The following is an excerpt from Ice Miller's Pathways to Success for Utilities Guide which provides insights on a variety of topics potentially impacting utility service providers.
The second part of Senate Enrolled Act 560 (read about the first part here) added a new subsection (Indiana Code § 8-1-2-42.7(e)) authorizing a utility to place into effect on an interim, temporary basis, 50% of a proposed rate increase, but not until 300 days after the utility has filed its case-in-chief supporting its request for a rate increase. This 300-day trigger mechanism can be extended by the Indiana Utility Regulatory Commission (IURC) for up to an additional 60 days for good cause (Indiana Code § 8-1-2-42.7(h)). In addition, the IURC may extend the 300-day deadline commensurate with any extension to the rate-case procedural schedule granted to the utility (Indiana Code § 8-1-2-42.7(g)).
Before being implemented and charged to customers, these interim rates must be reviewed and approved by the IURC to determine whether they comply with the statute. Further, if these interim rates end up being different than the rates ultimately approved by the IURC, the difference is to be credited to or collected from customers over a six-month period, with interest paid on any refunds to customers. Notably, this interim rate relief provision does not apply to rate cases where a utility seeks approval of a new alternative regulatory plan under Indiana Code Ch. 8-1-2.5.
Like the use of forecasted or “future” test periods, allowing utilities to implement rates on an interim basis, subject to refund, after a rate case has been pending for 10 months or longer, is a reasonable means of mitigating regulatory lag and will allow utilities a better opportunity to recover their current costs of providing service.