IURC Approves Less Than Half of IPL Proposed Rate Increase; Lost on increasing residential fixed charges and eliminating declining block rates

Posted by Laura Arnold  /   March 16, 2016  /   Posted in Indiana Utility Regulatory Commission (IURC), Indianapolis Power and Light (IPL), Uncategorized  /   1 Comments

 IndianaDG thoughts on IURC Order on IPL Rate Case:

 Here is an excerpt from the Order starting at page 71:

Increase in Residential Customer Charge and Continuation of Declining Block Rates. There were only two arguments presented in opposition to IPL's customer charge proposal: Mr. Watkins' contention that all costs are variable in the long run and therefore SFV rates represent inefficient pricing, and Mr. Howat' s testimony that Petitioner's rate design produces a disproportionate impact on low income customers.

As to the first argument, we note that IPL has not proposed SFV [Editor’s note: SFV = Standard Fixed Variable] rates. While the proposed increases in the customer charge from $6.70 to $11.25 (for less than 325 kWh/month) and $11.00 to $17.00 (for greater than 325 kWh/month) move toward a more fixed and variable rate design consistent with traditional cost causation principals, it is demonstrably short of SFV rates. There is no evidence that the customer charge as designed even reaches the level of full distribution system fixed cost recovery. Cost recovery design alignment with cost causation principles sends efficient price signals to customers, allowing customers to make informed decisions regarding their consumption of the service being provided. The Commission investigated the rate design issue with regard to natural gas service in Cause No. 43180, and the general premise appears to be reasonably applicable to electric utilities in the context of distribution-related costs. Notwithstanding, gradualism in any movement is a reasonable consideration, and we find that the increase in customer charge is consistent with the Commission's preference for gradual changes in rate structures. We note that IPL's proposed customer charge represents the first increase in the customer charge since base rates were last changed in 1995.

With respect to the second argument, Dr. Gaske's analysis demonstrated that approximately 8-10% of the customers within each residential class receive energy assistance, yet the median usage and the 9oth percentile usage for energy assistance customers compared to no-assistance customers is similar. While switching to an inclining block rate structure may benefit low income/low energy users, it would harm a substantial number of low income/high energy users. Many low-income customers use more than the residential average amount.

Ultimately, we find that Petitioner's proposed rate design to increase the customer charge and maintain declining block rates should be approved. [Emphasis added] We further find that this structure does not violate principles of gradualism, because gradualism is best considered in the context of the entire customer bill and not discrete charges within the bill.

"We lost on the issue of increasing the residential customer charge and eliminating IPL’s declining block rates." said Laura Ann Arnold, President Indiana Distributed Energy Alliance (IndianaDG).


 

Indiana Utility Regulatory Commission (IURC) NEWS RELEASE

FOR IMMEDIATE RELEASE

Media Contact: Chetrice Mosley Phone: (317) 232-2297

Email: clmosley@urc.in.gov

Commission Issues Final Order on IPL Investigation and Rate Case

INDIANAPOLIS (March 16, 2016) - The Indiana Utility Regulatory Commission (Commission) issued a final Order on its investigation (Cause No. 44602) into Indianapolis Power and Light Company’s (IPL’s) network facilities, as well as IPL’s request for a rate increase (Cause No. 44576).

The Order approves a $29.6 million increase in annual revenues, which is less than half of IPL’s original request of $67.8 million. The utility’s new rates and charges will be effective after they have been filed with and approved by the Commission. The Order also closes the Commission’s investigation into IPL’s ongoing investment in, and operation and maintenance of, its network facilities. While the Commission ultimately found that IPL’s network is basically sound at this time, continued investments will be necessary to ensure a safe and reliable system. An example of such an investment is the installation of Swiveloc covers on all manholes in the downtown area, which IPL completed in 2015. The Commission also determined that IPL’s asset management process is in need of significant improvement. Therefore, the Commission Order directs IPL to collaborate with the Commission’s technical staff, the Indiana Office of Utility Consumer Counselor (OUCC), and any parties who intervened in the case to assess and improve IPL’s asset management program and establish clear performance metrics. The Order directs IPL to file regular status reports with the Commission documenting specific actions that have been taken regarding its progress on these issues.

“The Commission appreciates the interest and participation of the public, IPL, OUCC, and the intervening parties in this complex case,” said Commission Chair Carol Stephan. “We have every expectation that a transparent, collaborative process will ensure that IPL continues to improve the safety and reliability of its system.”

The Commission held a technical conference to define the specific issues to be addressed in the investigation on April 2, 2015. This conference was open to the public, as was a field hearing held on March 16, 2015, at which the public was able to submit comments directly to the Commission, which were entered into the official record. Other comments were received outside of the field hearing and are also in the record. The two weeks of open hearings regarding the case were held September 21 through October 1, 2015.

To view the final Order, click here.

For all the public documents related to this case, visit the Commission’s electronic document system and search the Cause Numbers (44602 and 44576) at https://myweb.in.gov/IURC/eds/.

Instructions on how to best use this database can be found at www.in.gov/iurc/2666.htm.

 

One Comment

  1. Brian W April 1, 2016 10:11 am Reply

    I live in Indy and have net metered rooftop solar. While I am not thrilled with the Fixed Fee Increase, the impact on my bottom line is under $60.00 a year. So, not too bad. I also believe that Declining Block Rates discourage people from going solar. The economics are against it. Inclining Block Rates make going solar more economic. For that reason, I prefer them. However, switching to Inclining Block Rates would be horrible for anyone with a basement sump pump, dehumidifier, or home based life sustaining equipment, such as Oxygen Concentrator’s for COPD and C-Pap Machines for sleep apnea. Inclining Block Rates would disproportionately affect people with health issues and basements. And, for those reasons, I am relieved that Declining Block Rates remain part of the mix. It’s not all about me and my dream of having a rate environment that encourages rooftop solar. Sometimes it’s just about survival. For several members of my family, including elderly, the need for cost effective electricity in the range above 500kWh up to 1500kWh per month needed to sustain them is more important than my Distributed Generation dream. Declining Block Rates are necessary for my relatives continued existence in an era where Medicaid will pay for Oxygen Concentration equipment rental but not for pre filled oxygen tanks. This requires COPD patients to pay for a 600W machine to run 24/7 in their house. Or they die. Inclining Block Rates would devastate people in this situation, whose very existence requires as affordable electricity as possible. So, as I said, I am relieved for Declining Block Rates.

    For other situations, such as basements, sump pumps can be replaced with basement water proofing. On the high end, this could involve excavating the dirt on the exterior of the basement walls and installing waterproofing but this costs $10,000 to $30,000 depending on basement size. Other options include waterproofing the inside of the walls with membrane paint. This can also cost thousands and doesn’t work as well. All of these are a tough sell compared to good old cheap coal-based electrically powered sump pumps. It would be great if future rate design could distinguish higher than average residential customers by category and base their determination of Inclining Block Rates or Declining Block Rates based on need. Anyone with a sump pump should have Inclining rates to urge them to get the waterproofing and ditch the pump. But, anyone on life sustaining medical equipment should have Declining Rates. Same with basement dehumidifiers which run all the time. These, too, could be eliminated with waterproofing. But, prying into people’s lives is hard. So, I suppose it makes sense for IURC to continue Declining Block Rates for all. It’s easier and less complicated. Best, Brian

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