It’s Going to Cost You More to Keep Your Lights On — I&M Rate Hike OK’d

You better hope that Daylight Saving Time pays off, because any way you look at it you'll be paying more to keep the lights on...and the TV going...and the dishwasher running...and everything else electrical in your home and office.

The Michigan Public Service Commission Thursday approved an electric rate increase for Indiana Michigan Power Co. of just over $49 million effective April 26. It’s the utility’s first electrical rate increase in more than six years.

Even though the rate hike has been approved, the total is actually about 20-percent less than the $61.4 million increase in requested revenue requirement the Fort Wayne, Ind.-based company sought on May 15, 2017. This week’s approval means the average residential customer who uses 500 kilowatt hours (kWh) of electricity a month will see an $11.77 increase in their monthly bills, or 17.9-percent.

Sally Talberg is Chair of the Michigan Public Service Commission. She says, “A safe, reliable electric grid is important to serving customers in Michigan, so the Commission today is not only approving short-term upgrades, but also ordering I&M to file a long-term distribution plan that will help it and the MPSC to develop a rigorous plan to address aging infrastructure.”

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The Commission said replacing infrastructure and adopting advanced technology will ensure the utility’s distribution system is resilient. I&M is required to file its five-year distribution plan highlighting needed work to maintain its electrical system.

I&M says infrastructure improvement programs – replacing components, and work on overhead wires, poles, and underground residential cable -- will reduce equipment-related power outages. The utility also proposed implementing technology to help restore customers in a power outage.

The Commission approved funding for cybersecurity but urged the company to prove to the Commission that projects are completed on time. I&M also noted that federal rules require it to make sure digital systems at the Cook Nuclear Plant in Bridgman are safe from cyberattacks.

I&M last was allowed to raise rates in February 2012 by $14.6 million. Thursday’s $49,118,000 rate approval is 17.05-percent higher than rates set in the 2012 case.

The Commission decided to study the impact of the federal tax law changes in a separate proceeding. I&M must file a Credit A application within 30 days of yesterday's order.

I&M serves approximately 128,000 customers in Berrien, Cass, St. Joseph, Van Buren, Kalamazoo, and Allegan counties in southwest Michigan.

For an Issue Brief on utility rate proceedings, click the link below:

https://www.michigan.gov/documents/mpsc/Rate_Case_Issue_Brief_3-29-18_618861_7.pdf

Indiana Michigan Power Co. Case No. U-18370 Fact Sheet:

  • Revenue increase granted: $49,118,000
  • Return on common equity (ROE): 9.9-percent
  • Capital mix: 52.56-percent debt to 47.44-percent equity
  • Overall rate of return: 5.76-percent
  • Rate base: $984,631,000

In future rate cases, Indiana Michigan Power Company shall provide a detailed analysis of the projected and actual incurred costs for cyber security projects.

The residential customer charge will not change from its current level of $7.25 per month. I&M had sought to raise the charge to $18 a month.

I&M proposed a return on equity of between 10.2-percent and 10.60, and an overall rate of return on total rate base of 6.02-percent.

The cost to build a combustion turbine was adopted as the methodology to calculate a rate for capacity and the Commission set the rate at $288.95 per megawatt-day or $105,467 per megawatt year.

The company forecasted an increase of $944,000 to deploy supervisory control and data acquisition (SCADA) and distribution outage sensors to improve identification of reliability issues.

The record consists of 1,285 pages of transcript and 217 exhibits received into evidence.

The Commission approved $19,624,205 for 2018 for I&M to continue its trim cycle and to improve customer reliability.

For more information about the MPSC, you can visit www.michigan.gov/mpsc or sign up for one of its listservs to keep up to date on MPSC matters.