Lebanon Utilities: Electric IURC Regulation

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Overview

Lebanon Utilities (LU) is a municipally-owned family of utilities providing electric, water, and sewer services to the City of Lebanon and the Town of Ulen. In addition, LU operates a Telecommunications Division that provides wireless internet and commercial fiber-optic services. The Lebanon Utilities Service Board (LUSB) oversees the LU operations with day-to-day operational responsibilities assigned to a general manager. The LUSB has three members appointed by the mayor and two members appointed by the city council.

LU water and sewer rates are adopted by the LUSB and must be approved via city ordinance by the city council and mayor.

The adopted and approved city ordinances that establish LU electric rates must undergo final approval by the Indiana Utility Regulatory Commission (IURC). LU rate cases are formal, legal proceedings where the IURC serves as the "judge and jury." LU presents rate requests through attorneys and expert witnesses. The Indiana Office of Utility Consumer Counselor (OUCC) - a state agency separate from the IURC - has attorneys and technical experts who participate in IURC cases on behalf of ratepayer interests.

This web page details the reasons why LU electric rates approval by the IURC with input from the OUCC is ratepayer friendly and should be maintained.

 

Indiana Utility Regulatory Commission: Operations Summary

The IURC is an administrative agency overseen by five commissioners appointed by the governor.that hears evidence in cases filed before it and makes decisions based on the evidence presented in those cases. An advocate of neither the public nor the utilities, the IURC is required by state statute to make decisions in the public interest to ensure the utilities provide safe and reliable service at just and reasonable rates.

The IURC regulates more than 600 electric, natural gas, steam, water, and wastewater utilities in Indiana. These utilities may be investor-owned, municipal, not-for-profit, or cooperative utilities, or they might operate as water conservancy districts.

The IURC has a total professional staff of about 75 people, the majority of which are attorneys, engineers, accountants, and economists who advise the IURC on pending cases and other issues. The IURC also has a Consumer Affairs Division that serves as a liaison between utility customers and the utilities.

 

Indiana Office of Utility Consumer Counselor: Operations Summary

The OUCC’s mission is to represent Indiana consumers to ensure quality, reliable utility services at the most reasonable prices possible through dedicated advocacy, consumer education, and creative problem solving.

The OUCC and IURC are separate state government agencies, with the IURC designated under Indiana law to make decisions in cases involving regulated public utilities and the OUCC serving as the consumers’ legal and technical representative in those cases. Simply put, the OUCC represents the public and the IURC serves as the impartial fact finder and decision maker in cases that come before it.

The Consumer Counselor is appointed by the governor to serve a four-year term, and oversees a dedicated staff of more than 50 professionals including attorneys, analysts, engineers, and additional technical experts who represent Indiana’s residential, commercial, and industrial ratepayer interests in utility regulatory proceedings. 

 

City Ordinance 2012-11 ADOPTING A NEW RATES SCHEDULE

The OUCC provides a voice for the interests of ratepayers when LU presents a case to the IURC for an electric rate increase. The OUCC and IURC have experienced experts (including accountants, economists, and engineers) that sometimes propose less expensive or better alternatives that result in lower rates or better service. The most recent LU electric rate increase from City Ordinance 2012-11 is a good example of how the IURC with input from the OUCC approved an electric rate increase that saved ratepayers a great deal of money from a lower than requested rate.

In 2012, the LUSB and city initially requested through IURC Cause No. 44142 that an electric rate increase be approved to increase the LU annual operating revenues by 17.3%. As part of the approval process, the IURC held a field public hearing on June 11, 2012, at the Lebanon Middle School.

An electric rate increase that increased LU annual operating revenues just 13.4% was approved by the IURC on September 12, 2012, after an updated Cost of Service Study was completed at the request of the OUCC.

As a result of concerns raised by the OUCC, ratepayer savings were identified in the areas listed next.

(1) $572,180 annual ratepayer savings when LU updated its calculation of pro forma purchased power to a more current time period to reflect the lower energy cost adjustments currently being charged by the Indiana Municipal Power Aassociation.

(2) $7,362 annual ratepayer savings from reductions in principal & interest payments and debt service reserve when the approved bond issue was reduced to $13 million from the initially requested $15 million (one bond issue reduction was $60,000 in the cost of furnishings for the new operations facility).

(3) $9,831 annual ratepayer savings from a lower utility receipts tax.

(4) $186,752 annual ratepayer savings from the elimination of (a) one 2012 bucket truck, (b) $75,000 for local DSM initiatives, and (c) funds available for improvements for future service territory changes in 2016.

(5) $472 annual ratepayer savings from lower Payments In Lieu Of Taxes.

After $74,395 in yearly adjustments, the annual ratepayer savings totaled $702,202 when the electric rate increase was reduced to 13.4% from the initially requested 17.3%.

This significantly reduced 13.4% electric rate increase approved by the IURC in 2012 has provided LU ample revenue for its electric utility the past eight years. In fact, cash flow projections reveal that another electric rate increase will be unnecessary for the next five years - and that a $4,194,990 cash balance is anticipated for the LU electric utility on December 31, 2025.

 

IURC & OUCC Ratepayer Benefits Summary

1. Reduced Utility Bills. At a savings rate of $702,202 per year, LU ratepayer electric bills from 2013 through 2025 will be more than $9 million less.because the IURC with input from the OUCC lowered the 2012 requested rate increase from 17.3% to 13.4%. The total extra one-time LU cost for this 2012 ratepayer friendly outcome from the IURC was only $42,069.54 as follows: (a) $9,569.54 in itemized charges paid to the IURC for Commission Charges, Legal Advertising Charges, and Utility Consumer Charges and (b) a $32,500 fee paid into the Indiana Treasury ($0.25 for every $100 of the $13 million bond issue).

2. Professional Expertise. The proper operation of an electric utility is complicated and requires particular expertise. Few, if any, city officials and LUSB members have the detailed knowledge needed to provide quality service, charge reasonable rates, and provide appropriate oversight of consultants. The attorneys, engineers, analysts, accountants, and economists on the IURC and OUCC staffs have the expert knowledge needed to best protect the interests of LU ratepayers. Most electric utility rate cases before the IURC are settled (not litigated), reflecting a mutual desire to negotiate a fair and equitable settlement in each case.

3. Tracking Factor Approval & Publication. LU electric rates are adjusted quarterly using tracking factor data from the Indiana Municipal Power Agency that show increases and decreases in the cost to provide power. LU ratepayers can be assured that a tracking factor rate adjustment is accurate because all tracking factor adjustments are submitted to the IURC for review and approval. The IURC requires that approved quarterly LU tracking factor rate adjustments be published in The Lebanon Reporter so that interested ratepayers can be informed when their electric rate changes. The only extra LU cost is $22.97 for a quarterly classified ad.

4. Bond Issue Approval. LU must get IURC approval prior to the acquisition or construction of any electric utility project financed by the issuance of bonds. LU ratepayers get the benefit of the IURC and OUCC professional expertise to make certain that bond issue projects are properly planned and cost effective.

5. Annual Reports. LU must submit a detailed annual report for the electric utility each year to the IURC. This report contains pertinent electric utility operational and financial data. LU ratepayers can expect that a review of the report by IURC professional experts will help to make certain that LU can continue to provide reliable electric service that is cost effective.

6. Pandemic Policies. The IURC, with input from the OUCC, adopted COVID-19 disconnect and late fee policies that balanced the financial needs of utilities with the emergency needs of ratepayers economically impacted by the 2020 pandemic. LU used these required IURC policies as a framework  to develop local policies that maximized ratepayer friendliness.

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This page was last updated on 09/13/20 .