The Rate Increase Process in Indiana

HOW WATER AND SEWER RATES ARE SET: AN INDUSTRIAL USERS GUIDEBOOK

I. The Rate Increase Process in Indiana

A. The Indiana Utility Regulatoiy Commission (HJRC)

i. Regulates Rates and Charges and Financing

ii. The Hearing Process

iii. The Role of the Commissioners and the Technical Staff

iv. The Consumer Complaint Division

B. The Office of the Utility Consumer Counselor

i. A Consumer Advocacy Group Representing the Rate Payer

ii. The OUCC and the Hearing Process

iii. The Role of the Consumer Counselor and its Technical Staff

C. Rate Increases Outside of IURC Jurisdiction

i. Rates Set at the Local Governmental Level

ii. Fair and Reasonable Standard

II. IURC Regulated Utilities Vs. Non IURC-Regulated Utilities

A. IURC Regulated Utilities

i. Investor Owned Utilities (Water and Sewer)

ii. Non-Opted Out Municipal and Not-For-Profit Utilities, (Water)

B. Non-IURC Regulated Utilities

i. Opted Out Municipal and Not-For-Profit Utilities (Water)

ii. Municipal Sewer Works

III. Determination of Revenue Requirements

A. Municipal Utilities

B. Not-For-Profit Utilities

C. Investor Owned Utilities

IV. Types of Rate Increases

A. Across-The-Board Rate Increases

i. Every Customer Class Receives the Same Percentage Increase

B. Non-Across-The-Board Rate Increases

i. Different Increases to Each Customer Class Based on Cost of Service Study

V. Cost of Service Studies

A. Basis For Rate Design

i. Cost (accounting or book cost)

ii. Value of Service

iii. Other

a. Single Tariff Pricing

b. Marginal Cost Pricing

c. Incentive Pricing

B. The Cost of Service Process

i. Functionalization of Costs

a. Source of Supply

b. Pumping

c. Treatment

d. Transmission and Distribution

e. General or Indirect

ii. Methodologies for Classification of Costs (per Classification Methodology)

a. Commodity Demand Method

b. Base Extra Capacity Method

c. Functional Cost Method

iii. Classification of Costs Into Cost Type

a. Commodity Related (or Base Related)

b. Demand Related (or Extra Capacity Related)

c. Customer Costs

d. Direct Fire Protection

iv. Allocation of Costs to Customer Classes

a. Cost Allocation Method

i. Customer Class Commodity Usage

ii. Customer Class Demand - Maximum Day Usage

iii. Customer Class Demand - Maximum Hour Usage

iv. Customer Class Equivalent Meter Calculation

b. Customer Classes

i. Residential

ii. Commercial

iii. Institutional

iv. Industrial

v. Wholesale

v. Comparison of Revenue Received by Customer Class to Costs Allocation (Calculation of Subsidies)

vi. Bill Tabulation

vii. Development of the Rate Structure

a. Declining Block Rate Structures

b. Increasing Block Rate Structures

c. Individual Rates for Each Customer Class

d. Metered Rates vs. Unmetered Rates

e. Minimums vs. Service Charges

C. The Theory of Gradualism and Subsidy Reduction

VI. When Cost of Service Studies are Used

A. Under IURC Regulation

i. At the Request of the Petitioner

a. When there has been a change in the customer class mix

b. Periodically

ii. At the Request of the IURC or the OUCC

iii. At the Request of the Intervenor

B. Outside of IURC Jurisdiction

i. Cost of Service Studies are Rarely Used

VII. Other Cost Assignment Techniques

i. Billing Multiplier

ii. Capacity Charge

iii. Hook On Fee

iv. Sur-Charges

VIII Reasons to be Involved in Water and Sewer Rate Actions

A. To Reduce the Cost of Water and Sewer Utility Service

B. To Educate Your Supplier on Your Interests and Concerns

C. As A Protection Against Future Unwanted Rate Action By Your Supplier

IX. Alternatives Methods to Reduce Rates Outside of the Rate Increase Process

A. Recycling Water

B. Drilling Wells for a Supplemental Source of Water

C. Pre-Treatment (Sewer)