Vectren Energy Delivery’s natural gas bills in Indiana include a Compliance and System Improvement Adjustment (CSIA). State laws allow Vectren to seek rate increases through the CSIA every six months.
- A law approved by the Indiana legislature in 2011 allows natural gas utilities to seek periodic rate increases to pay for federal mandates, particularly for costs involving pipeline safety.
- A separate state law approved in 2013 allows natural gas and electric utilities to seek IURC approval of 7-year infrastructure plans. If a plan is approved, then the utility may request rate increases every six months to cover the costs of projects in the plan. The law requires the IURC to consider the plans and increases within very short timeframes.
Vectren’s Indiana natural gas utility has two service areas:
- The Vectren North territory includes 48 central, south-central, and southeastern Indiana counties formerly served by Indiana Gas Co.
- The Vectren South natural gas service territory includes nine southwestern Indiana counties formerly served by Southern Indiana Gas & Electric Co. (SIGECO).
CSIA Rate Increases to Date
The CSIA is included in each residential account as a flat monthly charge. Since Vectren’s 7-year plans were approved in 2014, the CSIA has raised each residential bill by $1.25 in the North territory and $2.67 in the South territory.
- The most recent tracker orders were approved in June 2015. Vectren had sought to raise the residential North and South CSIAs to $1.61 and $3.00 respectively.
- In the orders, the IURC approved OUCC recommendations reducing the charges and saving consumers more than $1.6 million from the utility’s requested amounts.
Pending CSIA Rate Increases
Vectren is now seeking to increase the North and South CSIAs, respectively, to $2.14 and $4.12.
- The request would raise the current North territory charge by 89 cents and the current South territory charge by $1.45.
- Total gas rates would rise by more than $25 million under the requests.
- The OUCC filed testimony on December 2:
- An IURC evidentiary hearing was held on December 18. Closing arguments have been submitted, including the OUCC's proposed orders (North and South) which were filed on January 11, 2016.
A Brief Summary of the Laws
Indiana Code 8-1-8.4 was approved by the Indiana General Assembly in 2011. It allows natural gas and electric utilities to recover federally mandated costs.
- Under the statute, a utility’s costs of complying with a number of federal mandates can be recovered through rates, including any requirement issued by the United States Department of Transportation (which has jurisdiction over interstate gas pipeline issues), Environmental Protection Agency (EPA), Department of Energy (DOE), or by the Federal Energy Regulatory Commission (FERC).
- Before recovering the costs through rates, the utility must receive IURC approval for its proposed projects. It may then recover 80 percent of the costs through incremental rate increases every six months (with the remaining 20 percent deferred until the utility’s next base rate case). The OUCC reviews these filings on behalf of ratepayer interests.
- Vectren previously recovered these costs through its Pipeline Safety Adjustment (PSA).
Indiana Code 8-1-39 was approved by the Indiana Legislature in 2013. It allows electric and natural gas utilities to submit 7-year infrastructure improvement plans for IURC approval. Also, it requires the IURC to rule within 210 days once such a request is filed.
- Once a 7-year plan receives IURC approval, the utility may request incremental rate increases every 6 months to pay for the projects. The rate adjustment is referred to as the Transmission, Distribution, and Storage System Improvement Charge (TDSIC). The IURC has 90 days to rule on such a request.
- TDSIC rate increases are limited to no more than 2 percent of total retail revenues.
- The TDSIC rate adjustment (or tracker) allows the utility to recover 80 percent of the costs as they are incurred. The remaining costs are deferred until the utility's next base rate case, which must be filed before the end of the 7-year period.
Vectren’s Seven-Year Plans
Vectren’s initial seven-year plans received IURC approval in August 2014.
- The North territory plan includes about $647.1 million in capital improvement projects. This total includes $369.7 million under the federal mandate law and $277.4 million in TDSIC rate recovery.
- The South territory plan includes about $216.8 million in capital improvement projects. This total includes $173.7 million under the federal mandate law and $43.1 million in TDSIC rate recovery.
- Projects in both plans include main replacements and upgrades to transmission and distribution pipelines. The North territory plan also includes extensions into areas that currently do not have natural gas service.
In its requested plans, Vectren projected that the CSIA would raise a monthly residential bill by 97 cents in the North territory and $1.34 in the South territory in the first year.
The IURC approved incremental rate increases under the plans in January (North and South) and July (North and South) of 2015.