend gas service in rural areas without seeking a deposit from customers who would directly benefit. That’s problematic because it effectively shifts risks and costs of gas company market expansion to the broader base of ratepayers, Olson said.

Another aspect of the bill appears to allow utilities to assign certain transmission, distribution and storage costs to the rate base over the entire remaining useful life of the system being improved.

“The way I read that, this is a permanent tracker,” Olson said.

utilities-factbox.gifTrackers are mechanisms for utilities to raise rates without having to litigate a full rate case.

They emerged about 30 years ago when volatile fuel prices put a strain on utilities. A timely solution was needed to help them recover rising fuel costs. But the same mechanism is now applied to everything from pollution control costs to customer energy-conservation programs.

“Utilities have been very successful in getting the Legislature to pass laws that favor the utilities at the expense, literally and figuratively, of the ratepayers of Indiana,” said Jennifer Wheeler Terry, an attorney for industrial energy customers at Lewis & Kappes.

“The suggestion by the utilities that the Legislature adopt even more trackers, on the heels of Duke [Energy’s] Edwardsport debacle, is stunning.”

Terry referred to Duke’s coal gasification generating station that is running $1.5 billion over the $2 billion cost originally approved by the IURC.

Trackers produce an unbalanced review of a select item that provides additional revenue and income to the utility, Terry said, “without any analysis of whether the utility is appropriately entitled to any additional revenue.”

The industrials and CAC say the Legislature should be scaling back on trackers because they’re making Indiana less competitive from an energy standpoint.

Indiana Industrial Energy Consumers Inc., the trade group for industrial energy users, said Indiana industrial electric rates rose 6.5 percent in 2011 and an additional 2 percent through October of last year.

While Indiana had the 16th-lowest industrial electric rates in 2010, it slipped to 23rd-lowest in late 2012, the industrial group said.

The 11-page SB 560 also would allow gas and electric utilities seeking increases in transmission and distribution system costs from ratepayers to do so more stealthily.

While such petitions would still have to be on file with the IURC and with the Office of Utility Consumer Counselor, “the public utility is not required to publish a notice of the filing of the petition,” according to language in the bill.

Such notices are generally filed in newspapers to alert members of the public who may be interested in filing comments with regulators.

The IURC files its own public notices inviting input on proposed rates and charges.•

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