RP&L studies its costs and rates

When Richmond Power & Light left the Indiana Utility Regulatory Commission in 2022, the utility’s board retained the new requirement that RP&L conduct a cost of service and rate study every five years.

The 2020 study resulted in rate increases phased across three years, and to meet the five-year requirement, a new study is underway this year. Tony Foster, RP&L’s general manager, updated the utility’s board about the study during its July 7 meeting.

The study determines what it costs RP&L to provide electrical service and what rates it must charge to generate revenue that covers those costs, Foster said. Prior to 2020, RP&L had not conducted a study in 15 years.

“It takes into account the community’s growth since our last rate study — and since the last one, we have had significant growth, which is a good thing — looking at future growth as well, and trying to find that balance,” Foster said.

The study considers factors such as system maintenance, which is the day-to-day operations cost; environmental regulations, which include reserve accounts established for required coal combustion residual mitigation and future Whitewater Valley Generating Station decommissioning; rebuilding and maintaining reserve accounts that unexpected equipment failures drained; and future growth considerations, such as the Midwest Industrial Park, that could require a third intertie substation bringing power to the city to handle the growth and provide redundancy.

Under system maintenance, Foster said five large transformers were installed between 1974 and 1991. Those transformers, which he said cost between $1.5 million and $2 million, have life expectancies of 40 to 50 years and will need replacement across the next decade. That area also considers the upcoming project to convert streetlights to LED, equipment upkeep and the purchase of new vehicles.

At this point, Foster said RP&L has accumulated data that is now under review.

In the only action taken by the board, it authorized Foster to receive bids on a 71-foot bucket truck for the line department. Foster expects to receive a new truck in two years, when the current truck would be 18 years old.