The plan improves energy reliability and safety by updating and replacing aging energy grid infrastructure, including substations, utility poles, power lines, and transformers. Outages will also be decreased and shortened using “self-healing” systems, which allow the company to reroute energy around power disruption events. Additionally, upgraded power lines will reduce overall power consumption by about 1 percent using new technologies to optimize voltages.
Duke filed the plan under provisions of Indiana Senate Enrolled Act 560, state legislation passed in 2013 to improve utility infrastructure. Under the law, a utility can file a seven-year infrastructure improvement plan with state utility regulators. If approved, a utility can request recovery of 80 percent of its investment through a customer bill tracker.
In March, Duke reached an agreement with the Indiana Office of Utility Consumer Counselor, the Duke Energy Indiana Industrial Group, Companhia Siderurgica Nacional, Steel Dynamics, Wabash Valley Power Association, Indiana Municipal Power Agency, Hoosier Energy Rural Electric Cooperative and the Environmental Defense Fund on the seven-year plan to use a combination of advanced technology and infrastructure upgrades to improve service to customers.
Last year, the Indiana Utility Regulatory Commission denied Duke Energy Indiana's original plan, asking for more details and more focus on electric grid projects. In December, the company filed a revised plan addressing the commission's issues. The company then reached a settlement with key consumer groups, and the commission has now approved the settlement without changes.
As part of the settlement, Duke Energy reduced the level of capital investments recovered through the plan's customer bill tracker from approximately $1.8 billion to approximately $1.4 billion. Part of the reduction came from $192 million earmarked for new advanced digital meters, but the company retains the ability to pursue the meters and defer some of their costs for consideration in a future rate case, rather than through a monthly bill tracker as other items in the plan.
The company also agreed to reduce its return on equity on plan investments from 10.5 to 10 percent for investments that flow through the plan's bill tracker. This does not affect the company's 10.5 percent allowed return on equity on its other remaining investments.
"We have an aging energy grid -- some equipment that is decades old -- and our work will focus on replacing some older infrastructure to reduce power outages," said Duke Energy Indiana President Melody Birmingham-Byrd. "We'll also be building a smarter energy structure with technology to provide the type of information and services that consumers have come to expect."
As a result of the plan, gradual rate increases averaging 0.75 percent per year will be passed along to customers between 2017 and 2022.