In the United States, the electric utility industry is highly regulated due to the nature of the service and the need to ensure power to all Americans. In exchange for having a defined service territory, electric utilities agree to be overseen by utility regulators who review many aspects of the business –including the rates charged.
Rate reviews are necessary for power companies to fund needed projects to increase reliability, enhance the customer experience and proactively prevent outages. Regulated utility earnings may be capped, and rates can only be changed by the regulatory commission.
We’ve submitted the Powering Our Future plan to adjust rates for Indiana and Michigan customers to the Indiana Utility Regulatory Commission (IURC) and the Michigan Public Service Commission (MPSC) for review.
The role of the IURC and the MPSC is to serve the public by ensuring safe, reliable and accessible energy at reasonable rates. A vast I&M team along with intervenors put together written and oral testimony. Then the Commissions hear evidence and make decisions based on the presented evidence.
Why does I&M file a rate review?
I&M is dedicated to providing safe, reliable power to our customers. A major factor in filing a rate review is our need to recover capital costs to update or replace aging infrastructure, replacing poles and wires and adding smart technology that reduces the extent and length of power outages.
I&M consistently monitors its finances and considers future expenses to determine if the rates match the company’s needs to provide safe, reliable power. From 1992 to 2017, I&M filed for three base rate reviews. I&M needed fewer reviews largely because our customer base and electricity needs consistently increased over those years, covering increased costs with increased revenues. Since then, I&M filed Indiana base rate cases in 2017, 2019, 2021 and now 2023. In Michigan, I&M filed base rate cases in 2017, 2019 and now 2023.
In the 2021 rate filing, I&M was ultimately able to slightly reduce Indiana base residential rates.
What makes up a customer’s typical base rate?
A residential customer’s rate is made up of the cost of providing electricity to their home. It includes the cost of generation, poles, wires, personnel, IT costs, taxes and capital projects such as new equipment to ensure the reliable delivery of power. The overall cost is allocated to each type of customer class and then divided by total amount of energy used by that customer class to determine the rate per kilowatt-hour (kWh). The rate times the amount of energy a customer uses each month makes up the amount shown on a customer bill.
Though the base rate is a major portion of a customer bill, there are other charges on their bill. For example, the service charge is a flat monthly fee. Both the base rates and service charges are determined during the rate review.
The bill also includes trackers and riders – that usually track specific costs or credits. For example, the fuel adjustment clause pays for coal and nuclear reactors that fuel our generation. New trackers must be established during the rate review, but are subject to periodic review and are adjusted annually outside the base rate review.
What does the standard schedule for a rate review look like?
- I&M Files for Rate Review
Day 1 Week 1
- Pre-hearing Conference (lawyers establish the schedule)
Weeks 3-4
- Commission Staff and Stakeholders Respond to Filing
Weeks 5-18
- Public Hearing – Indiana Public hearings are scheduled for October 16 (Fort Wayne) and October 30 (South Bend)
- I&M Files Written Rebuttal Testimony
Weeks 19-22
- Commission Conducts Evidentiary Hearing
Weeks 23-24
- Various Legal Briefs and Proposed Decisions Filed
Weeks 25-41
- Commission Issues Ruling
Day 300, Week 42
How long does the regulatory process take?
The IURC has up to 300 days to issue a ruling and the MPSC has up to 10 months. However, in some cases, I&M reaches an agreement with intervenors on what the rates should be, and a commission could take less time.
Consumer organizations, customer groups and other stakeholders may seek “intervenor” status, allowing them to be a party in the case, ask discovery questions, submit testimony and participate in hearings.
Do customers get a chance to offer feedback?
Typically, Customers are offered the chance to attend field hearings held by the Commissions to speak in favor or against the pending rate review. Customers can also comment on pending rate reviews by submitting written comments. In Michigan, the public can speak at any of the regularly scheduled Commission meetings about the rate review or any concerns they have with a utility’s service or rates.
What happens if the Commission doesn’t approve the rate review?
The Commissions use an open and transparent process in reviewing a utility’s rates and service offerings. Various organizations representing Customers can provide their views on the requested rates and service. The Commission may approve certain rates, but may determine different rates or services should be offered. On some occasions, the stakeholder parties reach an agreement on the rates and seek Commission approval of a settlement agreement.
For more information on the Powering Our Future plan: