American Electric Power’s (NYSE:AEP) Indiana Michigan Power (I&M) on May 14 said that it is seeking approval of an overall rate increase of about $172m, or 11.75%, via its proposed Innovate Indiana program filed with the Indiana Utility Regulatory Commission.
The Innovate Indiana plan calls for new rates to be phased-in over three steps, with the first occurring in spring 2020, the second on June 1, 2020, and the third in early 2021, I&M said, adding that after it takes full effect, the monthly increase would be $21.11 for a residential customer using 1,000 kWh of electricity per month.
That cost includes a proposed increase in the monthly residential service charge, the company said, noting that its service charge for residential customers is $10.50 per month. The company said that to more accurately reflect the true costs of serving a residential customer, I&M proposes raising the service charge to $15; that service charge is included in – not an addition to – the new rates.
As noted in the company’s May 14 petition, the company seeks commission authority to increase its retail rates and charges for electric service rendered by I&M in Indiana through a phase-in rate adjustment, as well as for approval of related relief including revised depreciation rates; accounting relief; inclusion in rate base of qualified pollution control property and clean energy project; enhancements to the dry sorbent injection (DSI) system; advanced metering infrastructure (AMI); rate adjustment mechanism proposals; and new schedules of rates, rules and regulations.
In its petition, I&M said that since its basic rates and charges were last established, it has continued to make significant capital expenditures for additions, replacements, and improvements to its electric utility system. I&M said that it must continue to invest in modernizing its infrastructure and service offerings to address rapid technological change and evolving customer expectations.
The company said that it has, and must continue to, make significant capital expenditures for additions as a result of environmental requirements. I&M further noted that the open access requirements applicable to I&M’s transmission system impose obligations, costs, and risks on I&M as a grid user and operator, and require the way in which those costs are recognized for ratemaking purposes to be updated. At the same time, the company said, I&M faces the challenges of declining customer usage and the expiration of a number of wholesale contracts.
Discussing AMI, for instance, I&M said that AMI deployment is forecast to begin in the 2020 Test Year and continue through 2022, with the majority of I&M’s expenditures taking place in 2021-22.
I&M President and COO Toby Thomas said in the filing that the company proposes to continue many collaborative pilot programs, and that new residential service offerings include a new residential demand metered service pilot that would provide customers an additional service option that may fit their usage profile and allow the company to gain experience with a residential tariff with demand components. That optional pilot would be limited to 4,000 customers, Thomas said.
The company is also proposing the “IM Plugged In” program, which is designed to support the expansion of plug-in electric vehicles at scale by aligning customer incentives for off-peak charging to simultaneously provide benefits to PEV drivers and all I&M customers, Thomas said.
Among other things, the company noted that it participates in PJM Interconnection as a generator, a load serving entity (LSE), as well as a transmission owner, and that there are various charges and credits that the company experiences resulting from each role. I&M said that it pays to use the PJM transmission system, including its own assets, through charges that are based upon I&M’s demand on the system. I&M said that the costs include charges for I&M’s purchase of network integration transmission service (NITS) under the PJM Open Access Transmission Tariff (OATT) to serve its retail customers.
In direct testimony accompanying the filing, Kamran Ali, managing director of transmission planning with American Electric Power Service Corporation, noted that PJM NITS costs are growing primarily due to charges in two accounts, which are billed by PJM to I&M in its role as the LSE for I&M’s native load customers. Charges to those and other NITS accounts will continue to be incurred and are forecast to be about $284.7m – total company – for the test year, Ali said. The increase in NITS charges is being driven by investment in transmission infrastructure, Ali said, adding that the transmission system requires substantial investment to address aging infrastructure, cyber and physical security threats, as well as modernization of protection and control equipment.