Please take a minute to call your state legislator and thank them if they voted against this bill or if they voted for HB 1529 tell them you are disappointed and that they should not have supported this "backdoor deregulation" bill. Representative Craig Fry D-Mishawaka who voted against the bill said it best, "If this bill was any good at all for consumers, the utility industry would not be supporting it."

House Democrats 1-800-382-9842 or 1-317-232-9600
House Republicans 1-800-382-9841 or 1-317-232-9600

The bill will now move to the state Senate were Senator Greg Server R-Evansville, James Merritt R-Indianapolis, and Senator Tim Lanane D-Anderson are sponsoring the bill. Please call your State Senator and urge them to vote against House Bill 1529. Tell them to reject this anti-consumer legislation that would lead to a series of increases in electricity and natural gas rates for all of us. 

Senate Republicans and Democrats. 1-800-382-9467, or 1-317-232-9400

Excused from Voting: 2

Smith Young, D

ANALYSIS OF HB 1529

INTRODUCTION

The Citizens Action Coalition urges you to vote against House Bill 1529. HB 1529 represents a worst case scenario for Indiana ratepayers and the Indiana economy. If HB 1529 is passed, hundred of millions of dollars will be unjustifiably transferred from ratepayers to gas and electric utility coffers. Moving ahead at this stage with such radical and detrimental changes to utility law can only end in disaster. Alternative designs for rate making should be seriously discussed and carefully crafted to balance the interests of utility companies and ratepayers. In that light, CAC proposes that the Indiana Utility Regulatory Commission (IURC) and the Office of Utility Consumer Counselor (OUCC), in conjunction with members of the Regulatory Flexibility Committee first conduct an exhaustive study of the types and rate impacts of tracking mechanisms available to Indiana with the aim of establishing just and reasonable rates. CAC suggests this course of action because: 

1) gas and electric utilities under IC 8-1-2-42(a) already have the option to propose tracking mechanisms before the Commission; and, 

2) if trackers are to be considered as a means to set rates, other factors, such as depreciation, increases in efficiency, decreases in labor force and other factors which would tend to reduce utility expenses, have to be taken into account.

GENERAL OBSERVATIONS

HB 1529 allows gas and electric utilities to earn unlimited profits with virtually automatic rate increases. It also punishes customers if the Commission fails to act on rate cases filed by gas and electric utilities. 

It is one of the most offensive and one-sided pieces of utility legislation Indiana has seen in several decades. It is designed solely to accelerate the revenues and profits of gas and electric utilities beyond reason at the expense of all ratepayers while providing a thin veneer of political cover by allegedly granting the IURC merger and fining authority.

HB 1529 eliminates the fundamental mandate of regulation and policy makers to balance utility and customer interests. For more than a century, utilities have had a regulatory bargain or compact that, in exchange for having a monopoly franchise authorized by the state and with a guaranteed opportunity to earn a fair return, utility companies would be subject to public oversight and a requirement to provide quality service at a fair cost. HB 1529 shatters that bargain.

HB 1529 radically expands the so-called "Clean Coal Tracker" created by last year's SEA 29. Every energy utility – gas, electric, municipal or cooperative – can get automatic increases in their rates for virtually any increase in costs or expenses with virtually no review by the Indiana

Utility Regulatory Commission as to whether the costs are appropriate or whether the utility is over-earning. For energy utilities it is an outright cash bonanza and to for utility customers it is little more than theft by a thousand trackers.

SPECIFIC PROVISIONS

PAST CONSTRUCTION TRACKER

The first set of trackers allowed by HB 1529 would allow any energy utility to obtain automatic approval to include in its rate base the cost of any investment in pollution control or construction on its generation, distribution, or transmission system between 1985 and 2002. HB 1529 only requires that the utility be able to claim it acted in response to some government rule, statute or order, that it intended the property to be used, and that the cost of the property was reasonable. But, the utility does not have to prove that the property itself is necessary, was the least cost alternative, or that it is actually used and useful for providing service.

Unlike later in the pro- consumer provisions of the bill with respect to fining, the Commission does not have to make any findings of fact under this section. The increases are automatic. There would be no consideration of whether investments under this section are necessary to provide service and no consideration of whether they are the least cost alternative. Moreover, there would be no consideration of whether the investment would be used and useful.

SO-CALLED GOVERNMENT MANDATE TRACKER

This tracker is even more egregious than the first in that it allows the utility to recover an even a wider range of inappropriate costs. The second set of trackers authorized in HB 1529 would allow any energy utility to recover virtually any costs related to utility's action to allegedly comply with a federal, state or local rule, regulation, order or statute that has a "direct and material" effect on the utility's operating expenses or capital costs. The bill also expressly exempts any new revenues collected by the tracker from the earnings test in the utility's FAC (Fuel Adjustment Cost)/GCA (Gas Cost Adjustment) proceedings. Although the utility must show the amount spent was reasonable for action, it does not have to prove the action was necessary or even related to providing retail service.

FILE AND SUSPEND

HB 1529 also mandates that rates proposed by an energy company automatically go into effect nine months after it has filed its case in chief unless the IURC expressly rules the delay is the utility's fault. Even if the IURC subsequently rules rates should be lower than those proposed, the utility keeps the overcharges it collected while waiting for approval. This provision penalizes ratepayers and rewards utilities for delays in the regulatory process.

IURC MERGER AUTHORITY

HB 1529 pretends to protect consumers by giving the IURC approval authority over any merger, consolidation, or similar transaction that causes 50% or greater of the outstanding voting shares of a utility or its holding company to change hands. However, it does not protect telephone utility customers and it does not protect energy utility customers from utility holding companies buying smaller less solvent or riskier ventures and then using ratepayers to bail out their bad investments like NiSource has done.

IURC FINING AUTHORITY

HB 1529 pretends to protect ratepayers by authorizing the IURC to assess multi-million dollar utilities with fines of up to $5,000 for violating the statute or IURC order. If the violation or failure demonstrates a disregard by the public utility of its duty to remedy the violation or failure and it continues to violate the statute, the IURC can only assess another fine of up to $10,000. The threat of a meager $15,000 in possible penalties is highly unlikely to force a utility with revenues in the hundreds of millions of dollars to comply. In many cases, paying the penalty is likely to be cheaper than fixing the problem.

Furthermore, HB 1529 would have funds from the assessed penalties go to the general fund. The Attorney General is authorized to take action to enforce and/or collect the penalties assessed by the IURC upon a complaint by the IURC. Because a utility violation or failure affects the quality of service or a rate or service requirement, the penalties collected should be returned to the utility's ratepayers. In addition, unlike the automatic tracker approval provisions in the bill, HB 1529 requires the IURC to make specific findings of fact on factors specified in the statute. Moreover, any fine paid by a utility can be collected by the utility under the government mandate tracker.

VOLUNTARY COMPLIANCE PLAN APPROVAL

HB 1529 authorizes energy utilities to voluntarily submit plans for complying with any state or federal environmental law. This prior approval allows the utility to guarantee future recovery of the related costs and lays the ground work for recovering those costs through a tracker mechanism.

Issue Update as of 4/03/03.

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