The Northern Indiana Public Service Company was seeking an electric rate hike of 15.6 percent for its residential customers.

What it got from the Indiana Utility Regulatory Commission (IURC) is something less, in an order which amounts to a critique of the way NIPSCO does business.

The IURC order shakes out this way:

•The IURC decreased NIPSCO’s authorized operating revenue by approximately $49 million, which includes the finding of a 9.9-percent return on equity, “a much lower return than in existing rates.” That return, the IURC specifically noted in a statement released on Wednesday, “serves as a directive to the company that it must improve the customer and operational shortcomings that were a subject of the proceedings.” That 9.9-percent return is a great deal less than the 12-percent sought by NIPSCO and even less than the 10-percent recommended by the Indiana Office of Utility Consumer Counselor.

•The IURC declared formally expired customer bill credits of $55 million per year, as ordered in 2002 under a settlement agreement.

•And the IURC approved an approximate 4-percent increase in base rates.

•Between the expiration of the annual credits and the 4-percent base-rate hike, the IURC estimated “that the net effect on residential customers will be approximately 10 percent.”

Under the order, NIPSCO has one month to submit to the IURC a revised cost-of-service study and new schedule of rates and charges, which will reveal more specifically what the company’s different customer classes—residential, commercial, and industrial—will be paying under the order.

“While the commission has seen recent positive efforts by senior management to address customer and operational shortcomings, the commission will continue to monitor and evaluate managerial efforts, and will review and revisit those efforts in NIPSCO’s next rate case,” the IURC said.

The IURC, noting that it last reviewed NIPSCO’s base rates more than 20 years ago, added that the “significant amount of time since the commission last aligned customer rates with NIPSCO’s underlying cost-of-service components fostered a general condition of misalignment and interclass subsidies. The commission directed the company to apply its overall revenue requirement such that interclass subsidies were eliminated while applying an allocation scheme that served to moderate the increase to residential customers.”

“Receipt of this IURC order is a key milestone in NIPSCO’s efforts to enhance reliability and customer service, while providing a modern energy infrastructure that will support Northern Indiana jobs and economic growth,” NIPSCO CEO Jimmy Staton said. “This ruling sets the stage for our ongoing commitment to Northern Indiana, which includes offering new customer programs and making ongoing system investments to benefit all our customers.”

“Improving customer service, increasing responsiveness, and enhancing the reliability of Indiana’s energy infrastructure have been key areas of focus for NIPSCO,” Staton said with respect to the IURC’s determination of “customer and operational shortcomings.”

“We have made recent progress in all of these areas,” Staton added, “and the commission has acknowledged our positive efforts. However, we know additional work remains. Our entire team embraces that challenge, and is committed to delivering material improvements in those key areas as we move forward.”

“Staton acknowledged that any rate increase is meaningful to customers and that NIPSCO will continue to work collaboratively with stakeholders to develop programs that help customers conserve energy and manage monthly bills.”

J.D. Power and Associates, in its 2010 study of electric utility customer satisfaction, ranked NIPSCO at nearly the bottom of the 121 utilities surveyed across the country. Only seven of those utilities scored lower than NIPSCO did in a survey of customer satisfaction in six categories: power quality and reliability; price; billing and payment; corporate citizenship; communications; and customer service.

In the Midwest Region: Midsize Segment—to which NIPSCO belongs—NIPSCO scored 587. The average score in Midwest Region: Midsize Segment was 629 and the high score—Omaha Public Power District’s—was 693.

NIPSCO, meanwhile, expects to file a second electric rate case later this year, which the company has said is intended to address the rapid increase of pension costs.

On Wednesday NIPSCO noted that it has “not yet determined potential customer rate impacts associated with that filing” but that case is necessary “to reflect more recent operating costs and usage levels.”

Posted 8/26/2010