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Duke reaches settlement over $1.4B modernization plan

March 7, 2016

Duke Energy Indiana is hoping the second time is a charm for its plan to modernize its electric grid and pass along more than $1 billion in costs to ratepayers.

The utility said Monday afternoon it has reached a settlement agreement with the Indiana Utility Consumer Counselor and some consumer groups on its new plan, which calls for updating and replacing aging substations, utility poles, power lines and transformers.

The money will be raised through a special fee or “tracker” on customer bills. If the plan is approved, customers would see a “gradual rate increase” averaging 0.75 percent per year between 2017 and 2022, Duke Energy said.

The development comes about a year after Indiana utility regulators denied Duke Energy’s original $1.8 billion plan and demanded more information.

The company’s new request would cost less than the original plan, with a price tag of $1.4 billion. Part of the reduction is due to Duke Energy’s decision to drop part of the plan that would have charged customers $192 million for new advanced digital metering.

The company said it retains the ability to pursue the meters and defer their costs for consideration in a future rate case, rather than through a monthly bill tracker.

The Indiana Office of Utility Consumer Counselor has blessed the seven-year plan, saying it will “provide measurable benefits” to Duke Energy’s 800,000 Indiana customers.

Other changes in the new plan, compared to the original, include reductions of $175 million in transmission project costs and $30 million in distribution project costs.

The new plan also would give Duke Energy a slightly lower return on equity for the investments: 10 percent, compared to the original proposal of 10.5 percent.

Duke Energy filed its plan under provisions of a state law enacted in 2013 aimed at improving utility infrastructure, allowing the companies to recover up to 80 percent of the cost through bill trackers. The remaining 20 percent would be deferred for review until the utility’s next base rate case goes before the Indiana Utility Regulatory Commission.

In addition to getting the blessing of the Utility Consumer Counselor, the revised plan has been approved by the Indiana Municipal Power Agency, the Hoosier Energy Electric Cooperative, the Wabash Valley Power Association and the Environmental Defense Fund, along with a large group of industrial customers and steel mills.

One group that didn’t agree to the terms was Citizens Action Coalition of Indiana, which said it opposes adding more trackers to customer’s monthly bills, and which has criticized the law for allowing utilities to “shift risk” to customers.

“This is a bad tradition the General Assembly gave to electric utilities,” said Kerwin Olson, CAC’s executive director. “We maintain opposition to the filings in general.”

The IURC has not yet approved any utility’s plan infrastructure plan submitted under the new law. In addition to denying Duke Energy’s first plan, it rejected plans filed by Indiana Michigan Power and the Northern Indiana Public Service Co.

Duke Energy said it expected a decision from state regulators by the middle of this year.

 

 

 

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