Rate hike nightmare

Allen Greenberg | Aug 16, 2015

 

Indianapolis Power & Light Co. has been dealing with a full-blown PR crisis over a proposed rate hike for months now, and Lisa Randall wasn't holding back.

"A pay hike for customers who have lost power 4 out of the last 8 days? Hell no! What about payback for lost food in fridge and freezer? Focus on cutbacks to (find) funds to repair what needs fixed. Establish good service for a year or two then ask for a rate hike. Until then, HELL NO!!!!!"

Randall, who identified herself as a training manager at Circle K, posted those remarks on the Indianapolis Star website in response to a report that a state government consumer agency had come out against IPL's rate increase request.

Peter Krempley, an engineering consultant, also used the comment sections of the site to offer his two cents:

"IPL management is propping up costs with wasteful spending to justify a rate increase. ... Example: The electrical usage reports that are sent out to every customer in addition to the standard billing is wasteful. . Anyone should be able to get this information anytime from an online account history by account number. ... The cost of these mailings each month to every customer (most of who ignore them) is an artificial mailing cost that should be eliminated. They are poorly managed and we should not have to pay for unnecessary PR work."

Any electric utility seeking a rate hike knows that overcoming the public's resistance is part of the process. IPL's request, however, looks to be in deeper trouble than most, offering utilities everywhere what looks to be a teachable moment.

I should say that, given the fire it has received, it's easy to conjure up a bit of sympathy for IPL's executive team. Perhaps all of the bad press is why IPL CEO Kelly Huntington left in June (after two years on the job) to become a senior VP at OneAmerica, an insurance firm. Or maybe Huntington just got out while the getting was good.

In any case, the Indiana Office of Utility Consumer Counselor has made a number of assertions and allegations that will require all of the remaining brain power and talent in IPL's C-suite.

IPL - which serves 470,000 customers in central Indiana - has asked the Indiana Utility Regulatory Commission to approve a $67.7 million rate increase, about $8 more per month per residential customer. The OUCC, however, said IPL deserves no more than $5.9 million. 

The OUCC isn't just another grass-roots consumer group that can easily be ignored. It is a state agency with a mission to represent consumers "to ensure quality, reliable utility services at the most reasonable prices possible through dedicated advocacy, consumer education, and creative problem solving."

It doesn't say so in its mission statement, but that job also entails occasionally taking a utility to the woodshed - as it now has in IPL's case.

In making its case, the OUCC noted that:

 

  • There have been 14 fires or explosions in IPL's downtown underground network since 2010. Also, data show hundreds of cable failures and other network failures over the last 12 years. 
  • As of March, IPL had replaced just 374 downtown manhole covers out of 1,214. The new covers are designed to stay in place in the event of an explosion.  
  • IPL paid $2.6 billion in dividends to its parent company, IPALCO Enterprises, between 1994 and 2014 - all while failing to spend on anything but routine 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 the OUCC's 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." 

The OUCC noted that IPL's current base rates haven't changed since 1995. "Since then, however, the monthly bill for an IPL residential customer using 1,000 kilowatt hours has risen by more than 43 percent through various rate adjustment mechanisms, or trackers," it said.

For its part, IPL says it need the rate hike to improve system reliability as well as to cover maintenance and operating costs.

The issues raised by the OUCC aren't news to IPL. A 2011 report from the state warned IPL that it needed to make some changes. 

But IPL has clearly moved much too slowly for the people it serves. It now has until Sept. 4 to file a rebuttal. An IURC hearing is scheduled for Sept. 16.

Consumer advocates, ratepayers and others in Indiana will be watching, as will, I imagine, utility executives who understand that the lessons imparted by worst practices can be as valuable as those offered in the study of best practices.

http://www.energycentral.com/functional/news/news_detail.cfm?did=37079701