State regulators scold Citizens, approve smaller water rate hike

Citizens Energy Group has won approval to raise water rates for Indianapolis customers, but for less than it had requested due to concerns over executive compensation and other management issues.

Citizens' 300,000 water customers will see a 9-percent increase in rates after the Wednesday ruling by the Indiana Utility Regulatory Commission. The increase is lower than the 14.7-percent bump Citizens had sought, but well above the 2.6 percent the Indiana Office of Utility Consumer Counselor, a consumer watchdog group, argued was appropriate.

The commission has taken issue with how much Citizen’s upper brass earned since executives received pay boosts in 2012. CEO Carey Lykins took home $2.8 million that year, which was almost double what he earned in 2011 because of a bonus. The utility’s top officers earned less in fiscal 2013, including $1 million less for Lykins.

“The IURC found that Citizens Water’s level of executive compensation was not appropriate for a municipal utility,” the agency said in a prepared statement. “Consequently, the IURC significantly limited the amount of recovery in this area. In Citizens Water’s next rate case, the IURC expects the utility to realign compensation so that it is more compatible with actual municipal-based expenses.”

Meantime, the IURC said it opened a probe into complaints about Citizens’ call center and billing practices.

One out of five callers hangs up before receiving service because of long wait times, the state agency says. There have also been concerns over Citizens complying with regulations for billing and payment application.

A statement from Citizens on Wednesday afternoon said the firm was reviewing the IURC's order. It noted that Citizens' executive compensation program was undergoing a review by a consultant, the results of which would be available to the public by mid-year.

Citizens acknowledged that as it encorporated the city's water and wastewater services into its operations in 2011 and 2012, there were delays in responding to customers. "Since then call wait times at Citizens' call center have been significantly reduced," according to the statement.

Indiana Utility Consumer Counselor David Stippler said Wednesday afternoon that he was pleased that the IURC had taken action.

"Today’s rate order takes important steps in addressing the utility’s executive compensation, while reducing various line items regarding operating expenses," Stippler said.

“In the Commission’s newly opened investigation of Citizens’ billing and customer service practices, the OUCC’s legal and technical teams look forward to fully participating and engaging in a robust dialogue that leads to a meaningful outcome," he said.

IURC also dinged Citizens for failing to provide adequate evidence to support its claim that water consumption dropped by $1.6 million; and not properly calculating $1.2 million in charges it wanted to claim because it averaged the expense over a time the city owned the water utility. The regulatory body said Citizens can only use its rate increase to cover its current and 2015 infrastructure expenses, which should save customers $2 million.