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. Currently, this charge on each residential bill is $2.11 in the North territory and $4.12 in the South territory.
- These amounts received IURC approval in March 2016.
- The previous residential North and South CSIAs approved in September 2015, respectively, were $1.25 and $2.67.
Pending CSIA Rate Increases
Vectren is now seeking to increase the North and South residential CSIAs, respectively, to $3.19 and $5.31.
- The OUCC is reviewing the proposed increases and is scheduled to file testimony on June 6, 2016.
- An IURC evidentiary hearing is scheduled for June 20, 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.