NiSource’s (NYSE:NI) wholly owned subsidiary Northern Indiana Public Service Company (NIPSCO) on Oct. 31 filed with the Indiana Utility Regulatory Commission a petition requesting that the commission issue an order authorizing the company to increase its retail rates and charges for electric utility service through the phase-in of rates.
The company also requested that the commission’s order approve new schedules of rates and charges, general rules and regulations, and riders; approve revised common and electric depreciation rates applicable to its electric plant in service; approve necessary and appropriate accounting relief; approve a new service structure for industrial rates; and authorize the company to implement temporary rates.
In direct testimony, Michael Hooper, senior vice president of Regulatory, Legislative Affairs and Strategy for NIPSCO, said that the company’s overall margin increase requested in the proceeding is about $21.4m or 1.4% above the revenue requirement of NIPSCO’s 2015 rate case, plus the inclusion of certain trackers that customers will pay.
J. Stephen Gaske, senior vice president of Concentric Energy Advisors, Inc., in direct testimony, said that with the “Utility Receipts Tax included,” the average residential customer, with average usage of 689 kWh, will experience an increase in her or his monthly bill of $11.42, or 12.1%, as a result of the rate increase proposed in this proceeding.
Rates for individual customers and different customer classes may change by amounts less than or greater than the average increase for all customers, the company said in its petition.
NIPSCO noted that its current electric basic rates and charges were approved by commission in a July 2016 order, with those basic rates and charges going into effect in September 2016. In May, NIPSCO’s basic rates were modified to reflect the reduction in the federal income tax rate from 35% to 21% as approved in the Tax Cuts and Jobs Act of 2017 (TCJA).
The company added that there are a few key drivers causing it to request a change in rates at this time, including to modify its depreciation rates for coal-fired generating assets to reflect the useful life of those assets as reflected in NIPSCO’s integrated resource plan, as well as to address the unresolved impacts of the TCJA, and to change its industrial service structure to address the changing energy landscape.
NIPSCO said that its existing rates and service structure must be revised to address the changing energy marketplace to provide revenues adequate to cover its necessary and reasonable operating expenses and permit NIPSCO to earn a fair return upon the fair value of its property to which NIPSCO is lawfully entitled.
As a result, the company said, revisions to NIPSCO’s rates and service structure are necessary and appropriate to provide it an opportunity to recover its operating expenses and earn a fair return on the fair value of its property used and useful in providing service to customers.
The proposed changes are also necessary and appropriate to provide revenues, which would enable NIPSCO to continue to attract capital required for additions, replacements, and improvements to its utility property, as well as to comply with regulatory mandates and otherwise provide adequate and reliable service at a reasonable cost, the company said.
NIPSCO President Violet Sistovaris, in direct testimony, said that the company invested about $360m in jurisdictional electric infrastructure through the 2017 historic base period, and projects an additional investment of $520m by the close of the 2019 forward test year.
Discussing challenges faced by NIPSCO’s electric operations, Sistovaris said that the company is in the process of evolving from being highly reliant on coal-fired generation to facing the prospect of the retirement of those resources in the near term. Despite currently strong economic conditions, NIPSCO electric operations continue to face declining industrial usage driven by the development of customer-owned generation and uncertainty in some industrial markets based on international trade conditions, Sistovaris said.
Additionally, she said, the industry is in the midst of a transformation toward increased reliance on gas-fired and renewable generation that is reflected in the Midcontinent ISO (MISO) markets. It is crucial, she added, that the company be in a position to evolve in alignment with that transformation.
Discussing environmental challenges that NIPSCO faces, Sistovaris noted that while implementation of the Clean Power Plan was stayed by the U.S. Supreme Court, earlier this year, the U.S. Environmental Protection Agency (EPA) initiated a rulemaking to promulgate replacement requirements. The cost of any new or amended regulations will depend upon the specific requirements enacted, but compliance with those requirements will likely be costly to NIPSCO and its customers, she said.
Major environmental controls installed since NIPSCO’s last rate case include installation of ground water monitoring facilities at the Bailly, Michigan City, and Schahfer generating stations, she said.