Return on equity: 9.86%
Overall rate of return: 6.08%
Revenue requirement increase: $36.4 million
Requested return on equity: 10.5%
Requested overall rate of return: 6.34%
Requested revenue requirement: $58.5 million
Here are a few things we think are important for you to know about this case if you are an Indiana Michigan Power (I&M) customer:
In January 2020, I&M reached a settlement with parties involved in the case that allows the rate increase to go forward, but at a level significantly reduced from what I&M initially requested.
The revenue I&M is authorized to raise through rate increases is $36.4 million, down from $58.5 million originally proposed by I&M, as a result of the settlement.
A residential customer using 500 kWh of electricity a month is expected to pay about 15.03% more as a result of this rate increase, according to the MPSC.
The monthly service charge for residential customers, a fixed fee, stays at $7.25, instead of increasing to $10.
Here are the major elements of the rate increase as originally proposed by IMP (but not approved):
- IMP requested to increase rates on residential customers by 24.48%, commercial customers by 14.91%, large commercial customers by 14.25% and industrial customers by 9.73%. In its previous rate case from 2017, the requested residential rate increase was 19.36%, and in the rate case before that, it was 12.14%.
- In addition to the above increases in the per kWh volumetric rate, IMP also proposed to increase the monthly service charge, a fixed fee, from $7.25 to $10.
- The biggest driver of the higher revenue requirement (and thus, the higher rates) identified by IMP is $19 million for new depreciation expense. In turn, much of that new expense stems from the costs of a project to upgrade equipment at the Cook nuclear plant in order to extend the plant’s life. IMP also asked for more depreciation expense due to the costs of projects to install environmental controls at the Rockport coal-fired power plant. IMP intends to operate Rockport unit 1 through the end of its useful life in 2028, but Rockport unit 2’s lease expires at the end of 2022.
- In its last rate case, filed in May 2017, IMP requested $51.7 million and an ROE of 10.6%. The MPSC approved a revenue requirement of $49.895 million, which IMP challenged in court, but the MPSC decision was upheld by the Michigan Court of Appeals.
- IMP’s current return on equity is 9.9%. Of the $58.5 million revenue requirement, $4 million comes from increasing the return on equity to 10.5%.