By KEVIN NEVERS

The Northern Indiana Public Service Company expects to file a petition with the Indiana Utility Regulatory Commission (IURC) this summer for its first full electric rate case in more than 20 years.

NIPSCO is still conducting an analysis and has not yet completed the case and spokesman Nick Meyers was unable to say how it could impact customers.

“Over 20 years we’ve worked to keep those rates and avoid an increase,” Meyers told the Chesterton Tribune last week. Among other things, though, the cost of fuel has risen during that period, he said.

In addition, NIPSCO will seek to include in that rate case its proposed purchase, for $329 million, of the 535 megawatt (MW) Sugar Creek generating facility in Terre Haute from the LS Power Group.

NIPSCO had planned to acquire, from parent company NiSource Inc., the 525 MW Whiting Clean Energy generating facility, but last month BP announced that it was exercising its right of first refusal and would buy the facility instead, located at the BP Whiting Refinery property.

NIPSCO had intended to acquire both Sugar Creek and Whiting Clean Energy as a preferable alternative to building new ones, as part of a plan to increase its electric generating capacity by 1,000 MW by 2014. With Whiting Clean Energy now off the table, NIPSCO is ”searching for additional options to meet that capacity need,” Meyers said.

Meyers could not say at this point whether any of those “additional options” would find their way into the rate case.

IURC spokesperson Beth Roads noted that, in a traditionally regulated state like Indiana, the IURC permits a monopoly like NIPSCO the right to recoup the costs of operation and maintenance and then the “opportunity” to earn a specified total rate of return. That rate—9.06 percent—is not guaranteed, however, and depends on the efficacy of NIPSCO’s business practices, Roads said.

Possibly NIPSCO will seek a higher rate of return, Roads ventured. Or it could seek to include a new facility—like Sugar Creek—in its existing rate of return.

Whatever NIPSCO does, the rate case itself will likely play out over a year or more, with “fairly extensive testimony, a full hearing schedule, and probably field hearings.” How long the case will take, Roads said, “depends on how complicated it is.”

Some History

Although the IURC has not issued an electric rate order for NIPSCO since 1987, in 2001 it did enter into a settlement with the company under which NIPSCO credited customers’ bills at least $225 million over 49 months. That settlement followed a mandatory periodic review in which the IURC determined that NIPSCO’s operating income in 1999 was around $23 million higher than the maximum allowable under the 1987 order and that its rate of return was 10.63 percent, a point and a half higher than the 9.06 percent allowed by that order.

IURC staff initially recommended an 11.6 percent across-the-board reduction in electric rates, then agreed to the customer credits, which saved the average residential customer approximately $50 per year over the life of the settlement.

At the same time that IURC staff was recommending an 11.6 percent across-the-board decrease in electric rates, however, NIPSCO was maintaining that it deserved a 24 percent increase to reflect a fair return on the fair value of its assets.

Posted 5/13/2008