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NIPSCO rates could jump 16.8 percent, more than expected

September 21, 2010

BY GITTE LAASBY,

The typical NIPSCO customer's electricity bill could be going up 16.8 percent -- not 10 percent as state regulators indicated last month, a company representative said Monday.

Outraged consumer groups call the hike "discriminatory."

The Northern Indiana Public Service Co. filed paperwork last week to clarify how customers will be impacted by the electric rate increase that state regulators approved at the end of August.

In an explanation to the Post-Tribune on Monday, NIPSCO spokesman Nick Meyer said if regulators approve the company's new numbers, a typical residential customer who uses 730 kilowatt hours per month would see their bill go up $13.39 per month, from $79.57 to $92.96. That's a 16.8 percent increase.

Grant Smith, executive director for the Citizens' Action Coalition of Indiana, called the number "ridiculous" and "outrageous" given that the Indiana Utility Regulatory Commission told NIPSCO to reduce its overall revenue.

"We're still trying to unravel how you reduce overall revenue by $49 million and then you have an increase on residential customers. Somebody's benefitting from that," he said. "It sounds like they're discriminating against residential customers in favor of manufacturers."

Business customers will only see a 4 percent hike, Meyer said.

"It costs more to serve residential customers than to serve industrial customers," he said.

"The rates that are existing today, they're 20 years old. Those rates were designed and based on cost of service that was out of whack, meaning commercial and industrial customers were spending more for their share of cost than residential customers were."

NIPSCO's estimate is higher than IURC's because the commission's number is an average across all customers, i.e. it assumes everyone uses about the same amount.

By contrast, NIPSCO's number takes into account that in reality, customers' electricity use is distributed closer to a bell curve.

The 16.8 percent is what a typical residential user in the middle of the bell curve would experience, Meyer explained.

IURC didn't approve a dollar amount increase on customers' bills, only percentage increases for each customer group.

IURC spokeswoman Danielle McGrath said the commission has 10 business days to review whether NIPSCO's numbers are in accordance with what the commission approved.

Shaw Friedman, an attorney with Friedman & Associates, who has represented LaPorte and Hammond, called the increase "excessive."

Based on NIPSCO's low customer satisfaction rate, the utility deserves less of a return on equity than the IURC approved, he said. Friedman said he has talked to governmental entities he previously represented about filing an appeal.

"Of the 26 contested issues, there were probably four to five that offered really solid areas for appeal," he said.

Groups that intervened in the rate case can appeal until Friday.

The Indiana Office of Utility Consumer Counselor originally argued that NIPSCO didn't deserve a revenue increase at all, but has not yet decided whether to appeal.

"Any time the commission issues an order in a case, the formal parties have 30 days to appeal if they choose to do so. We're still within that 30-day window," said OUCC spokesman Anthony Swinger. "No decision yet."

A rate increase typically takes effect within 30-60 days of IURC approval, Meyer said.

Smith said he's not sure if CAC will appeal, but he would support an appeal.