Transmission, Distribution, and Storage Improvement Charge (TDSIC) Tracker
The TDSIC tracker was created for Indiana's monopoly electric and gas utilities by the Indiana General Assembly in 2013. It was ostensibly created to incentivize utilities (read: give them more profit) to keep up the maintentance of their system - an obligation they were already under and should not receive extra profit for performing.
Prior to the creation of the TDSIC tracker, the utilities had to invest their own money into their system improvements, and then recover those costs by filing a base rate case. The TDSIC tracker provided the utilities with less risk, more profit, and easier access to customer money to do so.
In 2019, the Indiana General Assembly made the TDSIC tracker even worse. Now, even if the utilities have little to no idea what they are going to spend customer money on, they can provide merely a rough estimate of costs and still collect that money from customers through the TDSIC tracker. This new language reduced the utilities' incentive to adequately plan for the future, and to properly manage their costs.
Through the TDSIC tracker, the Indiana General Assembly has effectively turned the IURC into a rubber stamp and given Indiana's monopoly electric utilities a blank check.
(You can find more background on trackers in general here: https://www.citact.org/trackers.)
SEA560-2013 allows the utilities to file at the Indiana Utility Regulatory Commission (IURC) for a 7-year TDSIC plan and, if approved by the IURC, collect 80% of the costs for the plan through the TDSIC tracker on customers’ monthly bills. The remaining 20% of the costs associated with the plan would be deferred for recovery in the utilities’ next base rate case. The law requires that the utility file a base rate case at the conclusion of the 7-year TDSIC plan.
Proponents of the TDSIC tracker described it as an incentive for projects that a public utility undertakes for purposes of safety, reliability, system modernization, or economic development, including the extension of gas service to rural areas. Notably, the utilities are already under this obligation - SEA560-2013 merely provided utilities with less risk and easier access to customer money to do so.
The TDSIC tracker as laid out in SEA560-2013 spent the better part of five years in the courts.
Large industrial customers across Indiana repeatedly challenged IURC approval of certain costs included in the TDSIC tracker, arguing that the utilities may only recover costs associated with specific projects designated in the TDSIC plan, and that the utilities should not be allowed to recover costs projects which were not specifically identified in the TDSIC plan. Their contention was that TDSIC is not a blank check for utilities to recover costs through a tracker, especially considering the fact that utilities can otherwise recover prudently incurred costs in base rate cases.
The NIPSCO Industrial Customer Group won their case at the Indiana Supreme Court in June 2018. The Indiana Supreme Court wrote:
"We conclude the TDSIC Statute permits periodic rate increases only for specific projects a utility designates, and the Commission approves, in the threshold proceeding and not for multiple-unit projects using ascertainable planning criteria. In other words, a utility must specifically identify the projects or improvements at the outset in its seven-year plan and not in later proceedings involving periodic updates. There is an appreciable difference between designating specific ‘projects’ and ‘improvements’ up front, which the Statute requires, and describing the criteria for selecting them later, which the Commission approved (emphasis added)."
NIPSCO and the other investor-owned utilities were very unhappy with the ruling, which led us to HEA1470 in 2019.
HEA1470-2019 made several significant changes to the original statute (SEA560-2013). Those changes are mostly in response to rulings made by the IURC and opinions written by the Indiana Courts.
SEA560 required the utilities to specifically identify the projects within their 7-year TDSIC plan and limited the costs which the utilities could recover through the TDSIC tracker. HEA1470 changed that by amending the definition of eligible transmission, distribution, and storage system improvements which could be included in the TDSIC tracker. With HEA1470-2019, the utilities no longer need to specifically identify the projects they intend to complete in order to receive the favorable TDSIC tracker, effectively overturning the Indiana Supreme Court opinion.
In other words, even if the utilities have little to no idea what they are going to spend customer money on, they can provide merely a rough estimate of costs and still collect that money from customers through the TDSIC tracker. This new language reduced the utilities' incentive to adequately plan for the future, and to properly manage their costs.
- HEA1470-2019 went a step further by adding smart meters to the list of eligible improvements that utilities can include in the TDSIC tracker. Prior to that, the IURC, and other state regulatory commissions, had denied trackers for smart meters and the related infrastructure, questioning the costs borne by customers when compared to the purported benefits received by customers. HEA1470-2019 now mandates that the IURC allow smart meters to be included in the TDSIC tracker, regardless of whether or not the benefits to customers outweigh the costs.
HEA1470-2019 further reduced the authority and discretion of the IURC by amending only a few words in the existing law. While the law under SEA560-2013 mandated that the IURC approve the TDSIC plan by stating the commission SHALL approve the plan, it still provided some discretion by allowing the IURC to designate which transmission, distribution, and storage improvements included in the plan were eligible for the TDSIC tracker.
HEA1470-2019 removed that discretion by striking the language allowing the IURC to designate the eligible projects and replacing that language with "the commission shall approve the plan AND AUTHORIZE TDSIC TREATMENT for the eligible transmission, distribution, and storage improvements included in the plan."
The TDSIC tracker as it now stands has effectively turned the IURC into a rubber stamp.
By requiring approval of a TDSIC tracker, even if the utility has little to no idea what their plan is and how they will spend customer money, the State of Indiana has given the utilities a blank check and has rendered the IURC, our state agency with the expert and technical knowledge to fully understand the impact of these plans, virtually powerless to do anything about it.
The Indiana Supreme Court opinion says it all:
"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." (emphasis added)
There are billions of dollars at stake here for Hoosier consumers.
Encouraging and incentivizing the status quo will only lead to excessive utility profits and significant increases in the cost of energy. That may be in the best interest of the monopoly utilities, but it’s certainly not in the best interest of the public or the State of Indiana.