Explosive IPL Rate Case Continues This Week

by | Sep 30, 2015

The Indiana Utility Regulatory Commission (IURC Cause Nos. 44576, 44602) will continue hearing testimony this week on a rate request first made by Indianapolis Power & Light (IPL) last December – and delayed from March until September 21 by the vigorous objections of the Indiana Office of Utility Consumer Counselor (IOUCC).

While IPL has asked the commission to approve a $67.7 million rate hike to cover rising operational costs, the IOUCC alleges that the utility’s increase should be limited to one-tenth of that amount – $5.9 million – based on an investigation conducted by the agency.

IPL, a subsidiary of AES, serves about 480,000 retail customers in greater Indianapolis; as well as in portions of other central Indiana communities surrounding Marion County. The utility claims that the majority of the capital expenditures that it is trying to recover via the rate increase have been made in its downtown network in Indianapolis, where miles of electric transmission wires have been buried under the streets – but have refused to stay there.

In fact, since 2010, fires and explosions in the underground electric infrastructure have sent heavy manhole covers careening through the air 14 times in the city – endangering lives and property. What’s more, the IOUCC claims, hundreds of other network failures have occurred without above-ground blasts, due to the utility’s failure to provide sufficient, ongoing maintenance.

“The evidence presented by our 14 witnesses shows that IPL has the revenues necessary to provide safe, reliable service to all of its customers, and to make the underground infrastructure upgrades that are strongly needed,” said Indiana Utility Consumer Counselor David Stippler. “However, the evidence also tells a story of misguided leadership and misplaced priorities, with critical downtown infrastructure needs taking a back seat to shareholder dividends.”

Indeed, according to the consumer advocates, IPL is moving too slowly to install Swiveloc manhole covers, which are designed to stay in place in the event of an underground explosion. As of March 2015, IPL had only replaced 374 downtown manhole covers out of 1,214 – a rate of only 31 percent.

In addition, the IOUCC has found “no evidence that IPL, in recent years, has spent more money on its downtown network than its typical expenditures for routine maintenance. … However, IPL has paid $2.6 billion in dividends to its parent company – IPALCO Enterprises – between 1994 and 2014. Between 2010 and 2014, the dividends totaled $507 million.”

coalition of consumer advocacy and social justice groups also is recommending that the state utility regulatory commission reject IPL’s rate increase request. The coalition of organizations include Citizens Action Coalition of Indiana (CAC), Indiana Association for Community Economic Development (IACED), Indiana Coalition of Human Services (ICHS), Indiana Community Action Association (INCAA), Indiana State Conference of the NAACP, and National Association of Social Workers – Indiana Chapter (NASW-IN).

In testimony filed with the IURC this month, IPL makes counterclaims that “capital expenditures necessary to continue to ensure safe and reliable service to customers have steadily increased since the utility was acquired by AES [in 2000]. Additionally, IPL, like most companies, pays dividends to its shareholders in line with industry standards, but only after all needs of the business are met, including operation and maintenance of its facilities.”

In its September rebuttal, IPL asserted that, “The installation of locking manhole covers on all 1,214 manholes within the downtown network by the end of this year continues to progress. To date, 991 lids have been installed.”

In addition, the utility points out that testimony from third-party reviewer, UMS Group, a consultancy that specializes in asset and performance management stated, “The fact that IPL is on a journey to improve its systems, processes and competencies can only be construed to mean they strive to be even more effective. In fact, there is ample evidence that confirms that, from an overall system perspective, IPL has managed its assets very effectively.”

If IPL’s request is approved by the IURC, customers should plan for a rate increase near the end of the year. “The proposed request [of nearly $68 million] would,” the utility said, “result in the average residential customer seeing an increase of about $8 per month,” adding that, “IPL small business – general service customers will see an increase of less than $20 per month.”

The evidentiary hearing is expected to wrap up shortly, however, there is not likely to be a resolution to the case before year-end. Media spokesperson Anthony Swinger, Office of Utility Consumer Counselor, told Retail Energy Buyer in a recent phone call, “When the evidentiary hearing is over, IPL will be asked to follow up with its proposed order. IOUCC and the other parties to the complaint then will file their proposed closing statements and IPL will have another chance to respond. The rate increase probably will not be completely closed until November or December.

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