Indiana Michigan Power (I&M), a unit of American Electric Power (NYSE:AEP), has been authorized by the Indiana Utility Regulatory Commission to increase its electric rates by $85 million annually.
I&M filed for an increase in rates in September 2011 to recover its costs of serving customers. The costs used to determine the rate increase predominantly reflect a historic cost of service using costs largely incurred over two years ago that are lower than current costs.
The amount granted represents an overall increase of 6.4 percent percent over the rates set in I&M’s last rate case, filed in 2007. Rates for residential customers will increase more than the average to reduce the subsidy those customers currently receive from commercial and industrial customers and to better match the rates paid to the costs incurred. An average residential customer will likely experience an increase of about 13 percent.
A bill for a residential customer using an average of 1,000 kilowatt-hours per month will increase by about $12 a month over rates that were set in 2009. The rate increase is expected to take effect in March.
The increase authorized by the IURC is less than the $174.3 million originally requested by I&M to recover the costs associated with the day-to-day costs of running the electric utility and over $3 billion of investments made at I&M’s power plants and energy delivery systems. Part of the increase is needed because federal environmental regulations are contributing to the early retirement of three generating units at I&M’s Tanners Creek Plant in Lawrenceburg, Indiana.
Indiana Michigan Power (I&M) is headquartered in Fort Wayne, and its 2,500 employees serve more than 582,000 customers. It operates 3,595 MW of coal-fired generation in Indiana, 2,110 MW of nuclear generation in Michigan and 22 MW of hydro generation in both states. The company also provides its customers 150 MW of purchased wind generation.
I&M is a unit of AEP, which delivers electricity to more than 5 million customers in 11 states. AEP owns more than 38,000 MW of generating capacity in the U.S. AEP also owns a nearly 39,000-mile network.
AEP’s transmission system directly or indirectly serves about 10 percent of the electricity demand in the Eastern Interconnection, the interconnected transmission system that covers 38 eastern and central U.S. states and eastern Canada, and about 11 percent of the electricity demand in ERCOT, the transmission system that covers much of Texas. AEP’s utility units operate as AEP Ohio, AEP Texas, Appalachian Power (in Virginia and West Virginia), AEP Appalachian Power (in Tennessee), Indiana Michigan Power, Kentucky Power, Public Service Company of Oklahoma, and Southwestern Electric Power Company (in Arkansas, Louisiana and east Texas). AEP’s headquarters are in Columbus, Ohio.