I&M seeks increase to cover growing operation costs

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News release from Indiana Michigan Power:

I&M seeks increase to cover growing operation costs

(September 23, 2011) – Indiana Michigan Power (I&M), a subsidiary of American Electric Power (NYSE:AEP) today filed a base rate proposal with the Indiana Utility Regulatory Commission (IURC) substantiating the need for an increase in annual revenue of $148.7 million, an overall increase of 14 percent. Rates proposed in the filing are based on a comprehensive review of the company’s financial records from March 2010 through March 2011 with adjustments for fixed expenses through March 2012.

“Despite ongoing efforts to control and reduce costs, I&M’s existing rates are below the level required for the company to maintain adequate financial strength to comply with environmental mandates and to continue to maintain safe and reliable service to our customers,” said Paul Chodak III, president and chief operating officer of Indiana Michigan Power.

I&M’s current rates are among the lowest in the nation and in Indiana. Under current rates, a typical I&M residential customer using 1,000 kilowatt-hours of electricity every month pays about $86 – well below the state average of $100 per month. Upon approval, a typical residential customer will see an increase in their electric bills of about $20 per month, an increase of 22.7 percent. The increase for commercial and industrial customers will be about 9.5 percent.

Rates will not be put into effect until a final order on the rate case is issued by the IURC, a process that can take up to a year or more from the date of the filing.

Reflected in the filing are higher costs associated with the day-to-day costs of running the electric utility, funding for mandated emissions control equipment at fossil fuel power plants, adjustments for the depreciation of power plant equipment and the early retirement of three units at the Tanners Creek plant in Lawrenceburg, Ind.

The company is requesting an authorized return on equity of 11.15 percent. Earning a fair return on equity is critical to I&M’s ability to provide service to customers and directly impacts the cost to finance projects to comply with environmental regulations and make long-term investments to provide reliable electric service. Although not a part of this rate case, within the next five years environmental compliance alone will require I&M to invest an amount equal to the current book value of the company.

“In these difficult economic times our customers understand what it means to do more with less,” said Chodak. “In terms of operational efficiency, customer satisfaction and minimizing our impact on the environment, I&M has done more with less while providing exceptional value for our customers. We’ve tightened our belts over the years, but now we are out of notches.”

Since 2009, the company has drastically reduced its operating budget including an employee severance program in April 2010. AEP currently employs approximately 2,500 people in Indiana and Michigan and paid over $78 million in state and local taxes in 2010.

Customers can take action to offset the rising cost of energy by managing their energy use. I&M offers energy-saving tips and programs to reduce overall energy use, as well as a free online energy calculator that can help customers understand what steps they can take to use electricity wisely. I&M also offers alternative payment plans such as its Average Monthly Payment Plan and Equal Payment Plan which can help eligible customers level out monthly payments and make monthly electricity costs more predictable.

Information about energy efficiency and payment options is available at indianamichiganpower.com.


About Indiana Michigan Power
Indiana Michigan Power (I&M) is headquartered in Fort Wayne, and its 2,500 employees serve more than 582,000 customers. It operates 3,595 MW of coal-fired generation in Indiana, 2,110 MW of nuclear generation in Michigan and 22 MW of hydro generation in both states. The company also provides its customers 150 MW of purchased wind generation.

I&M is a unit of American Electric Power (NYSE: AEP), which is one of the largest electric utilities in the United States, delivering electricity to more than 5 million customers in 11 states. AEP ranks among the nation’s largest generators of electricity, owning more than 38,000 megawatts of generating capacity in the U.S. AEP also owns the nation’s largest electricity transmission system, a nearly 39,000-mile network that includes more 765 kilovolt extra-high voltage transmission lines than all other U.S. transmission systems combined. AEP’s transmission system directly or indirectly serves about 10 percent of the electricity demand in the Eastern Interconnection, the interconnected transmission system that covers 38 eastern and central U.S. states and eastern Canada, and approximately 11 percent of the electricity demand in ERCOT, the transmission system that covers much of Texas. AEP’s utility units operate as AEP Ohio, AEP Texas, Appalachian Power (in Virginia and West Virginia), AEP Appalachian Power (in Tennessee), Indiana Michigan Power, Kentucky Power, Public Service Company of Oklahoma, and Southwestern Electric Power Company (in Arkansas, Louisiana and east Texas). AEP’s headquarters are in Columbus, Ohio.


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