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IURC OKs Duke Energy rate hike to fund more than $1B in upgrades

June 29, 2016
Duke Energy’s 800,000 customers in Indiana will see their electrical bills rise over the next five years to pay for more than $1 billion in upgrades to the company’s statewide energy grid.
 
The Indiana Utility Regulatory Commission on Wednesday approved the company’s settlement with several consumer groups over how to pay for improvements for substations, utility poles, power lines and transformers.
 
Customers will pick up $1.4 billion of the price tag, down from the $1.8 billion that Duke Energy had originally sought.
 
The money will be raised through a special fee or “tracker” on customer bills. Customers will see a “gradual rate increase” averaging 0.75 percent per year between 2017 and 2022, Duke Energy said.
 
“We have an aging energy grid—some equipment that is decades old—and our work will focus on replacing some older infrastructure to reduce power outages,” said Melody Birmingham-Byrd, president of Duke Energy Indiana. 
 
Part of the cost 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 company said it also will be building a “smarter energy structure” with line sensors that will enable the company to provide customers more information about power outages affecting them and estimated restoration times.
 
The new plan also gives Duke Energy a slightly lower return on equity for the investments: 10 percent, compared with 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 has opposed adding more trackers to customer’s monthly bills, and has criticized the law for allowing utilities to “shift risk” to customers.
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