IURC Rejects Duke Energy Smart Grid Proposal

Duke Energy Indiana requested approval of a proposed alternative regulatory plan, including the following: (1) implementation of a proposed distribution system "smart grid" program, consisting of Company-wide deployment of advanced metering infrastructure, automated distribution investments, and a distributed renewable generation demonstration program (the "SmartGrid Initiative"); (2) timely recovery of its SmartGrid Initiative costs, and its distributed renewable generation demonstration project costs, via either a distribution formula rate mechanism or a SmartGrid tracking mechanism; (3) recovery of "lost revenues," as a part of the alternative proposed SmartGrid tracking mechanism; and (4) creation of a regulatory asset for the subsequent recovery of existing undepreciated meter costs.

The Order states:

C. Framework for Commission Review. Under the terms of the Alternative Utility Regulation Act, the Commission must review an Alternative Regulatory Plan presented to it to determine whether the plan is in the public interest. Within this framework the only portion of the plan (as presented in the Settlement Agreement) that can be considered by the Commission as a firm obligation of the parties is the portion that addresses the installation of meters and corresponding tracked recovery of costs. While agreement on the timing of the installation of meters and the associated recovery of costs are important initial steps in developing the smart grid program proposed by Duke Energy Indiana, this step alone was not presented to the Commission as the sole objective of the Alternative Regulatory Plan. Additional expectations form the basis of the Settlement Agreement and these uncertain and unresolved tasks must be considered as part of our public interest review of the specific factors outlined in the Alternative Utility Regulation Act.

Based on the incomplete picture regarding the additional steps that will be pursued, but may not be resolved by the parties to this proceeding, the Commission finds that Duke Energy Indiana's Alternative Regulatory Plan, as currently comprised and presented in this proceeding under the terms of the Settlement Agreement, is incomplete. The only matters that will be pursued with certainty under the terms of the Settlement Agreement are the installation of new metering technology and cost recovery for this equipment. Remaining issues that could ultimately address the overall efficacy and utilization of the meters in a way that will make them "smart" are left for another day to be considered in working collaboratives between the parties. The uncertainty associated with the collaborative process is a central issue of concern to the Commission, as none of these collaborative efforts are required to bear fruit since implementation of determinations of the Collaboratives are contingent, in every instance, upon cost recovery approval acceptable to Duke Energy Indiana.

While we encourage the parties to continue the collaborative process outlined in the Settlement Agreement or consider smaller scale pilot or phased-in options to arrive at a fullydeveloped alternative regulatory plan that could be considered by the Commission; with respect to our consideration of the Alternative Regulatory Plan presented to us in this matter we must conservatively surmise that, as nothing else is assured under the plan, nothing more than installation of the meters and cost recovery for the meters will be forthcoming. If that is ultimately the case, Duke Energy Indiana ratepayers will have paid for new smart meters without fully realizing the enhanced benefits that can be provided by the technology. While it appears that this is not the objective of the parties, that is the extent of the plan that we have been asked to find to be in the public interest in this proceeding.

Accordingly, in reviewing the plan submitted and determining whether the public interest will be served, the Commission has considered the specific provisions set forth in the Alternative Utility Regulation Act including: technological and operating conditions and competitive forces; benefits to the utility, its customers, and the state; the promotion of energy utility efficiency; and the ability of the utility to compete with other providers of functionally similar energy services or equipment. The Commission has also considered whether the plan enhances or� maintains the value of the energy utility's retail energy services or property, including practices, procedures and mechanisms focusing on the price, quality, reliability, and efficiency of the service provided by the utility. Ind. Code � 8-1-2.5-5 and 6.

Based on the agreement presented to us in this proceeding the Commission cannot find that the Alternative Regulatory Plan (as presented in the Settlement Agreement) will offer long term benefits to Indiana ratepayers. Therefore, inasmuch as important matters that will impact the efficacy of the program remain unresolved by the terms of the Settlement Agreement, the Commission finds that the Alternative Regulatory Plan, as modified by the Settlement Agreement and presented to us for our consideration in this matter, is not in the public interest and is hereby rejected by the Commission.

As the proposed Settlement Agreement has been denied by the Commission, within ten (10) days, the parties shall file a proposed procedural schedule with the Commission to allow for consideration of the underlying request for relief presented in this matter. In reaching this conclusion, the Commission notes that certain aspects of the current administrative record may now be stale, specifically with respect to potential funding of the SmartGrid initiative under the American Recovery and Reinvestment Act of 2009. As discussed in the Settlement Agreement, the Company committed to make reasonable and good faith efforts to seek federal stimulus funds under the ARRA for its SmartGrid and Renewable Distributed Generation initiatives to reduce costs to customers. Under the terms of the Settlement Agreement, the details regarding how such stimulus funds received were to be considered by the Deployment Collaborative.

While the Commission has declined to endorse the collaborative approach recommended by the parties in this matter, we do recognize that the receipt of stimulus funds by the Petitioner could have a direct' impact on the underlying proposal presented in this Cause. Therefore, we find that the procedural schedule developed by the parties should provide an opportunity for the Petitioner to supplement the record regarding funding received under the American Recovery and Reinvestment Act of 2009. The procedural schedule should also provide an opportunity for the Petitioner to address the deficiencies identified by the Commission with respect to the Settlement Agreement as it relates to the potential utilization of such funding and to allow for responses to any such proposals from the parties to this Cause.

IT IS THEREFORE ORDERED BY THE INDIANA UTILITY REGULATORY COMMISSION, that:

1. The Petitioner's proposed Alternative Regulatory Plan, as contained in the Settlement Agreement, is hereby rejected by the Commission consistent with the findings set forth in this Order.

2. Within ten (10) days of the date of this Order, the parties shall file a proposed procedural schedule with the Commission to allow for consideration of the underlying request for relief presented in this matter. As set forth herein, the procedural schedule developed by the parties should, among other things, provide an opportunity for the Petitioner to supplement the record to address issues regarding funding received under the American Recovery and Reinvestment Act of 2009.
...
ATTERHOLT, GOLC, LANDIS AND ZIEGNER CONCUR; HARDY ABSENT

Click HERE for more about members of the IURC.