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IURC Approves NIPSCO Settlement, NIPSCO to Maintain Current Market Practices Pending Code of Conduct

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November 9, 2010

The Indiana Utility Regulatory Commission approved without modification a unanimous settlement in the gas rate case of Northern Indiana Public Service Company which requires NIPSCO to not alter its current market practices and policies in connection with its competitive products (such as fixed bill and fixed price offerings) during the time in which a code of conduct is being developed in a pending proceeding merging its Indiana local distribution companies into a single operating company (Cause No. 43894).

Under the settlement (Matters, 8/27), NIPSCO agreed to maintain competitive neutrality, to proactively support customer choice, to enhance transparency, and to ensure fair cost allocation in regard to its products and service in order to avoid: (a) subsidization of its competitive products, specifically PPS and DependaBill, and the operational and overhead costs associated with those products; and (b) optimization of assets in a manner inconsistent with or broader than otherwise currently permitted by the stipulation approved by the Indiana Utility Regulatory Commission in Cause No. 43837 (see Matters, 4/7/10).

NIPSCO further agreed that a code of conduct consistent with the principles and objectives agreed to above shall be established within its now pending merger proceeding. Pending the implementation of such code of conduct, NIPSCO will not alter its current market practices and policies in connection with its competitive products.

The settlement requires that the margins associated with NIPSCO's Current Gas Alternative Regulatory Plan (ARP) programs shall be included in the Gas Cost Adjustment (GCA) Net Operating Income earnings test pursuant to Ind. Code §§ 8-1-2-42(g)(3)(C) and 8-1-2-42.3 except for: (a) NIPSCO's Gas Cost Incentive Mechanism (GCIM), Capacity Release, and Optional Storage Service Rider (Rider 482A), which shall be treated as below-the-line but shall continue to be shared with customers through the GCA as provided in the Current Gas ARP; (b) NIPSCO's DependaBill fixed bill program; and (c) NIPSCO's Price Protection Service fixed/capped price product (PPS).

The stipulation requires the cost of Unaccounted for Gas (UAFG) to be fully recoverable within the GCA mechanism based on a maximum system-wide UAFG rate of 1.04%. Customers served directly from the transmission system will pay the system-wide UAFG percentage rate less .10, and the rate for other customers, including Choice customers, PPS customers, and DependaBill customers will be set at an amount in order for NIPSCO to recover the system-wide percentage.

Settling parties agreed that NIPSCO's UAFG percentage shall be updated annually, capped at the 1.04% maximum.

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