Ind. Code § 8-1-31.7-1 Applicability of definitions
Sec. 1. The definitions in IC 8-1-2-1 apply throughout this chapter.
As added by P.L.137-2020, SEC.15.
Ind. Code ch. 8-1-31.7
Ind. Code ch. 8-1-31.7
in effectInd. Code § 8-1-31.7-2 "Eligible addition"
Sec. 2. As used in this chapter, "eligible addition" means any new utility plant or equipment:
(1) that does not increase revenues by connecting to new customers, even though the plant or equipment may provide the eligible utility with greater available capacity; and
(2) that:
(A) for a public utility:
(i) is used and useful;
(ii) is procured, installed, or constructed by the public utility with expenditures that are service enhancement improvements; and
(iii) was not included in the public utility's rate base in its most recent general rate case; or
(B) for a municipally owned or not-for-profit utility:
(i) is or will be an extension or replacement, consistent with section 8 of this chapter; and
(ii) was not included on the utility's balance sheet as plant in service in the utility's most recent general rate case.
As added by P.L.137-2020, SEC.15. Amended by P.L.32-2021, SEC.18.
Ind. Code § 8-1-31.7-3 "Eligible utility"
Sec. 3. As used in this chapter, "eligible utility" means:
(1) a public utility;
(2) a municipally owned utility; or
(3) a not-for-profit utility;
that provides water or wastewater service to the public and is under the jurisdiction of the commission for the approval of rates and charges.
As added by P.L.137-2020, SEC.15.
Ind. Code § 8-1-31.7-4 "Not-for-profit utility"
Sec. 4. (a) As used in this chapter, "not-for-profit utility" has the meaning set forth in IC 8-1-2-125(a).
(b) The term includes a utility company that is owned, operated, or held in trust by a consolidated city.
As added by P.L.137-2020, SEC.15.
Ind. Code § 8-1-31.7-5 "Pretax return"
Sec. 5. As used in this chapter, "pretax return" means the revenues necessary:
(1) to produce net operating income equal to a public utility's weighted cost of capital multiplied by the net original cost of the eligible addition; and
(2) to pay state and federal income taxes applicable to the net operating income described in subdivision (1).
As added by P.L.137-2020, SEC.15.
Ind. Code § 8-1-31.7-6 "Requirement"
Sec. 6. As used in this chapter, "requirement" means any decision or regulation imposed on an eligible utility by a unit (as defined in IC 36-1-2-23), a municipal corporation (as defined in IC 36-1-2-10), a state, or the federal government in connection with any of the following:
(1) The federal Water Pollution Control Act (33 U.S.C. 1251 et seq.).
(2) The federal Safe Drinking Water Act (42 U.S.C. 300f et seq.).
(3) Any other law, order, or regulation administered by the United States Environmental Protection Agency, the United States Army Corps of Engineers, the United States Department of Transportation, the Indiana department of transportation, the Indiana department of environmental management, or the department of natural resources.
(4) Regulation imposed by local government under IC 8-1-2-101, IC 36-9-2-14, IC 36-9-2-15, or IC 36-9-2-16.
As added by P.L.137-2020, SEC.15.
Ind. Code § 8-1-31.7-7 "Service enhancement improvement"
Sec. 7. As used in this chapter, "service enhancement improvement" means an expenditure that is either of the following:
(1) Made, or to be made, by an eligible utility and related to:
(A) direct or indirect compliance with one (1) or more requirements; or
(B) installation of a new plant or equipment:
(i) that is not a replacement plant or equipment; and
(ii) that the commission determines is reasonable and appropriate to further health, safety, or environmental protection for the eligible utility's customers, employees, or the public.
(2) Any of the following that are made, or to be made, or incurred, or to be incurred, to maintain existing health, safety, or environmental protection for the eligible utility's customers, employees, or the public:
(A) Replacement of a plant or equipment.
(B) Subject to section 9.1 of this chapter, chemical costs recorded in:
(i) Account 618; or
(ii) Account 718;
of the National Association of Regulatory Utility Commissioners Uniform System of Accounts as adopted by the commission under 170 IAC 6-2-2.
(C) Subject to section 9.1 of this chapter, power costs recorded in:
(i) Account 615; or
(ii) Account 715;
of the National Association of Regulatory Utility Commissioners Uniform System of Accounts as adopted by the commission under 170 IAC 6-2-2.
As added by P.L.137-2020, SEC.15. Amended by P.L.127-2026, SEC.4.
Ind. Code § 8-1-31.7-8 "Service enhancement improvement costs"
Sec. 8. (a) As used in this chapter, "service enhancement improvement costs" means costs that an eligible utility incurs in connection with an eligible addition, including the following:
(1) Depreciation expenses.
(2) For a municipally owned utility or a not-for-profit utility, extensions and replacements, to the extent that the extensions and replacements are not provided for through depreciation, in the manner provided for in IC 8-1.5-3-8 or IC 8-1-2-125.
(3) For a municipally owned utility or a not-for-profit utility, debt service on funds borrowed to pay for the eligible addition.
(4) Property taxes to be paid by the eligible utility based upon the first assessment date following the placement in service of the eligible addition.
(5) Pretax return for a public utility.
(b) The term does not include fines or penalties assessed against or imposed on an eligible utility for violating laws, regulations, or consent decrees related to a requirement.
As added by P.L.137-2020, SEC.15.
Ind. Code § 8-1-31.7-9 Eligible utility's plan for proposed improvement; preapproval by commission; public hearing; findings; final order; exception to preapproval requirement; recovery of costs
Sec. 9. (a) Except as provided in subsection (e), before an eligible utility may seek to recover its service enhancement improvement costs through a periodic rate adjustment under section 12 of this chapter, it must first obtain preapproval from the commission of its plan for the proposed service enhancement improvement or improvements. The eligible utility must file with the commission a petition and a case in chief, including supporting information described in section 10 or 11 of this chapter, as applicable. If the petition includes a request for an allocation of costs under IC 8-1-30.3-6.5, the eligible utility shall provide a copy of:
(1) the petition; and
(2) the eligible utility's case in chief;
to each intervenor in the eligible utility's last general rate case.
(b) After holding a public hearing for which proper notice is given under IC 8-1-1-8, the commission shall preapprove the eligible utility's plan under this section if the commission makes the required findings under section 10 or 11 of this chapter, as applicable. If the service enhancement improvement is not described in section 7(1)(A) of this chapter, the commission shall preapprove the eligible utility's plan under this section if the commission makes the required finding under section 7(1)(B)(ii) of this chapter.
(c) The commission shall issue its final order on the petition not later than two hundred ten (210) days after the filing of the eligible utility's case in chief.
(d) An eligible utility may have more than one (1) plan, and an eligible utility may file separate petitions for separate plans.
(e) An eligible utility is not required to seek preapproval of a plan in order to seek recovery under section 12 of this chapter for:
(1) service enhancement improvements that are described in section 7(2)(A) of this chapter; or
(2) costs that are described in section 7(2)(B) or 7(2)(C) of this chapter.
(f) This subsection does not apply to an adjustment rider under section 12 of this chapter for the recovery of costs described in section 7(2)(B) or 7(2)(C) of this chapter. If the commission approves an eligible utility's plan under this section, or if approval is otherwise not required, the commission shall approve a rider authorizing timely recovery of the eligible utility's service enhancement improvement costs under section 12 of this chapter. The following apply to the utility's timely recovery:
(1) Eighty percent (80%) of the eligible utility's service enhancement improvement costs shall be recovered by the eligible utility through a periodic rate adjustment mechanism that allows the timely recovery of the approved service enhancement improvement costs.
(2) Twenty percent (20%) of the eligible utility's service enhancement improvement costs, including depreciation, allowance for funds used during construction, and post in service carrying costs, compounded monthly and based on the overall cost of capital most recently approved by the commission, shall be deferred and recovered by the eligible utility as part of its next general rate case filed by the eligible utility with the commission.
(3) Actual costs that exceed by more than twenty-five percent (25%) the projected costs set forth in the eligible utility's plan approved under this section require specific justification by the eligible utility and specific approval by the commission before being authorized in the next general rate case filed by the eligible utility with the commission.
As added by P.L.137-2020, SEC.15. Amended by P.L.100-2023, SEC.2; P.L.127-2026, SEC.5.
Ind. Code § 8-1-31.7-9.1 Recalculation of chemical costs and power costs for purposes of adjustment rider
Sec. 9.1. (a) This section applies to the recalculation of costs described in section 7(2)(B) and 7(2)(C) of this chapter for purposes of an adjustment rider under section 12 of this chapter.
(b) Chemical costs described in section 7(2)(B) of this chapter may be recalculated as follows:
(1) If:
(A) at least two (2) years have elapsed since the date of the commission's most recent order adjusting the basic rates and charges of an eligible utility; and
(B) the average actual annual cost of chemicals has increased or decreased by at least three percent (3%) over the course of the two (2) year period described in subdivision (2);
the eligible utility may submit for the commission's review supporting documentation of the average actual annual cost of chemicals for the two (2) year period described in subdivision (2), as calculated under subdivision (2), along with documentation of how the average annual cost of chemicals over that period differs from the amount currently being collected for chemicals through the eligible utility's rates. However, if the average actual annual cost of chemicals has not changed or has increased or decreased by less than three percent (3%) over the course of the two (2) year period described in subdivision (2), an eligible utility may not seek an adjustment to the eligible utility's recovery of chemical costs under this section.
(2) If the eligible utility has determined that the average actual annual cost of chemicals has increased or decreased by at least three percent (3%) over the course of the two (2) year period described in this subdivision, the eligible utility shall include in its submission under this subsection a calculation of the average actual annual cost of chemicals for the two (2) year period described in this subdivision, along with a comparison of that cost to the amount currently being collected for chemicals through the eligible utility's rates, as follows:
STEP ONE: Calculate the actual cost of chemicals during the two (2) year period immediately preceding the date of the eligible utility's submission under this subsection by adding together the actual annual cost of chemicals in each year of the two (2) year period.
STEP TWO: Calculate the quotient of the STEP ONE amount divided by two (2). This quotient is the average actual annual cost of chemicals for the two (2) years immediately preceding the eligible utility's submission under this subsection.
STEP THREE: Calculate the difference between:
(i) the STEP TWO result; minus
(ii) the amount currently being collected for chemicals through the eligible utility's rates on an annual basis, as authorized in the commission's most recent base rate order for the eligible utility, and adjusted to reflect the change in volume from the volume level authorized in the commission's most recent base rate order. The authorized chemical costs in the commission's most recent base rate order shall be divided by the number of gallons projected to be sold in the commission's most recent base rate order to impute an original cost of chemicals per gallon of water sold per unit cost. This per unit cost shall be multiplied by the projected number of gallons of water to be sold by the eligible utility over the twelve (12) month period of the adjustment rider under section 12 of this chapter to impute an adjusted cost of chemicals from the most recent base rate case.
(3) If the STEP THREE result under subdivision (2) is a positive number, the amount of the STEP THREE result shall be included in the adjustment rider under section 12 of this chapter as an expense in calculating an adjustment to the rider.
(4) If the STEP THREE result under subdivision (2) is a negative number, the amount of the STEP THREE result shall be included in the adjustment rider under section 12 of this chapter as a credit in calculating an adjustment to the rider.
(c) Power costs described in section 7(2)(C) of this chapter may be recalculated as follows:
(1) If:
(A) at least two (2) years have elapsed since the date of the commission's most recent order adjusting the basic rates and charges of an eligible utility; and
(B) the average actual annual cost of power has increased or decreased by at least three percent (3%) over the course of the two (2) year period described in subdivision (2);
the eligible utility may submit for the commission's review supporting documentation of the average actual annual cost of power for the two (2) year period described in subdivision (2), as calculated under subdivision (2), along with documentation of how the average annual cost of power over that period differs from the amount currently being collected for power through the eligible utility's rates. However, if the average actual annual cost of power has not changed or has increased or decreased by less than three percent (3%) over the course of the two (2) year period described in subdivision (2), an eligible utility may not seek an adjustment to the eligible utility's recovery of power costs under this section.
(2) If the eligible utility has determined that the average actual annual cost of power has increased or decreased by at least three percent (3%) over the course of the two (2) year period described in this subdivision, the eligible utility shall include in its submission under this subsection a calculation of the average actual annual cost of power for the two (2) year period described in this subdivision, along with a comparison of that cost to the amount currently being collected for power through the eligible utility's rates, as follows:
STEP ONE: Calculate the actual cost of power during the two (2) year period immediately preceding the date of the eligible utility's submission under this subsection by adding together the actual annual cost of power in each year of the two (2) year period.
STEP TWO: Calculate the quotient of the STEP ONE amount divided by two (2). This quotient is the average actual annual cost of power for the two (2) years immediately preceding the eligible utility's submission under this subsection.
STEP THREE: Calculate the difference between:
(i) the STEP TWO result; minus
(ii) the amount currently being collected for power through the eligible utility's rates on an annual basis, as authorized in the commission's most recent base rate order for the eligible utility, and adjusted to reflect the change in volume from the volume level authorized in the commission's most recent base rate order. The authorized power costs in the commission's most recent base rate order shall be divided by the number of gallons projected to be sold in the commission's most recent base rate order to impute an original cost of power per gallon of water sold per unit cost. This per unit cost shall be multiplied by the projected number of gallons of water to be sold by the eligible utility over the twelve (12) month period of the adjustment rider under section 12 of this chapter to impute an adjusted cost of power from the most recent base rate case.
(3) If the STEP THREE result under subdivision (2) is a positive number, the amount of the STEP THREE result shall be included in the adjustment rider under section 12 of this chapter as an expense in calculating an adjustment to the rider.
(4) If the STEP THREE result under subdivision (2) is a negative number, the amount of the STEP THREE result shall be included in the adjustment rider under section 12 of this chapter as a credit in calculating an adjustment to the rider.
As added by P.L.127-2026, SEC.6.
Ind. Code § 8-1-31.7-9.2 Commission order approving adjustment rider for recovery of chemical costs or power costs; petition for change in adjustment amount; hearing and order on petition
Sec. 9.2. (a) This section applies to an eligible utility for which the commission has issued an order under section 12 of this chapter to approve an adjustment rider for the recovery of costs described in section 7(2)(B) or 7(2)(C) of this chapter, as calculated under section 9.1 of this chapter.
(b) An eligible utility to which this section applies shall file a petition for a change in its adjustment amount:
(1) not later than thirty (30) days after the end of each twelve (12) month period after the date on which the commission issued the order under section 12 of this chapter approving the adjustment rider; and
(2) until the commission issues an order in the eligible utility's next general rate case.
(c) Upon filing a petition with the commission under subsection (b), an eligible utility shall serve a copy of the petition on the office of utility consumer counselor.
(d) The commission shall hold a hearing and issue an order on the petition not later than sixty (60) days after the date the petition is filed.
As added by P.L.127-2026, SEC.7.
Ind. Code § 8-1-31.7-10 Plan for improvements related to compliance with certain requirements; factors for commission's consideration
Sec. 10. If the plan is for a service enhancement improvement described in section 7(1)(A) of this chapter, the commission shall approve the plan if the commission finds that the public convenience and necessity require the proposed service enhancement improvement to allow the eligible utility to comply directly or indirectly with one (1) or more requirements. The commission shall examine the following:
(1) The following factors, which must be set forth in the eligible utility's case in chief filed in accordance with section 9 of this chapter:
(A) A description of the requirements, including any consent decrees related to the requirements, that the eligible utility seeks to comply with through the proposed service enhancement improvement.
(B) A description of the projected service enhancement improvement costs associated with the proposed service enhancement improvement.
(C) A description of how the proposed service enhancement improvement allows the eligible utility to comply with the requirements described by the eligible utility under clause (A).
(D) Alternative plans for compliance.
(2) Any other factors the commission considers relevant.
As added by P.L.137-2020, SEC.15.
Ind. Code § 8-1-31.7-11 Plan for improvements related to compliance with regulation imposed by local government
Sec. 11. If the plan is for a service enhancement improvement described in section 7(1)(A) of this chapter related to a requirement described in section 6(4) of this chapter, the eligible utility shall provide a copy of the unit or municipal corporation ordinance or other determination setting forth the requirement and shall provide the eligible utility's estimated cost to comply with the requirement. The commission shall review the reasonableness of the requirement under IC 8-1-2-101(a). Unless the commission finds the requirement to be unreasonable, the commission shall approve the plan for the service enhancement improvement. The unit or municipal corporation that has adopted the requirement shall be provided notice of the proceedings.
As added by P.L.137-2020, SEC.15.
Ind. Code § 8-1-31.7-12 Eligible utility's petition for adjustment rider; recovery of costs; hearing; order; costs for replacement of plant or equipment; recovery of chemical costs or power costs not subject to deferral
Sec. 12. (a) If the commission approves an eligible utility's plan under section 9 of this chapter, or if commission approval of the plan is otherwise not required, the eligible utility may file a petition to establish or adjust an adjustment rider to its rate schedules under this section so as to allow timely recovery of the eligible utility's service enhancement improvement costs. The following shall apply:
(1) The adjustment rider shall be calculated as a fixed charge based upon equivalent meter size.
(2) Publication of notice of the filing is not required.
For purposes of this section, the timely recovery of costs for a municipally owned utility or a not-for-profit utility shall be in a manner consistent with IC 8-1-31-8(a)(3).
(b) Except as provided in subsection (i), the adjustment rider shall provide for the timely recovery of eighty percent (80%) of the service enhancement improvement costs. The remaining twenty percent (20%) of the service enhancement improvement costs shall be deferred under section 9(f)(2) of this chapter.
(c) The commission shall conduct a hearing.
(d) The office of the utility consumer counselor may:
(1) examine information of the eligible utility to confirm:
(A) that the eligible additions are in accordance with sections 2 and 8 of this chapter, as applicable; and
(B) the proper calculation of the adjustment amount proposed under this section or section 9.1 of this chapter, as applicable; and
(2) submit a report to the commission not later than thirty (30) days after the petition is filed.
(e) Except as provided in subsection (h), the commission shall hold the hearing and issue its order not later than sixty (60) days after the petition is filed.
(f) Except as provided in subsection (h), the commission shall enter an order approving a petition filed under this section to the extent the commission finds that the petition complies with the requirements of this chapter.
(g) A petition filed under this section may combine one (1) or more of the following:
(1) Service enhancement improvement costs associated with one (1) or more plans approved under section 9 of this chapter.
(2) Service enhancement improvement costs for which approval of a plan is not required under this chapter.
(h) If a petition filed under this section seeks recovery of service enhancement improvement costs associated with eligible additions made in association with service enhancement improvements described in section 7(2)(A) of this chapter:
(1) the commission shall create a sub-docket to consider the service enhancement improvement costs if the petition combines the service enhancement improvement costs with service enhancement improvement costs associated with approved plans under section 7(1)(A) or 7(1)(B) of this chapter;
(2) to approve recovery of the service enhancement improvement costs associated with service enhancement improvements described in section 7(2)(A) of this chapter, the commission must find that the service enhancement improvements described in section 7(2)(A) of this chapter are reasonable and necessary; and
(3) the time period for issuance of an order under subsection (e) is extended to one hundred twenty (120) days with respect to the service enhancement improvement costs associated with service enhancement improvements described in section 7(2)(A) of this chapter.
(i) An adjustment rider under this section for the recovery of costs described in section 7(2)(B) or 7(2)(C) of this chapter shall provide for the timely recovery of those costs in full and without the deferral otherwise required under subsection (b).
As added by P.L.137-2020, SEC.15. Amended by P.L.127-2026, SEC.8.
Ind. Code § 8-1-31.7-13 Pretax return for public utility; factors for commission's consideration
Sec. 13. In determining an appropriate pretax return for a public utility, the commission may consider the following factors:
(1) The current state and federal income tax rates.
(2) The eligible utility's actual regulatory capital structure.
(3) The actual cost rates for the eligible utility's long term debt and preferred stock.
(4) The eligible utility's cost of common equity.
(5) Other components that the commission considers appropriate.
As added by P.L.137-2020, SEC.15.
Ind. Code § 8-1-31.7-14 Cost of common equity for public utility
Sec. 14. (a) Except as provided in subsection (b), the cost of common equity to be used in the calculation of the pretax return under section 13 of this chapter shall be the most recent determination by the commission in a general rate proceeding of the eligible utility.
(b) If the commission finds that the most recent determination described in subsection (a) is no longer representative of current conditions, the commission may, after notice and hearing, make a new determination of the common equity cost rate for use in determining the charge. The most recent prior determination shall be used pending any redetermination under this subsection.
As added by P.L.137-2020, SEC.15.
Ind. Code § 8-1-31.7-15 Recovery of costs for municipally owned utility; factors for commission's consideration
Sec. 15. In determining the amount of allowable recovery of service enhancement improvement costs for an eligible utility that is a municipally owned utility, the commission may consider the following factors:
(1) Extensions and replacements, to the extent that the extension and replacements are not provided for through depreciation, in the manner provided for in IC 8-1.5-3-8.
(2) Debt service on funds borrowed to pay for eligible service enhancement improvement.
(3) Depreciation expenses on eligible service enhancement improvements based on the same rate or rates of depreciation approved by the commission for the calculation of depreciation in the eligible utility's most recent rate case.
(4) Other components that the commission considers appropriate.
As added by P.L.137-2020, SEC.15.
Ind. Code § 8-1-31.7-16 Recovery of costs for not-for-profit utility; factors for commission's consideration
Sec. 16. In determining the amount of allowable recovery of service enhancement improvement costs for a not-for-profit utility, the commission may consider the following factors:
(1) Extensions and replacements, in the manner provided for in IC 8-1-2-125.
(2) Debt service on funds borrowed to pay for eligible service enhancement improvement.
(3) Other components that the commission considers appropriate.
As added by P.L.137-2020, SEC.15.
Ind. Code § 8-1-31.7-17 Adjustment amount calculation and reconciliation procedures
Sec. 17. An adjustment amount proposed under section 12 of this chapter may be calculated based on a reasonable estimate of equivalent meters in the period in which the charge will be in effect. At the end of each twelve (12) month period following the date on which the commission initially approves an adjustment amount for an eligible utility following the eligible utility's most recent general rate case, the eligible utility, using procedures approved by the commission, shall reconcile the difference between revenues under the adjustment rider and service enhancement improvement costs during that period and recover or refund the difference, as appropriate, through additional adjustments to the adjustment rider.
As added by P.L.137-2020, SEC.15.
Ind. Code § 8-1-31.7-18 Petition to change adjustment rider
Sec. 18. Except as provided in section 9.2 of this chapter, an eligible utility may, but is not required to, file a petition for a change in its initial adjustment amount not more than one (1) time in every twelve (12) months. Section 12 of this chapter applies to a petition to change an adjustment rider.
As added by P.L.137-2020, SEC.15. Amended by P.L.127-2026, SEC.9.
Ind. Code § 8-1-31.7-19 Resetting of adjustment rider after increase in basic rates and charges
Sec. 19. An eligible utility's adjustment rider approved under sections 12 and 18 of this chapter shall be reset to zero (0) upon approval of new basic rates and charges for the eligible utility by the commission in a general rate case in which the eligible service additions are included in the eligible utility's rate base.
As added by P.L.137-2020, SEC.15.
Ind. Code § 8-1-31.7-20 Commission to adopt rules
Sec. 20. The commission shall adopt rules under IC 4-22-2 to implement this chapter.
As added by P.L.137-2020, SEC.15.
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