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Indiana Office of Utility Consumer Counselor

OUCC > Natural Gas > Natural Gas Cases of Note > Vectren Gas Infrastructure Plans Vectren Gas Infrastructure Plans

Vectren Energy Delivery has received Indiana Utility Regulatory Commission (IURC) approval of long-term plans for natural gas transmission, distribution and storage system improvements, including incremental rate recovery of those costs as the projects proceed. The IURC issued its order (29 pages) on August 27, 2014.

Vectren filed its request under 2 state laws: A 2011 law dealing with cost recovery for federal mandates and a 2013 law addressing system improvements.

The Indiana Office of Utility Consumer Counselor (OUCC) filed testimony on Vectren's 7-year plans on March 21, 2014, following a four-month review. This review showed that the projects in Vectren's 7-year plans are consistent with the statutes the General Assembly approved in 2011 and 2013. However, the OUCC's testimony recommended that the IURC impose specific conditions if it approved the plans, including no double-recovery for infrastructure, use of the volumetric portion of gas bills (and not the fixed charge portion) for future cost recovery, the filing of an updated capital structure with each 6-month rate filing, and stricter reporting requirements.

An IURC public field hearing was held on April 14, 2014 in Evansville. For more information, please see the OUCC's March 17, 2014 news release or the consumer fact sheet distributed at the field hearing.

The OUCC has appealed the Commission's August 27 order to the Indiana Court of Appeals.

Vectren is allowed to file rate adjustment requests under the approved plans every six months and filed its first such requests on October 1, 2014.

  • The utility's request would add 67 cents to a residential customer's monthly bill in the Vectren North service territory (formerly served by Indiana Gas Co.) and 88 cents to a monthly residential bill in the Vectren South territory (formerly served by Southern Indiana Gas & Electric Co.).
  • The OUCC has until December 1, 2014 to file testimony. 
  • An IURC order is due by December 30, 2014.

A brief summary of the laws

Indiana Code 8-1-8.4, approved by the Indiana General Assembly in 2011 (Senate Enrolled Act 251), 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 Indiana Office of Utility Consumer Counselor (OUCC) participates in these cases on behalf of ratepayer interests.

  • Vectren has previously recovered these costs through its Pipeline Safety Adjustment (PSA).

Indiana Code 8-1-39 was approved by the General Assembly in 2013 (Senate Enrolled Act 560). It allows electric and natural gas utilities to submit 7-year infrastructure improvement plans for IURC approval.

  • Once a 7-year plan receives IURC approval, the utility may request incremental rate increases every 6 months to recover the amounts actually spent on 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 the utility’s total retail revenues each year.

  • The TDSIC rate mechanism (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 is the second utility to request TDSIC ratemaking treatment and cost recovery. Northern Indiana Public Service Co. (NIPSCO) filed TDSIC requests for its gas and electric utilities earlier in 2013.

Vectren North request

The Vectren North gas service territory includes approximately 570,000 customers in 48 central, south-central and southeastern Indiana counties formerly served by Indiana Gas Co.

According to the utility's testimony and exhibits:

  • The 7-year plan has a total of 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.

  • Projects throughout Vectren North’s natural gas service territory include main replacements, upgrades to transmission and distribution pipelines, and extensions into territories that currently do not have natural gas service.

  • Vectren North plans to file its first gas rate increase request for these costs in October 2014. It will combine recovery of federally mandated costs and TDSIC costs through a new rate recovery mechanism called the Compliance and System Improvement Adjustment (CSIA).

  • Vectren North projected that the CSIA would raise an average residential customer’s monthly bill by $0.97 in the first year. Annual rate impacts on a percentage basis are as follows:

Year

Federally mandated costs

Annual rate increases
by percentage (%)

TDSIC costs

Annual rate increases
by percentage (%)

Total Revenue

Residential Customers

Total Revenue

Residential Customers

2015

1.24

1.29

0.27

0.28

2016

1.71

1.78

0.63

0.65

2017

1.24

1.29

0.69

0.72

2018

1.08

1.12

0.73

0.75

2019

0.99

1.02

0.70

0.73

2020

0.85

0.88

0.64

0.66

2021

0.67

0.69

0.65

0.68

Source: Petitioner’s Exhibit No. SEA-3, IURC Cause No. 44430

Vectren South request

The Vectren South gas service territory includes about 110,000 customers in nine southwestern Indiana counties formerly served by Southern Indiana Gas & Electric Co. (SIGECO).

According to the utility's testimony and exhibits:

  • The 7-year plan has a total of 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 throughout Vectren South’s natural gas service territory include main replacements and upgrades to transmission and distribution pipelines.

  • Vectren South plans to file its first gas rate increase request for these costs in October 2014. It will combine recovery of federally mandated costs and TDSIC costs through a new rate recovery mechanism called the Compliance and System Improvement Adjustment (CSIA).

  • Vectren South projected that the CSIA would raise an average residential customer’s monthly bill by $1.34 in the first year. Annual rate impacts on a percentage basis are as follows:

Year

Federally mandated costs

Annual rate increases
by percentage (%)

TDSIC costs

Annual rate increases
by percentage (%)

Total Revenue

Residential Customers

Total Revenue

Residential Customers

2015

2.37

2.58

0.23

0.25

2016

3.63

3.94

0.58

0.63

2017

2.54

2.74

0.57

0.62

2018

2.43

2.60

0.56

0.60

2019

2.61

2.79

0.67

0.72

2020

2.04

2.16

0.90

0.97

2021

1.76

1.85

0.56

0.60

Source: Petitioner’s Exhibit No. SEA-3, IURC Cause No. 44429

Additional information

All filings in this case are available by visiting the IURC's Electronic Document System and entering docket number 44429.

Electric rates and charges were not at issue in this case.

10-16-14