Utilities face major pushback over pandemic-relief request

The reaction was swift and furious.

Within days of a group of Indiana utilities asking regulators for permission last month to charge ratepayers for revenue they stood to lose because of the COVID-19 pandemic, thousands of people from all corners of Indiana sent a flurry of complaints to the Statehouse.

“This is greed and robbery at its finest,” wrote Donald Dicus of Terre Haute.

“This is WRONG,” wrote Robert Hagle of South Bend. “It’s not our fault the country was shut down.”

“Please reject this act of greed,” wrote Carolyn Herz of Indianapolis.

“Indiana’s monopoly utilities want to opportunistically profit off of customers like me by charging us for the energy that they did not sell because of the COVID-19 pandemic,” wrote Kathryn Sturm of Merrillville. “Hoosiers are suffering enough right now.”

In all, more than 2,300 people sent emails to the Indiana Utility Consumer Counselor, which is on track to become the largest number of complaints for any single case in at least a decade. The office said the vast majority of emails expressed “strong opposition” to the utilities’ request.

The outpouring of reaction seems to show that Indiana utility customers are in no mood for another rate increase, especially as an untold number of businesses are reeling from revenue they lost after Gov. Eric Holcomb ordered non-essential businesses to close their doors for months and people to stay at home.

It’s a key moment for Indiana utilities, which are fighting hard for the right to recover tens of millions of dollars in lost revenue at the same time they are facing higher expenses and escalating consumer debt as a result of a state moratorium of disconnecting utilities during the pandemic.

A group of 10 utilities that filed the petition—including Indianapolis Power & Light Co. and Duke Energy Indiana—say they are dealing with a challenge tougher than any storms.

The utilities are asking the IURC for permission to implement something called “deferred recovery” of lost load and revenue reductions associated with the pandemic. In particular, they want assurances they can return to the commission in the future and recover the revenue through higher rates.

“COVID-19 is an unexpected occurrence, totally outside of the control of utilities,” they said in a June 10 joint filing with the IURC, which will hear their case. “In fact, it is more unexpected and unprecedented than other extreme costs which are typically afforded deferred accounting treatment, such as restoration costs after a hurricane or a severe ice storm, or cost associated with a major project, like generating plants.”

Lower revenue, higher costs

The utilities say the pandemic is causing distress not only because of reduced demand and sales but also because of higher costs for cleaning supplies, health care, testing and temperature checks, personal protection equipment, and equipment and supplies to enable employees to work from home. Other costs include uncollectible or bad-debt expense associated with some customers’ inability to pay bills.

The petition does not say how much the utilities are losing financially, or how much consumer bills might increase in the future. The petition is only one step in a process to raise rates. If state regulators approve the petition, utilities would have to go back to regulators one at a time with new rate cases.

Despite the outpouring of opposition, the utilities say they have no plans to drop the matter.

“The regulatory process allows for the exchange of information and the solicitation of public comment,” said Danielle McGrath, president of the Indiana Energy Association, a trade group that represents investor-owned utilities. “This is an integral part of the process, which the companies value.”

The IEA has pointed out that at least 29 states have seen similar regulatory filings. Utility commissions in 10 states have opened dockets of a similar nature at the request of energy companies.

Yet the Indiana utilities are facing criticism for seeking permission to raise rates without any advance public notice. The group filed the petition on a Friday afternoon in early May without issuing a press release, as the state was consumed with a surge of cases and hospitalizations from the pandemic. The matter was brought to the public’s attention the following Monday through a press release issued by Citizens Action Coalition of Indiana, which has long fought utilities on rate and environmental issues.

“Consumer advocates call on Gov. Holcomb to reject unprecedented utility greed,” said the headline on CAC’s press release. Holcomb has declined to state an opinion on the matter.

The group of utilities includes the biggest electricity providers in the state. In addition to IPL and Duke Energy, petitioners include Indiana Michigan Power Co. and Northern Indiana Public Service Co.

They were joined by smaller gas companies: Indiana Gas Co., Indiana Natural Gas Corp., Midwest Natural Gas Corp., Ohio Valley Gas, Southern Indiana Gas & Electric Co., and Sycamore Gas Co. Two of them—Indiana Gas and Southern Indiana Gas & Electric—do business as Vectren Energy Delivery Indiana.

Political pushback

Hoosiers who might feel they have no power against billion-dollar utilities have found growing support from elected political officials of both parties.

State Rep. Carey Hamilton, D-Indianapolis, said utilities should not get special treatment while so many other businesses and workers are suffering.

“Hoosier families, small businesses and other utility customers across Indiana are facing disruptions and looming uncertainties, and these privately held utilities should be no exception to this,” she wrote to the IURC on June 16. “The idea that ratepayers will have to pay for energy they have never used to ensure healthy profits for utility investors is unacceptable.”

State Sen. John Ruckelshaus, R-Indianapolis, urged the IURC last month to not even give the petition a hearing, because it would have “devastating effects on consumers.”

State Rep. Cherrish Pryor, D-Indianapolis, asked the IURC for a financial breakdown of the pandemic’s effects on utilities, and what might happen when the state gradually reopens. “Will they expect to see a surge in revenue as we reopen?” she asked in a May 14 letter. “If so, would that mitigate the need to increase rates?”

Fishers Republican Mayor Scott Fadness, in a public statement earlier this month, called the utilities’ request “poor public policy at best and greedy at worst.” He said the utilities should make financial and business adjustments just like nearly everybody else during the pandemic.

“Over the last nine weeks, I have witnessed countless businesses, both small and large, make unbelievably difficult decisions as they face the realities of decrease in demand due to COVID-19,” wrote Fadness, who is also chairman of the Central Indiana Council of Elected Officials and chairman of Advancing Indiana Municipalities Legislative Committee.

“They have let go of long-term employees. They have burned through their life savings to maintain payroll. They have had to sell their assets. They have been forced to reinvent themselves.”

Customers balk

The state’s largest users of electricity have strongly come out against the utilities.

The Indiana Industrial Group, which represents more than 27 large industrial customers, including drugmaker Eli Lilly and Co. and manufacturer Allison Transmission, called the utilities’ request “overreaching” and “unprecedented.”

“[It is] remarkably self-indulgent in the face of the widespread adversity and economic hardship that is impacting individuals and businesses throughout Indiana,” the group said in a filing to the IURC on June 10.

It added that the utilities’ request for deferred accounting to recover lost revenue from reduced sales was “contrary to law, unreasonable and bad policy.”

Environmental and consumer action groups have joined the fight. The Citizens Action Coalition pointed out that unemployment in Indiana hit a record-high 16.9% in April, making Indiana one of the hardest-hit states, and in no condition to pay higher utility bills. The number of Hoosiers served by the Midwest Food Bank doubled in April, and the number of Hoosiers seeking housing assistance and services in April climbed 22%, to 22,000 people.

“A financial cliff has arrived, with rent, utility and other bills coming due, compounded with record-high job furloughs, permanent job losses and COVID-19 health crises,” the organization wrote in a June 10 filing to the IURC.

The Indiana Chamber, one of the state’s largest lobbying groups, said it is not taking a position on the issue, due in part to a wide spectrum of views from its huge membership base, which includes energy suppliers and customers alike.

“It’s hard to take a position on this,” said Greg Ellis, the chamber’s vice president for energy and environmental policy. “To be honest, we have members all over the place on this issue.”

Two-phase probe

The utilities’ request is only part of the issue the IURC will decide. At nearly the same time the utilities filed their petition, the Indiana Office of Utility Consumer Counselor asked state regulators to open an investigation into how utilities will deal with the impact of COVID-19 on utility rates and services, and on how they will deal with overdue utility accounts.

The OUCC asked the state to extend the suspension of utility disconnections “for an appropriate timeframe,” which is now set to expire on June 30. It also asked the state to order a waiver of all deposits, late fees, convenience fees and reconnection fees.

On May 27, the IURC said it would roll the petitions from the utilities and the OUCC into one investigation, which would be conducted in two phases.

In the first, regulators are requesting information from all parties regarding disconnections, utility fees and customer payment arrangements. The IURC said it will issue an order before the June 30 disconnection moratorium expires.

The second phase will consider the utilities’ request to recover lost revenue from consumers in the form of higher monthly bills. The IURC hinted the matter is complex and could require a lengthy investigation.

“The commission anticipates that impacts due to the COVID-19 pandemic may not be fully understood for months, if not years, as the effect is ongoing,” the order said.

In response, the utilities proposed to extend all utility disconnections for nonpayment for residential customers for one month, until July 31. During that time, it would also waive late fees, credit and debit card fees, and reconnection fees for residential customers. It also offered to set up payment plans that would allow overdue accounts to be paid off over six months, through Dec. 31.

“A longer moratorium [than July 31] is not in the best interest of customers, and in particular lower income customers, because during such an extended period, customer account balances will potentially become so large that they will struggle to successfully pay these more substantial balances along with current bills, and thereby may ultimately face disconnection,” the utilities said in their filing.

It remains unclear how much money utilities might be losing as a result of businesses closing their doors, factories cutting hours, and customers not paying bills. The utilities did not provide particulars on revenue declines or customer debt increases, a point raised by many opponents in their filings.

The U.S. Energy Information Administration said last month that business shutdowns and changes in consumer behavior caused electricity demand in the central United States to decrease 9% to 13% in March and April, compared with expected demand.

Yet demand seems to now be on the upswing. The Midcontinent Independent System Operator, better known as MISO, a Carmel-based not-for-profit that manages the electric grid across 15 states and part of Canada, said loads and revenue are recovering although still not back up to full swing.

“June, so far, measures about 5% down from normal, compared to [a decrease of] 10.6% in May,” the organization said in a June 15 report.

For Indiana, however, the picture is less clear. Doug Gotham, director of State Utility Forecasting Group at Purdue University, said his group doesn’t provide short-term forecasts to account for such things as storms or disease outbreaks. Instead, it focuses on long-term trends, in an effort to give industry and government officials a picture of the economy and electricity usage.

“We haven’t done a forecast since COVID came out,” he said. “I can see how there is certainly a lot of uncertainty right now.”•