Vectren Corp. said it reached a settlement agreement with several parties in Indiana that will allow the company to request a $24 million increase in Vectren North’s (formerly Indiana Gas Co.) base gas distribution rates, which is about half of what the utility originally planned to request.

The rate increase, which will average 3.5% for average residential gas customers, will cover the ongoing cost of operating, maintaining and expanding the utility’s 12,000-mile distribution and storage system, which serves 525,000 customers in 49 central and southeastern Indiana counties. The settlement addresses Vectren North’s “non gas” costs only, which represent 25-30 cents of every dollar paid by customers for their gas service.

“We have worked cooperatively with all the parties to craft a balanced settlement,” said Vectren Chairman Niel C. Ellerbrook. “In order to attract new capital for future infrastructure improvements, it is critical for us to begin earning on the more than $270 million invested since the last rate case. This is a reasonable and fair outcome that will allow us to continue serving our customers with safe and reliable energy.”

Vectren Energy Delivery of Indiana-North (Vectren North) reached the settlement with the Indiana Office of Utility Consumer Counselor (OUCC), the Indiana Gas Industrial Group and the Citizens Action Coalition of Indiana Inc. (CAC). It was filed Tuesday with the Indiana Utility Regulatory Commission (IURC) and completes a collaborative effort between Vectren North and other interested parties to the proceeding resolving issues presented by the case. The IURC will now review the settlement and must approve the terms before it becomes final.

“By cutting Vectren’s requested increase in half, consumers’ rates will be kept as low as reasonably possible, while providing the utility with the revenue it is allowed by law to ensure safe, reliable service for all of its customers,” said Indiana Utility Consumer Counselor Anne E. Becker.

The settlement also permits Vectren North to recover the on-going costs associated with the federal Pipeline Safety Improvement Act of 2002. The Pipeline Safety Improvement Tracker in the rate request provides for the recovery of on-going costs associated with the Pipeline Safety Act, capped at $2.5 million per year. Costs in excess of the cap are deferred for future recovery.

The proceeding was initiated by Vectren North on March 19. Vectren North originally requested an increase of $47 million, which would have increased an average residential consumer’s monthly bill by about 7%. The request to adjust base rates was the first by Vectren North since 1991. Over the past 13 years, investments made to serve Vectren North customers have exceeded $270 million, and the amounts paid for taxes, health care, labor and other operating costs have increased as well, the utility said.

Terms of the settlement agreement also include the following:

Grant Smith, executive director of the CAC of Indiana also mentioned that the settlement will result in new programs to help customers reduce their bills through investments in efficiency. It “creates an innovative and collaborative framework for including gas efficiency programs in utility long-term planning,” said Smith.

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