The Michigan Public Service Commission (MPSC) issued an order on Oct. 14 approving a rate settlement agreement between Indiana Michigan Power (I&M), a subsidiary of American Electric Power (NYSE: AEP), and parties represented in the company’s general rate case that was filed on January 27, 2010.
With this settlement, I&M residential customers continue to pay the lowest rates in the state, according to the most recent rate comparison among regulated utilities published by the MPSC. The settlement establishes a base rate for residential customers of 8.5 cents per kilowatt-hour. The typical residential consumer, using an average of 1,000 kilowatt-hours per month, will see an increase between $11.75 and $13.41 when compared to average bills prior to January, but $3.20 - $5.25 lower than current average bills which reflect interim rates that went into effect on July 26. Rates based on the settlement will become effective with the December billing cycle.
The order authorizes an overall increase of 17 percent or $35.7 million annually. The final settlement will result in rates that are lower than the interim rates which were approved in July and lower than the company’s original proposal requesting an overall revenue increase of $62.5 million.
Because the final order authorized rates that are lower than current rates, I&M customers in Michigan will receive a refund. The timing and amount of the refund will be determined in a separate filing with the MPSC.
"We are mindful of the effect that current economic conditions have had on our customers and will continue to manage costs and provide the best value for the dollars spent for electric service," said Paul Chodak III, Indiana Michigan Power’s president and chief operating officer. "The January filing was the first rate case for I&M in Michigan in almost 20 years and we appreciate that all parties involved in this rate case understood that costs associated with providing electric service have risen significantly over the past two decades."
In its original filing requesting an increase of $62.5 million, I&M proposed funding to improve the reliability of its distribution system, offer smart grid technology to Michigan customers and modernize power plants. Funding for the improvements was not included in the final settlement, so the company will need to file future applications with the MPSC to seek recovery for such large capital investments.
"We had hoped to receive funding to upgrade an aging distribution system and to better manage vegetation growth near power lines," noted Ed Ehler, vice president of Distribution Operations. "In order to deliver the reliability our customers expect, we will need to make another request for those funds."
The agreement also allows I&M to unify its two rate jurisdictions in the state, which existed since the former Michigan Power Company merged with I&M in 1992. "Our Michigan customers will benefit from the cost savings associated with a simpler, more efficient regulatory process," noted Chodak.
Indiana Michigan Power, the MPSC staff, the Attorney General, the Association of Businesses Advocating Tariff Equity (ABATE), Metal Technologies, Inc. participated in the settlement.

David Mayne
Indiana Michigan Power Communications
(260) 425-2109

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