The Northern Indiana Public Service Company (NIPSCO) filed its previously announced natural gas rate case on Monday with the Indiana Utility Regulatory Commission (IURC).

Although the case is designed to be revenue neutral—NIPSCO would not earn higher gas revenues if the IURC approves it—it would increase the average residential customer’s monthly gas bill by 2.65 percent or $1.67.

That’s because industrial and commercial customers would see their rates decline somewhat, NIPSCO spokesman Nick Meyer told the Chesterton Tribune today. “We’re not increasing revenues but we are adjusting the rate structure to make it more fair and balanced across customer classes,” he said. “It’s been more than 20 years since NIPSCO changed the base rate and in that time industrial and commercial customers have been paying more than their average share.”

Or as NIPSCO Executive Vice-president Jimmy Staton said in a statement released on Monday, “NIPSCO customers have the lowest gas bills in Indiana and we want to continue offering the lowest bills under this proposal. We realize any increase is challenging, which is why we also are seeking approval to extend some of our most successful programs helping our customers reduce gas usage and lower their monthly bills.”

But if residential customers would pay slightly more under the adjustment, they would also get a better idea of exactly how their actual usage affects their monthly bill. That’s because the rate case would establish a regular flat charge for the delivery portion of the bill—around $20—in place of the currently variable charge, Meyer said.

There are three basic components in every monthly bill, Meyer explained: gas usage, the single largest portion of the bill, based on a customer’s actual usage; pipeline and transportation, the smallest component of the bill, which Meyer likened to the tolls paid by motorists on turnpikes; and gas supply, based on NIPSCO’s cost of providing service, which is a “pass-through cost” but nevertheless fluctuates from month to month under the present rate structure. The latter, the gas supply component, would become fixed under the rate case.

The advantage of a flat gas supply charge, Meyer said, is that customers would “be able see much more clearly how their monthly consumption of natural gas affects what they pay on their bills.” And by knowing what they use determines pretty much precisely what they pay, they would have an increased incentive to conserve gas.

Or as NIPSCO said in the statement released on Monday, “This will offer customers more predictable bills from month-to-month and an opportunity to better track their gas use.”

The gas rate case also includes proposal for the following:

•Cash incentives for buying energy-efficient gas appliances.

•Energy assistance for income-eligible customers facing financial challenges.

•High-efficiency furnace replacement for qualifying low-income households.

•Self-service tools to give customers more control over their energy use and their bills.

•Incentive programs for new construction homes meeting ENERGY STAR guidelines.

•Energy efficiency education for local schools to create “future energy-wise consumers.”

In addition, “NIPSCO has made a decision to reduce security deposit requirements for low-income customers,” the statement said. “The change will be implemented in the fall of this year—separately from the rate case—to coincide with the Energy Assistance Program start-up date for the winter heating season.”

NIPSCO expects the IURC to compete its review of the gas rate case by “early 2011 or sooner.”

Meanwhile, NIPSCO is awaiting the IURC’s decision in an electric rate case filed in 2008. Should the IURC grant the full 15.6 percent hike which the company wants to impose on residential customers, the average household’s bill would increase by $12.76, from $81.68 to $94.44.

Under NIPSCO’s proposal, residential customers would shoulder the greatest part of the hike, as the overall rate increase sought by the company—when spread among NIPSCO’s residential, commercial, and industrial customers—would total only 9.8 percent.

Nearly 88 percent of NIPSCO’s customer base in August 2008 was comprised of residential households. But those households consume only 20 percent of NIPSCO’s generated electricity.

For its part the Indiana Office of Utility Consumer Counselor (OUCC) is actually recommending a $135.2 million reduction in NIPSCO’s annual electric revenues, to be achieved, however, not by a slash in the rate paid by customers but by the expiration of monthly residential rate credits totaling $55 million per year, as ordered by the IURC in a 2002 investigation of the company’s electric rate.

Under the OUCC’s recommendation, “base electric rates paid by NIPSCO residential customers would remain at or near their current levels,” the OUCC said.

The OUCC is also recommending to the IURC an authorized return on equity of 10 percent, as opposed to NIPSCO’s request for a 12-percent return. At the moment, NIPSCO’s authorized return on equity is 9.06 percent.

The OUCC is the state agency tasked with representing the interests of Indiana’s utility consumers.

While NIPSCO awaits the IURC decision in the previously filed electric rate case, it is also planning to file a second, brand-new electric rate case sometime in the second half of 2010.

At the moment, the company has not released any details about this second case but Meyer has said that it’s intended to address the rapid increase of pension costs, which since 2006 have spiked by a total of $55 million and which the company continues to absorb.

Posted 5/4/2010