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Justices tweak NIPSCO rate hike denial to allow recovery of cost overruns

September 26, 2018

Revisiting a decision that limited how utilities can pass the bill for future costs to ratepayers, the Indiana Supreme Court on Tuesday tweaked its earlier opinion to insert language in a modified decision that now will allow utilities to recover project cost overruns in utility rate increases.

Justices in June ruled against Northern Indiana Public Service Co. and in favor of a group of its heaviest commercial users, NIPSCO Industrial Group. The decision reversed regulatory approval of a portion of a rate increase meant to pay for undefined replacement of a percentage of NIPSCO gas pipes throughout its system.

The court generally held in June that under that the 2013 TDSIC Statute, utilities may obtain rate increases for specific, defined projects, but not for broad categories of projects such as unspecified maintenance of infrastructure.

After a rehearing, the court reissued Justice Geoffrey Slaughter’s unanimous opinion in NIPSCO Industrial Group v. Northern Indiana Public Service Company, 18S-EX-334, with a small but significant difference. The new opinion is substantially identical to the June order, with the notable exception of the addition of the clause in bold in this paragraph:

 “After the Commission has approved the foundational seven-year plan under Section 10, the utility may file petitions every few months under Section 9 to obtain ‘automatic’ rate adjustments for approved costs and expenditures as it completes these improvements and puts them into service. I.C. §§ 8-1-39-9(a), (c), (e). These periodic Section 9 petitions allow the utility to recoup eighty percent of approved cost estimates. Id. § 8-1-39-9(a). The remaining twenty percent—along with any cost overruns that are specifically justified by the utility and specifically approved by the Commission—is recoverable during the general ratemaking case required.”

Slaughter wrote for the court that the decision in the NIPSCO case would be far-reaching, as likely the modification will be for utilities and their ratepayers.

“The stakes are much larger than just the roughly $20 million at issue between NIPSCO and the Industrial Group. The Commission, we are told, has approved billions of dollars of utility-infrastructure investments through the TDSIC process. Given the favorable regulatory treatment, utilities are likely to funnel increasing amounts of infrastructure investments through this reimbursement mechanism. How we resolve these competing visions of the TDSIC Statute will likely have enormous financial consequences for utilities and their customers,” both opinions say.

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