Statement to IURC public field hearing in Evansville on Monday, November 28, 2011

Regarding Cause # 44067 and other comments

Gail Riecken, State Representative, District 77

5935 Knight Drive

Evansville, IN 47715

Thank you for this opportunity to talk with you about the problems our community is facing regarding Vectren. Scheduling this meeting tonight demonstrates your respect for the opinions of those affected by the rate increases of late and their complaints about some of the services Vectren offers. I do appreciate it.

I am Gail Riecken, District 77 State Representative. My district runs from downtown Evansville going southeast into Warrick County. Many of my constituents are here this evening.

This hearing is first about the rate proposal before the IURC, Cause No.44067.

There will be a tariff of a little more than a dollar added to our bills to pay for environmental improvements to one of the plants, the Posey County facility. The cost estimate is a little over 30 million. Vectren says that customers will be rewarded in the end for the environmental improvements.

But, as hard as it is to argue against the purpose of the proposal, I do question if this makes sense. Does the rate increase reach the standard of being just and reasonable and is it affordable?

On one hand, Vectren is reducing emissions from the Posey Co. plant and, on the other hand, Vectren is increasing sales and, therefore, emissions by way of the recently approved 700 million dollar capital improvement proposal that included expansion to Big Rivers and Gibson.

I know that Vectren feels customers will be rewarded in the end for the new request of $1.08 added to each monthly bill. Vectren rationalizes that we should accept the increase because we might see our rates flatten out over time or even decrease.

However, rate payers are now going to pay for improvements to reduce emissions at the Posey Co facility when we are already paying for increasing emissions since as of the last rate increase Vectren is going to sell more power to Gibson and Big Rivers.

Ratepayers are paying for both improvements and the benefits of the added sales appears to counter the benefits of the added improvements at the Posey Co facility. Considering clean air is a goal we all respect, and considering customers just went through a major rate increase and are very upset, why isn’t Vectren required to look at alternative funding formulas for this proposal?

I know that Vectren feels customers will be rewarded in the end for the new request of $1.08 added to each monthly bill. Vectren rationalizes that we should accept the increase because we might see our rates flatten out over time or even decrease.

But, I would ask “What about the stockholders? What is their role, their reasonable responsibility in this increase? What other formula for funding the project are there that might be just and reasonable?

And, if Vectren were required to include the concept of “affordability” in their rate decisions, Vectren would have figured out a less costly model to consumers or may have incorporated stockholder investment in that new formula.

I’ve mentioned the concept of “affordability”. It relates to the present proposal but the concept is important in all proposals. This concept, affordability, is the central theme in the two main areas of concern I hear about from constituents.

1.) 1.) Vectren’s policies and procedures are unfair and/or confusing--- policies and procedures in disconnects, the costs to reconnect, payment plans that sound like a good idea until the payment goes up or you have one late payment, and replacement meters when there aren’t any problems with the meters in place now.

2.   2.) The biggest complaint I hear the most, however, is that utility prices are simply too high and “we can’t afford them”.

Examples of complaints are:

• A small restaurant owner who was working to keep his doors open found he could pay the Vectren bill if he had the weekend to earn the money. He questions why he can’t have a payment plan like residences have; and, if there is such a plan, why doesn’t Vectren get the word out
• A homeowner received his notice that his late payment was due on a certain date but on the day he received the bill he received a courtesy call from a computer that said he had to pay immediately or the service would be disconnected; his wife used her entire social security check to pay the bill. What a shame.
• Another homeowner questioned why his deposit was not included in the cost to reconnect when the reconnect fee was calculated.
• And on that subject, another person reported his service was disconnected at the poll, and it cost $500 to reconnect plus the back bill. He questions why so much when a simple reconnect is $70. Understandably, he questions, if you had trouble paying the gas bill before, how do you come up with an additional $500?
• Two homeowners have questions why a meter is replaced when there is no complaint from the owner and when, in the end, it seems only to increase revenue to Vectren; and,
• Having to pay a fee at a Vectren kiosk to pay your bill is totally unacceptable/punitive.

I understand that solutions to many of these problems might be better, fairer policies/procedure; maybe clearer policies; or maybe agreements that are written down so everyone understands the same terms of the agreement.

But I believe the problems – all of these problems - are more than clearing up confusion. They are about the operation of a failed system – a system that fails to provide a public service that is just and reasonable and at prices citizens can afford.

Just as troublesome, the system in southwestern Indiana is working against the best interests of our community. How do you keep competitive with other cities, when you have the highest electric rates? How do you meet the needs of so many good, honest homeowners who are on the brink of being forced out of their homes because they cannot pay these exceedingly high utility prices.

High utility prices are especially damaging when taken into consideration the economic status of our citizens, nationally, in Indiana and at home.

A nationwide survey of more than 5,200 workers conducted this year by CareerBuilder, an online jobs site, found that ‘42 percent of American workers are living paycheck to paycheck to make ends meet, a one-point improvement over 2010. The number of workers who have missed a bill payment over the past year came to 20 percent.

In Indiana, 1 in 3 Hoosiers is now classified as low-income (under $22,050 for a family of 4, under $10,000 for a single person). More than 1 in 6 Hoosiers are living in poverty. In fact in Indiana, income patterns have been steadily trending downward since 1980. Then, the percent of people in poverty was 11.8%; the poverty rate today in Indiana is 13.2%.

Hoosiers in Evansville fair even worse than the rest of the state. Evansville’s poverty rate is18.4% ---

5% higher than the state average*. Much of the area I represent is in southeast Evansville and that area represents about 41% of Evansville’s population. The poverty rate in that area is 22.6%.

The median household income in Indiana is a little over $47,000. Evansville isn’t doing as well. Our median household income is more than $10,000 dollars less that the state average.

Evansville’s average population 65 and older, those on fixed incomes, mostly reduced incomes, is over 14% , again a higher percentage than the state average.

Simply stated, we are a nation losing its middle class and a state with increasing poverty. In Evansville, we are even older and poorer than the state average and I would add, many of those same people live in older, less weather tight homes in older neighborhoods.

These facts, Commissioners, tell a story, a story about many of the residents who are unable to pay high utility prices. They are not unwilling to pay, they just can’t afford the price.

Affordability –the ability to pay – then, is the major issue –an approach - absent in the present system that Vectren and the IURC participate to make rate decisions.

Affordability is also why field hearings on all Vectren proposals should be mandatory. If IURC Commissioners are to understand affordability, they must hear from local citizens who will give you their opinions why a rate increase is affordable or not.

With respect to affordability and the last Vectren rate proposal approved by the IURC, if you aspire to the concept, then decision-makers would take into consideration other proposed rate increases like the water rate increases that will fund combined sewer overflow remediation. Taking into consideration those costs plus the costs to heat and cool our homes is a comprehensive posture and a lot fairer approach.

As more family income is devoted to paying high utility prices because of repeated rate hikes, even including seemingly small fees like the $1.08 per month, fewer resources are available for other needs.

Taking into consideration the environment in which proposals are offered to the Commission is also an issue of future growth for our area. Regarding the new rate proposal, even if Vectren is right that the area utility prices will eventually rise to Vectren’s present prices, we will have lost years of opportunity where people will have chosen to live and work in another less expensive area.

We will have gained a damaging reputation, a reputation the Sandman, an old CB radio operator in the 1970’s, signaled to truckers rolling through our area “ welcome to southern Indiana, the land of high taxes and short mini-skirts”.

Can Vectren’s assertion that their rates will be competitive really play out?

A recent article in the Louisville Courier Journal refutes that argument. The article reported that the electricity rates charged by Kentucky Utilities (KU) would be increasing to a level of $0.0745 kWh by the year 2016 when the investments made to achieve EPA compliance have been completed. This rate is roughly half of what Vectren charges in SW Indiana today. Vectren challenged that report stating that it was incorrect. However, it was confirmed by KU that the full cost to KU customers for a 1,000 kWh today is $86.70 and is expected to rise by 20% to $105.00 by 2016 when attainment is achieved. Vectren's 2011 price for the same 1,000 kWh is $157.60 a full 82% higher than KU and even 50% higher than KU's projections for 2016.

The concept of affordability, being able to pay Vectren’s utility prices is about fair policies and procedures, a recognition of the economic status of many of our residents and an approach to decision making that incorporates comprehensive/all-inclusive planning. Affordability means we will avoid deadly negative images that discourage a person locating their business here. Affordability means this area will remain economically competitive with surrounding areas.

Perhaps a good start to the concept of affordability would be to change the Indiana Utility Regulatory Commission purpose statement, as is on the website. It now reads, “The IURC is the decision-making body in utility regulatory proceedings and is required by law to make decisions that balance the interests of all parties to ensure that utilities provide reliable service at reasonable prices.” Perhaps that statement should be changed to read “reasonable and affordable.”

When Commissioner Atterholt, Joe Sutherland, Kerwin Olson and I met in August about your coming to Evansville, we were all interested in looking into solutions. I don’t think anyone wanted to have a meeting, listen to complaints and end with everyone frustrated and angry.

Proposing solutions, however, is a futile exercise unless those of us interested had good data from which to work. So, in the letter dated Sept 6 to Commissioner Atterholt, I requested the Commission gather information that will be necessary to begin looking at solutions, and not just here but across Indiana. If other utilities are going to have to jump their rates for EPA regulations, there will be greater numbers of folks in the same boat we are here, not able to pay Vectren’s utility prices.

I wrote that the Commission:

Begin a formal investigation into the current economic well-being of all Indiana utility ratepayers, to include but not limited to, the current amount of utility revenue in arrears by a utility; the number of disconnects on a weekly basis by a utility; and the average time a utility ratepayer is left without service after being disconnected.

And, I requested that all the information on the economic status of ratepayers be made public.

With information from Vectren, we should learn how many accounts are in arrears, what the total dollar amount is outstanding and how it breaks out among ratepayers. How many disconnects/reconnects there are in our area. We need to know what are the actual dollars involved to reconnect to justify a $500 reconnect fee. We need to know how many households are on payment plans; what is the total dollar amount of unpaid bills on these plans; and, how many households are successful with their plan. Or do households end up defaulting anyway. And, finally how do these facts compare year to year with the last four or five years.

Once we have this information we will have the documentation that can tell us how profound the problem of high utility prices is for families in our area.

If we are looking at solutions, then, the first suggestion would be to have a complete assessment of Vectren’s customers payment history.

Then, I would hope the IRUC would take steps to promote a fairer system.

A fairer system

1.) 1.) That promotes a system that approves rates that are just and reasonable and a system that includes the concept of “affordability”,

2.) 2.) That defines a system that would look at ratemaking comprehensively taking into account what is impacting ratepayers in the area, and

3.) 3.) That requires proposals be specific, transparent, and communicated in a way that the layman can appreciate the impact.

Take trackers and decoupling, as examples. Unless there is a clear understanding of who owns the subsidiary resource suppliers and companies in the costs to be tracked or decoupled, customers may see never ending increases in uncontrollable prices for our gas and electric. If a utility controls the resource cost, he controls the price and the profit.

4.) 4.) That requires utilities adopt policies to promote transparency, ie., requiring the utilities accept the lowest bid when awarding contracts, just the same as governments should be required.

All bid proposals over a certain dollar amount should have the results of those bids public for all to review.  The utilities are a publicly regulated entity and should be bound to a high level of transparency. Ratepayers should have confidence that costs, especially relative to trackers and decoupling, are the lowest bid.

5.)5.) That requires utilities adopt policies to promote transparency, i.e, requiring employees going to work for a company they have regulated as employees of the IURC to wait a period of time before initiating that new employment--- a cooling off period, if you will.

Hoosier taxpayers should have the assurance their interests are not compromised. Right now the public interprets that IURC employees don’t have a respect for the public community. They can work for the IURC regulating utility companies and turn around and go to work immediately for the utility company they were regulating. That is wrong.

6.) 6.) That the system should hold accountability as a basic right the public deserves.

There should be in depth evaluation of utility companies, in particular Vectren, to fully appreciate they are working efficiently and responsibly for ratepayers.

7.) 7.) That a requirement all rate proposals include a justification of “affordability”.

8.) 8.) That there be a mandate that all utilities operating in Indiana present an arrearage report, so we would know just how serious the problem of uncollected debt is.

Solutions to affordability are probably the most difficult of all these concerns. They involve recognizing that affordability responds to all our needs, but that there are some ratepayers who will not have the ability to pay the high prices. It is a shared responsibility. The issue is the ability to pay --- not that customers are unwilling to pay.

Because paying Vectren’s prices place a higher burden on lower income residents than for other residents, utility prices are highly regressive by nature. It is true I don’t have the documentation until the IURC requires Vectren submit the raw data; but, I am confident my request to secure the arrearage report will prove that low income residents are in trouble. As I mentioned, nonpayment of bills, default on payment plans, disconnect notices, service terminations of service and uncollectible accounts are all indications of their plight.

Vectren has to be accounting for uncollected debt. It is being offset elsewhere or other ratepayers are making up the loss.

9.) 9.) And, last, an opportunity to cooperatively address low-income affordability in a systems approach. Illinois and Ohio have interesting approaches as well as the District of Columbia has for water rate hikes.

We can do more than talk about the problem of the low income; there are solutions out there. I commend Vectren for stepping up to the plate with added dollars for weatherization programs and information on gas and electric savings tips.

I commend local taxing units and volunteer organizations for allocating dollars for emergency help to residents. Those are excellent resources . Sadly, they are always in a time of crisis, the last resort so to speak.

 

I would like to see the legislature research alternatives how to address low income affordability.

 

One proposal could be that the system of bill payments would allow for differential charges for low income residents. For example, there would be one formula that low income residents would pay, a rate that would not exceed a certain percentage of their household income. The District of Columbia has such a program for water rates.

You could argue this is fair. Low income residents are disproportionately impacted by increasing rates. $400 is a bigger bite out of that family’s $20,000 income versus $400 of a family making $100,000 a year.

Illinois has a low income payment plan that maximizes the percentage of income that a participant in the plan can pay. The plan, called PIP, percentage of income plan, is a mandatory bill payment assistance program for low-income residential customers of utilities serving more than 100,000 retail customers. It has been in effect since 2009.

The Percentage of Income Payment Plan (PIPP) program will limit participants' payments for electric and gas utility service to no more than six percent of their income. Participants also will have access to federally-funded weatherization services.

"The PIPP program will help maintain affordable year-round utility service, by offering low-cost, level payment plans to low income customers," said Sen. Lightford. "This program will eliminate the cycle of disconnection and reconnection now faced by customers that rely on energy assistance payments."

The PIP Plan’s purpose is to:

(1) bring participants' gas and electric bills into the range of affordability;

(2) provide incentives for participants to make timely payments;

(3) encourage participants to reduce usage and participate in conservation and energy efficiency measures that reduce the customer's bill and payment requirements; and

(4) identify participants whose homes are most in need of weatherization.

Ohio has a new and improved Percentage of Income Payment Plan, PIPP Plus The plan makes monthly payments more affordable on a year-round basis. And, when a PIPP Plus household pays the monthly PIPP Plus payment on-time and in-full, some of their old debt and the rest of that month's bill goes away in the form of a credit on their utility account.

Summary : The purpose of the Vectren rate proposal before the IURC promotes environmental improvement. Vectren should be required to justify the funding formula for the project to make sure it is fair and reasonable between customers and stockholders.

This situation highlights what is the inequity of the present system of rate making. The system should take in consideration the concept of “affordability” for ratepayers. The system should promote openness by requiring bid proposals be open to the public. When employees leave to go to work for a regulated company, there should be a waiting period. Utility companies should be held to a high level of efficiency and an in-depth efficiency evaluation compared to other utility companies of similar size. Lastly, given ratepayers are paying one way or the other for uncollected debt, affordability should be researched to support a portion of low income high utility bills due to high rates. I believe that when there is a review of collection of arrange data from Vectren, we’ll find that many families are in crisis over again. I am aware that, although the IURC would adopt the concept of affordability, we will continue to see residents default on their payments. But, I am also aware that a system can be adopted that is fair, reasonable and affordable, more so than the present system is for all ratepayers.

Image: Daniel St. Pierre

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	State	Evansville	Ft. Wayne	Gary	Indianapolis	Jeffersonville	South Bend
Population	6,483,802	117,429	253,691	80,294	820,445	44,953	101,168
Median Household Income	47,465	35,749	43,320	27,367	43,351	45141	34,891
Per Capita Income	24,044	21,204	23,074	15,575	24,443	24,347	18,945
People of all ages in poverty - percent 2005-2009	13.2%	18.4%	14.7%	33.4%	17.2%	12.3%	23.1%