RATE CASE Q & A’s
Crawfordsville Electric Light and Power (CEL&P), the hometown power supplier to the City of Crawfordsville for 130 years, seeks to provide the community with a stable, reliable, and low-cost power supply. Our customers – our friends, neighbors, and employees – deserve reliable electricity that is there when they need it, all at a price that is fair and reasonable. CEL&P works hard every day to maintain that stability, provide top-notch service, all while managing the costs of providing such a service.
At this time, CEL&P is seeking to adjust electric rates for the future for all customer classes to ensure we can continue providing the same level of reliability and service you have depended on for the last 130 years.
What is a rate case?
As a municipally-owned utility, Crawfordsville Electric Light and Power is owned and governed by the City of Crawfordsville. Decisions regarding the operations of the utility are decided upon by a governing board of Crawfordsville residents – the Utility Service Board and the City Council. CEL&P is also under the jurisdiction of the Indiana Utility Regulatory Commission (the IURC or the Commission), which is an Indiana agency that regulates the rates and operations of utilities throughout the state.
CEL&P must file a rate case with the Commission in order to modify its rates for the future. A rate case is a formal process, conducted by the IURC, to determine if a utility’s proposed rates are just and reasonable. The petition for the rate case will include the total costs of CEL&P’s service to customers and justification as to why the utility’s current rates are not sufficient to provide quality service to the Crawfordsville community.
What is the process for a rate case?
CEL&P must have any changes to its rates and rate structure examined and approved by the local governing bodies (the CEL&P Utility Service Board and the Crawfordsville City Council) as well as the IURC. Earlier this year, CEL&P performed a rate study to determine the proper rates and rate structure for the future. CEL&P presented the rate study to the Utility Board and the City Council. If the Crawfordsville City Council approves the rate study, it will be filed in a petition to the IURC and become a rate case before the Commission.
Once a rate case is filed, the case is assigned to a regulatory judge who presides over the case and issues a ruling based upon the information and facts that are gathered. The ultimate goal of a rate case is to establish rates that are fair for customers and CEL&P.
Rate cases filed before the IURC can take anywhere from 10 to 12 months from the initial filing until the final decision.
What costs does my utility bill pay for?
Your monthly electric bill essentially covers two different types of costs – charges for the amount of electricity you use, and fixed costs. The first portion of your bill varies based upon how much electricity you use each month. Fixed costs, on the other hand, are expenses incurred by CEL&P in the operation and delivery of energy to all homes and businesses in the community. These costs include maintaining distribution poles and lines, meters, other electric infrastructure, employee salaries, materials and supplies, and cash on hand for emergency situations. The rate study takes all of these costs into account to devise the most fair and reasonable rates for consideration by the Utility Service Board, the City Council, and the IURC.
What is cash on hand?
“Cash on hand” is essentially a savings account that is available to help support CEL&P in emergency situations. As we have seen in today’s COVID-19 environment, an emergency situation can happen at any time. Any such emergency affecting CEL&P or our community could impact that cash on hand the utility has, requiring the utility to use those funds to continue providing power. It is recommended that electric utilities have 90 days cash on hand available at any time should an emergency occur. Under CEL&P’s current rate structure, the utility only has about 30 days cash on hand at any given moment.
Why is CEL&P modifying its rates?
CEL&P needs to adjust its rates for three primary reasons:
- To correct an under-collection of costs resulting from a mathematical error in a previous rate case 5 years ago
- To pursue capital improvement projects that will enhance the stability and reliability of our distribution system
- To increase our cash on hand to a 90 day supply to ensure we are able to continue operations in emergency situations.
Why has CEL&P been undercollecting?
CEL&P last modified its rates in 2015. At that time, the consultant we worked with to develop our rate structure had a mathematical error in their calculations. The error was not caught by the consultant, CEL&P, or anyone at the IURC, which must approve CEL&P’s rates. Due to the miscalculation, CEL&P has not been collecting 3% of the revenue that it should have been collecting for the past 5 years. Because of this, the utility has not been able to build up the reserves necessary to sufficiently maintain our distribution infrastructure, prepare for future capital improvement projects, and maintain the solvency of the utility.
What impact will this have on my bill?
If approved, CEL&P will implement the rate change over the course of 2020-2022. By the time the new rates are fully enacted, the average residential customer will pay approximately $13 more per month for electricity.
