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State regulators scold Citizens, approve smaller water rate hike

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Citizens Energy Group has won approval to raise water rates for Indianapolis customers, but for less than it had requested due to concerns over executive compensation and other management issues.

Citizens' 300,000 water customers will see a 9-percent increase in rates after the Wednesday ruling by the Indiana Utility Regulatory Commission. The increase is lower than the 14.7-percent bump Citizens had sought, but well above the 2.6 percent the Indiana Office of Utility Consumer Counselor, a consumer watchdog group, argued was appropriate.

The commission has taken issue with how much Citizen’s upper brass earned since executives received pay boosts in 2012. CEO Carey Lykins took home $2.8 million that year, which was almost double what he earned in 2011 because of a bonus. The utility’s top officers earned less in fiscal 2013, including $1 million less for Lykins.

“The IURC found that Citizens Water’s level of executive compensation was not appropriate for a municipal utility,” the agency said in a prepared statement. “Consequently, the IURC significantly limited the amount of recovery in this area. In Citizens Water’s next rate case, the IURC expects the utility to realign compensation so that it is more compatible with actual municipal-based expenses.”

Meantime, the IURC said it opened a probe into complaints about Citizens’ call center and billing practices.

One out of five callers hangs up before receiving service because of long wait times, the state agency says. There have also been concerns over Citizens complying with regulations for billing and payment application.

A statement from Citizens on Wednesday afternoon said the firm was reviewing the IURC's order. It noted that Citizens' executive compensation program was undergoing a review by a consultant, the results of which would be available to the public by mid-year.

Citizens acknowledged that as it encorporated the city's water and wastewater services into its operations in 2011 and 2012, there were delays in responding to customers. "Since then call wait times at Citizens' call center have been significantly reduced," according to the statement.

Indiana Utility Consumer Counselor David Stippler said Wednesday afternoon that he was pleased that the IURC had taken action.

"Today’s rate order takes important steps in addressing the utility’s executive compensation, while reducing various line items regarding operating expenses," Stippler said.

“In the Commission’s newly opened investigation of Citizens’ billing and customer service practices, the OUCC’s legal and technical teams look forward to fully participating and engaging in a robust dialogue that leads to a meaningful outcome," he said.

IURC also dinged Citizens for failing to provide adequate evidence to support its claim that water consumption dropped by $1.6 million; and not properly calculating $1.2 million in charges it wanted to claim because it averaged the expense over a time the city owned the water utility. The regulatory body said Citizens can only use its rate increase to cover its current and 2015 infrastructure expenses, which should save customers $2 million.

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  • @ Joe
    Now come on Joe, let's not muddy up personal points with something like facts.
  • Some thoughts
    A couple of points... The hikes were coming regardless. The point of Citizens buying over other parties was that the hike was going to be less vs other counter parties; 14% vs 20% for example. This wasn't a huge surprise, so I'm not sure what the fuss is about. Second, citizens has plenty of unregulated business on top of the utilities that it also runs. To look at their salaries under just the scope of a utility is foolish. It's not just the revenue from the gas or water that goes towards their salaries, but also their other entities. A portion of the salary comes from each utility, and if broken out individually by rate payer, likely amounts to a few cents per month. Quit with the over the top statements like "putting those salaries on the backs of citizens" as if everyone in Indianapolis is some downtrodden out of work person barely able to get by. Additionally, do you all really think any of the execs sits in their office going, "you know what, I'm going to make my salary $2 million a year!" No. Someone else sets their salary just like everyone else in the company. If you're an accountant, and someone says we're going to pay you $2 mil a year, you're not going to walk back to your boss and ask for a decrease because you think it's too much. Finally, Lykins is a Dem, not GOP.
  • Non Political Corruption
    The Indiana Utility Regulatory Commissioners have been in the pockets of those utilities they are supposed to regulate for over 50 years. This is non-partisan corruption, this has been happening regardless of dem or republican in charge.
  • 9%??
    A 9% increase over what we pay now is ridiculous. If you want to see all the salaries: http://www.indystar.com/story/money/2013/10/23/public-employee-salary-database/3171481/ this site is flooded with Citizens employees - how do I go to work for a "public" trust??
  • Not GOP
    The leader at Citizens Energy Group is a strong Democrat. Please get your facts straight.
  • Your Modern GOP at Work Folks
    The salaries at Citizens is ridiculous and a blatant money grab by executives. This is simply how the GOP does business in America these days. The Party of Plutocrats! Over two million a year? Really?
    • @ Fred
      Citizens isn't a private, for-profit utility owned by shareholders. Citizens is a nonprofit trust whose Board of Directors (its primary governing body) is appointed by a Board of Trustees that is appointed by the Mayor of the City of Indianapolis. It's further removed from the politic process than most municipal utilities, but it is still "owned" by the City of Indianapolis.
    • Environment
      I completely agree that the levels of executive compensation are ridiculous, so hopefully this action today by the IURC will serve as an important check on Citizens. With that being said, I think many people are more upset that water rates are going up - period. Unfortunately, these increases need to happen. Our utilities have many millions of dollars of deferred maintenance that need to be addressed. Our sewers are also dumping tons of raw sewage into our streams and waterways after every major rainfall. A solution to this problem is in the works, but all of that costs money. I for one would prefer to pay high water and sewer rates if that means a cleaner environment.
    • Greed
      This consolidated monopoly is a disgrace. It's number one priority is to make as much money as possible for all the top brass. Utility prices should have dropped when they consolidated Water and Gas. This was a money making scheme all along. This monopoly should be thrown out. I lived 62 years and never witnessed such gross and greedy attitudes and behavior.
    • CEO Pay
      Gotta have the rate hike so the CEO can live a proper lifestyle. This makes me sick. The people get screwed time after time.
    • Monopolies
      There really shouldn't any shareholder owned utilities. They are monopolies; it is not capitalism and they work about as well as when the Soviets tried the same thing. If we have to have a monopoly it should be controlled by ratepayers so the thigs can be thrown out if they pay themselves millions in executive compensation.
      • Drought
        And, Carmel had also invested enough in plant and treatment facilities so they could handle the increased demand during the last drought. There was a big pr push from Indy that there wwas a water shortage. Wrong! The only shortage was of foresight and investment in a sufficient number of wells and treatment capacity to handle the increased demand.
      • Carmel
        Another reason to move to Carmel. Govt. operated water utility 30 percent less than Citizens AND the water is softened at the plants so residents don't need to buy a home softener or salt.
      • Equal Scrutiny
        Now if only Duke had been under the same scrutiny over the past several years, instead of back scratching and wink and nods, Indiana consumers might not be eating white elephant! A few dim bulbs have been replaced by a plant that, so far, can only produce dim bulbs! Maybe they should have been checking dim bulb executive pay (in more ways than one) as closely as Citizens.
        • Lykins is Scum
          Taking that salary on the backs of Indy residents should make Carey sick. This is what corruption looks like. sure would be nice if I could vote to have him fired. Oh, that's right, Ballard sold our water company.

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