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ORIGINAL L~. r· ?H- I

STATE OF INDIANA

INDIANA UTILITY REGULATORY COMMISSION

VERIFIED PETITION OF NORTHERN ) INDIANA PUBLIC SERVICE COMP ANY ) LLC FOR (1) AN ADJUSTMENT TO ITS ) GAS SERVICE RATES THROUGH ITS ) FEDERALLY MANDATED COST ) CAUSE NO. 45007 FMCA 1 ADJUSTMENTFACTORPURSUANTTO ) IND. CODE CH. 8-1-8.4 AND THE ) APPROVED: MAR 2 7, 2019 COMMISSION'S ORDER IN CAUSE NO. ) 45007; AND (2) AUTHORITY TO DEFER ) 20% OF THE FEDERALLY MANDATED ) COSTS FOR RECOVERY IN NIPSCO'S ) NEXT GENERAL RATE CASE. )

ORDER OF THE COMMISSION

Presiding Officers: Sarah E. Freeman, Commissioner Brad J. Pope, Administrative Law Judge

On November 30, 2018, Northern Indiana Public Service Company LLC ("NIPSCO" or "Petitioner") filed its Verified Petition in this Cause and case-in-chief, including the prefiled direct testimony and attachments of Elizabeth A. Dousias, Manager of Regulatory for NiSource Corporate Services Company ("NCSC"); Donald L. Bull, Director of Gas TDSIC Proje~ts for NCSC; Albert (Andy) A. Stone, Vice President and General Manager of NIPSCO; and Benjamin (Chuck) C. Kanoy, Director of Pipeline Asset Integrity for NCSC.1

On February 4, 2019, the Indiana Office of Utility Consumer Counselor ("OUCC") prefiled the direct testimony and attachments of Mark H. Grosskopf, Senior Utility Analyst, and Leon A. Golden, Utility Analyst II.

On February 7, 2019, NIPSCO filed a Motion for Protection and Nondisclosure of Confidential and Proprietary Information, which was granted by docket entry dated February 8, 2019. On February 22, 2019, as corrected on February 25, 2019, NIPSCO filed revisions to implement changes necessary to comply with the September 19, 2018 Order in Cause No. 44988 (the "44988 Order"). In compliance with the 44988 Order, NIPSCO also filed its Complianc~ Filing- Step 2 on February 22, 2019, for rates to become effective March 1, 2019. The revisions

1 On December 10, 2018, NIPSCO filed revisions indicating that it anticipated that the factors requested in this filing would be implemented in April 2019, rather than March 2019. To align the recovery period with customers' expected usage, NIPSCO revisedPet'r's Ex. No. 1, Attach. 1, Sched. 8, Cols. E andFto utilize estimated therms for the months of April through September 2019. NIPSCO also made conforming changes to Pet'r's Ex. No. 1, P. 18 to reflect the revised bill impact. NIPSCO also changed the proposed factors on App. G - FMCA Factors in Pet'r's Ex. No. 1, Attach. 1-A, Attach. 3.

were made to reflect amounts that are now being collected through base rates. The projects that were in service as of December 31, 2018, that had costs included in the filing as of September 30, 2018, were removed, resulting in a decrease in the proposed factors.

The Commission held an Evidentiary Hearing in this Cause at 1 :00 p.m. on February 28, 2019, in Room 224, 101 West Washington Street, Indianapolis, Indiana. NIPSCO and the OUCC appeared and participated at the hearing, and the prefiled testimony and exhibits were admitted into the record without objection.

Based on the applicable law and the evidence presented, the Commission finds:

1. Notice and Jurisdiction. Notice of the hearing in this Cause was given and published as required by law. NIPSCO is a public utility as defined in Ind. Code§ 8-1-2-l(a) and an energy utility as defined in Ind. Code § 8-1-8.4-3. Petitioner is also subject to Rules and Regulations promulgated by the United States Department of Transportation Pipeline and Hazardous Materials Safety Administration ("PHMSA") subject to enforcement as provided by law. Under Ind. Code§§ 8-1-8.4-6 and 8-1-8.4-7, the Commission has authority to approve cost recovery for projects necessary to comply with federally mandated requirements. Under Ind. Code § 8-1-2-42, the Commission has jurisdiction over changes to NIPSCO's rates and charges. Therefore, the Commission has jurisdiction over NIPSCO and the subject matter of this proceeding.

2. NIPSCO's Characteristics. NIPSCO is a public utility organized and existing under Indiana law, with its principal office at 801 East 86th A venue, Merrillville, Indiana. NIPS CO owns, operates, manages, and controls plant and equipment used for the generation, transmission, distribution, and furnishing of electric and gas utility services to the public in northern Indiana.

3. Background. By its September 19, 2018 Order in Cause No. 45007 (the "45007 Order"), the Commission approved, among other things, NIPSCO's request pursuant to Ind. Code ch. 8-1-8.4 for: (1) a Certificate of Public Convenience and Necessity for federally mandated projects associated with NIPSCO's Pipeline Safety Compliance Project to comply with various provisions of 49 CFR Part 192 promulgated by PHMSA (the "PHMSA Rules"); (2) timely recovery of 80% of the federally mandated costs incurred in connection with the Pipeline Safety Compliance Project; (3) a semi-annual federally mandated cost adjustment mechanism pursuant to Ind. Code§§ 8-1-8.4-7 and 8-1-2-42 to effectuate the timely and periodic recovery of 80% of the federally mandated project costs and ongoing expenses incurred in connection with the Pipeline Safety Compliance Project; (4) authority to defer 20% of the federally mandated project costs and ongoing expenses incurred in connection with the Pipeline Safety Compliance Project, including ongoing carrying charges on all deferred federally mandated costs, for recovery in NIPSCO's next general rate case; and (5) approval of ongoing review of the Pipeline Safety Compliance Project.

4. Relief Requested. NIPSCO requests approval of: (1) an adjustment to its gas service rates through its Federally Mandated Cost Adjustment Factor ("FMCA") to recover 80% of the costs incurred in connection with its federally mandated Pipeline Safety Compliance Project approved in the 45007 Order; and (2) authority to defer 20% of the federally mandated costs, including ongoing carrying charges on all deferred federally mandated costs, for recovery in

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NIPSCO's next general rate case pursuant to Ind. Code§ 8-1-8.4-7 and the Commission's 45007 Order.

5. Ongoing Review of Progress Reports. In the 45007 Order, we approved NIPSCO's request for ongoing review of the Pipeline Safety Compliance Project as part of its FMCA semi-annual :filings. Our 45007 Order approved NIPSCO's estimated capital cost for the Pipeline Safety Compliance Project of $91,493,664, which included of direct, indirect, and Allowance for Funds Used During Construction ("AFUDC") costs, and estimated operations and maintenance ("O&M") spending related to the Pipeline Safety Compliance Project of$35,499,727. In this proceeding, NIPSCO is not requesting approval of any modifications to the Pipeline Safety Compliance Project in its First Progress Report. The Pipeline Safety Compliance Project is broken out by three sets of projects: Transmission Integrity Management Program ("TIMP") Projects,2

Gas Operations Projects,3 and Transmission and Distribution ("T&D") Projects.4

Mr. Kanoy described and explained the federally mandated costs associated with the TIMP Projects incurred for the period November 8, 2017 through August 31, 2018 (for O&M expenses), as follows:

• TIMP Programmatic Improvements Project (Project No. PSl) - For this period, NIPSCO: (1) evaluated destructive and non-destructive material testing protocols by various vendors; (2) met with statistical consultants concerning material sampling methodologies; (3) evaluated a methodology for defining and tracking statistical pipeline segment populations; and ( 4) preliminarily defined a proposed, prioritized work plan to address unknown pressure test parameters, inadequate test records, missing materials documentation, etc. The total amount of federally mandated O&M expenses incurred for this period was $75,930. NIPSCO was unable to finalize this project because of PHMSA's delay of the promulgation of the Gas Transmission rulemaking, which PHMSA has indicated will not occur now until the first quarter of 2019, and plans to utilize the remaining, approved dollars for this project in future years.

2 The TIMP Projects include: TIMP Programmatic Improvements Project (Project No. PS 1 ); Management of Change Project (Project No. PS2); Preventive and Mitigative ("P&M'') Measures Project (Proje-ct No. PS3); Annual Plan Improvements Project (Project No. PS4); Transmission Risk Modeling Project (Project No. PS20); and Maximum Allowable Operating Pressure ("MAOP")- Transmission Project (Project No. PS24).

3 The Gas Operations Projects include: Enhanced Emergency Responder Outreach Program (Project No. PS5); Federal Distribution Pipeline Integrity Management Plan ("DIMP") Administration I Leak Data Verification Project (Project No. PS6); Service Card Enhancements Project (Project No. PS7); Fiberglass Riser Replacement Project (Project No. PS8); Legacy Cross Bore Remediation Project (Project No. PS9); Underground Storage Integrity Project (Project No. PSIO); Farm Tap Remediation Project (Project No. PSll); Legacy Cross Bore Inspection Project (Project No. PS21); Test Station Casings Project (Project No. PS22); and MAOP - Distribution Project (Project No. PS23).

4 The T&D Projects include: ILI Project (Project No. PS12); Transmission Inspect & Mitigate Project (Project No. PS13); AC Mitigation Project (Project No. PS14); Transmission Remote Control Valves ("RCV") Installation Project (Project No. PS15); Isolated Services Project (Project No. PS16); Emergency Valve Project (Project No. PS17); Casings Project (Project No. PS18); and Distribution Inspect & Mitigate Project (Project No. PS19).

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• Management of Change Project (Project No. PS2) - The Management of Change Project will commence in 2019. There were no O&M expenses incurred for this period.

• Preventive and Mitigative Measures Project (Project No. PS3) - For this period, NIPSCO conducted P&M measures to address risks from active threats on the gas transmission system. There were two efforts addressed for P &M measures in this time period: (1) conditions were assessed at 56 stations and NIPSCO received 11 reports; and (2) 86 girth welds have been identified as requiring investigation about external corrosion threats. This is based on coating conditions identified by industry events as having susceptibilities if coating was not applied correctly. Further monitoring and investigating is anticipated. The total amount of federally mandated O&M expenses incurred for this period was $42,383.

• Annual Plan Improvements Project (Project No. PS4) - While NIPSCO originally forecasted O&M expenses of $30,000 for 2018, it has not incurred any expenses during this period. Prior to the issuance of the 45007 Order, an effort was undertaken at the corporate level to aggregate the TIMP Plan for all seven states in which NiSource companies operate, including NIPSCO. As part of that effort, NIPSCO representatives, along with NCSC representatives, evaluated and improved TIMP Plan documents, programmatic documents, and process documents. NIPSCO is not seeking recovery of these expenses in this tracker proceeding. The $30,000 originally approved for 2018 will be used for the Annual Plan Improvements Projects in later years.

• Transmission Risk Modeling Project (Project No. PS20) - While NIPSCO originally forecasted O&M expenses of $300,000 for 2018, it has not incurred any expenses during this period. During this period, NIPSCO's Transmission Integrity Group worked on contract development and finalization of a Master Services Agreement with DNV GL,5 which was executed on September 17, 2018. Under the terms of the agreement, NIPSCO will acquire the Synergi Pipeline6 application module for the Pipeline Risk Analysis offered by DNV GL. NIPSCO anticipates receiving and integrating the Synergi Pipeline application by the end of 2018, which will begin to be utilized in 2019.

• MAOP - Transmission Project (Project No. PS24) - During this period, NIPSCO completed the records research and gap analysis of 665 miles of transmission pipeline and 58 point of delivery stations, which included verifying the completeness of the MAOP classification for each asset. The total amount of federally mandated O&M expenses incurred for this period was $791,681.

5 DNV GL is a global quality assurance and risk management company, with an expertise in many areas, including oil and gas pipeline safety and risk management.

6 This is a software application intended to enable safe and efficient pipeline operations, document risk, and give a clear overview of the integrity of offshore and onshore pipelines.

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Mr. Kanoy testified there are no changes to the approved estimated O&M expenses or scope of the TIMP Projects included in the Pipeline Safety Compliance Plan. He testified that while there have been no changes to the PHMSA Rules that impact NIPSCO's approved TIMP Projects, promulgation of the first phase of rules addressing material verification and MAOP are expected in March 2019 with a second phase of rule updates anticipated in December 2019. Mr. Kanoy testified the PHMSA Rules applicable to the TIMP Projects continue to be federally mandated requirements with which NIPSCO must comply, which requires implementation of the TIMP Projects included in the Pipeline Safety Compliance Plan.

Mr. Stone described and explained the federally mandated costs associated with the Gas Operations Projects incurred forthe period November 8, 2017 through August 31, 2018 (for O&M expenses), as follows:

• Enhanced Emergency Responder Outreach Program (Project No. PS5) - During this period, NIPSCO delivered 49 training sessions. These sessions included 33 different agencies and approximately 744 Emergency Officials. NIPSCO also anticipates incorporating the development of an e-leaming portal for first responders by the end of 2018. The total amount of federally mandated O&M expenses incurred for this period was $21,540.

• DIMP Administration I Leak Data Verification Project (Project No. PS6) -NIPSCO hired one Compliance Specialist in January 2018, who is responsible for the review and verification ofNIPSCO's historic leak records and the input of that data into a model so that the data can be used for predictive modelling in support of DIMP's progressive improvement requirement. At this time, this employee has direct responsibility for some Local Operating Areas ("LOAs") and works alongside responsible parties for other LOAs. Eventually, this employee will have responsibility for all NIPSCO's LOAs. The total amount of federally mandated O&M expenses incurred for this period was $58,772.

• Service Card Enhancements Project (Project No. PS7) -A third-party vendor has been selected to research and locate all gas service cards, inclusive of legacy records, and is responsible for re-creating all missing service cards and providing files to NIPSCO. A Request for Proposal is in process for selecting a third-party contractor to scan, index, and convert service cards to a confirmed data base. Selection of the third-party contractor and a signed master agreement is anticipated to be completed by the end of2018. The total amount of federally mandated O&M expenses incurred for this period was $86,974.

• Fiberglass Riser Replacement Project (Project No. PS8) - NIPSCO hired two contractors to assist in its efforts with the replacement process. During this period, NIPSCO completed 365 units. The total amount of federally mandated O&M expenses incurred for this period was $208,375.

• Legacy Cross Bore Remediation Project (Project No. PS9) - NIPS CO identified 21 gas-related cross bores and, as of August 31, 2018, has remediated 16 of them. Remediation plans for the remaining five are in various stages of engineering or

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execution. The total amount of federally mandated O&M expenses incurred for this period was $12,283.7 See the Legacy Cross Bore Inspection Project (Project No. PS2 l) for further information regarding inspection costs related to cross bores.

• Underground Storage Integrity Project (Project No. PSlO) - For this period, NIPSCO has completed the Integrity Management Plan, the Risk Analysis, and reviewed and, as required, revised the procedures. During this same time, NIPSCO was preparing and planning to "log"8 the wells with the full suite of logging tools, including: (1) Segment Bond Tool, which checks the cement to casing bond; (2) Vertilog Tool, which checks the casing material thickness; and (3) Gamma Ray Neutron Tool, which checks for tube and/or casing leaks by looking for abnormal areas of gas saturation. The total amount of federally mandated O&M expenses incurred for this period was $5,139.

• Farm Tap Remediation Project (Project No. PSll) - While NIPSCO originally forecasted O&M expenses of $27,626 for 2018, it has not incurred any expenses during this period. This is because the projected 2018 expenditure is being deferred to 2019 to align with other work schedules. The $27,626 will be used in later years to complete the Farm Tap Remediation O&M projects originally planned for 2018.

• Legacy Cross Bore Inspection Project (Project No. PS21) - During this period, NIPSCO investigated approximately 55.6 combined miles of sanitary and storm sewer, including sanitary lateral footage. Within that 55.6 miles, there were 50 cross bores identified. Out of those 50 cross bores, 21 were instances of a gas line encroaching on the sanitary or sewer line, and 29 were a mix of water, phone, cable, and/or electric lines. The total amount of federally mandated O&M expenses incurred for this period was $569,149.

• Test Station Casings Project (Project No. PS22) - During this period, NIPSCO inspected 229 cased crossing sites and installed corrosion test stations at all of these sites, which will permit these crossings to be monitored in conjunction with NIPSCO's atmospheric corrosion inspection cycle. The total amount of federally mandated O&M expenses incurred for this period was $294,179.

• MAOP - Distribution Project (Project No. PS23) - During this period, NIPSCO established distribution MAOPs for 16 systems totaling 98.2 miles of main, which had 3,008 associated service lines. There are 14 additional systems that have been engineered and NIPSCO is ready to begin the formal process of establishing MAOPs for these systems in 2019, and an additional 10 systems are in various stages of engineering. The total amount of federally mandated O&M expenses

7 The cross bores that were remediated during this period were lower cost than NIPSCO has estimated for the average cross bore. This is due to the location of these cross bores resulting in much simpler remedies and lower labor costs. NIPSCO still believes that, on average, cross bore remediations are likely to be more in-line with its original estimate.

8 Logging is the practice of recording inventory and conditions of each well. NIPSCO's logging checked tubing, casing, and the bore holes associated with underground wells.

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incurred for this period was $528,331.

Mr. Stone described and explained the federally mandated costs associated with the Gas Operations Projects incurred for the period November 8, 2017 through September 30, 2018 (for capital costs), as follows:

• Underground Storage Integrity Project (Project No. PSlO) - The Underground Storage Integrity Project commences in 2019. There were no capital costs incurred for the period November 8, 2017 through September 30, 2018.

• Farm Tap Remediation Project (Project No. PSl 1) - During this period, 21 Farm Taps were completed; 25 Farm Taps were engineered with construction moving to 2019; 13 were installed but still need the tap retired; two were under construction as of September 30, 2018; and six were cancelled due to remediation associated with other projects. NIPSCO is expecting to complete construction on 36 Farm Taps by the end of 2018.9 The total amount of federally mandated capital costs (direct) incurred for this period was $29,745.

Mr. Stone testified there are no changes to the approved estimated capital costs or O&M expenses, construction start dates or estimated in-service dates, or scope of the Gas Operations Projects included in the Pipeline Safety Compliance Plan. He testified there have been no changes to the PHMSA Rules that impact NIPSCO's approved T&D Projects included in the Pipeline Safety Compliance Plan. He testified that the PHMSA Rules applicable to the Gas Operations Projects continue to be federally mandated requirements with which NIPSCO must comply, which requires implementation of the Gas Operations Projects included in the Pipeline Safety Compliance Plan.

Mr. Bull described and explained the federally mandated costs associated with the T&D Projects incurred forthe period November 8, 2017 through September 30, 2018 (for capital costs). For each of these eight projects, no capital costs were incurred during this period of time, as the projects are scheduled to commence in 2019, with the exception of Transmission RCV Installation Project (Project No. PS15), which is scheduled to commence in 2021.

Mr. Bull testified there are no changes to the approved estimated capital costs, construction start dates or estimated in-service dates, or scope of the T&D Projects included in the Pipeline Safety Compliance Plan. He testified he is not aware of any changes to the PHMSA Rules that impact NIPSCO's approved T&D Projects included in the Pipeline Safety Compliance Plan. He testified that the PHMSA Rules applicable to the T&D Projects continue to be federally mandated requirements with which NIPSCO must comply, which requires implementation of the T&D Projects included in the Pipeline Safety Compliance Plan.

OUCC witness Golden recommended the First Progress Report be approved, with the exception of the $30,000 for 2018 for the Annual Plan Improvements Project (Project No. PS4),

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which NIPSCO is proposing to carry forward into other plan years. With regard to the Annual Plan Improvements Project (Project No. PS4), he stated that this project is intended to improve

9 The balance of Farm Taps that NIPSCO planned to complete in 2018 will be completed in later years.

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NIPSCO's current evaluation program for program and process documentation and that the activities will be incremental to its existing plan and procedure maintenance activities. Specifically, because NIPSCO evaluated and improved its TIMP Plan documents at the corporate level in 2018, Mr. Golden testified that NIPSCO does not need the $30,000 associated with 2018 for later years. He stated that since the dollars for 2018 were not needed and the later years have already had costs estimated, unless there is incremental work being done, it is inappropriate to move unspent dollars to future years simply because they were not needed during the originally planned year.

Based on the evidence presented, we find that the First Progress Report is reasonable. However, we agree with Mr. Golden that carrying forward the $30,000 from 2018 for the Annual Plan Improvements Project (Project No. PS4) is inappropriate because NIPSCO performed that evaluation at the corporate level and has estimated dollars associated with future years included. We, therefore, direct NIPSCO to revise its Pipeline Safety Compliance Plan to remove the $30,000 from the Annual Plan Improvements Project (Project No. PS4) associated with 2018 in its next tracker filing.

6. FMCA.

A. Capital Projects. The total cost of the Pipeline Safety Compliance Project capital projects incurred as of September 30, 2018, upon which NIPSCO is authorized to earn a return is $38,469 (Pet'r's Ex. No. 1, Attach. 1, Revised Sched. 1, Col. H, Line 11), which includes AFUDC. Ms. Dousias testified that NIPSCO computes AFUDC amounts and relevant AFUDC rates in accordance with the FERC Uniform System of Accounts. She testified that if the Commission approves the proposed ratemaking treatment for the total net book value of eligible federally mandated capital costs related to the Pipeline Safety Compliance Projects as of September 30, 2018, then NIPSCO will cease accruing AFUDC on those costs once the incurred costs receive ratemaking treatment and are being recovered through the FMCA.

Ms. Dousias explained the weighted average cost of capital ("W ACC") used to calculate post-in-service carrying charges ("PISCC"). The updated total weighted cost of capital as of September 30, 2018 (the date of valuation of the Pipeline Safety Compliance Projects) is 6.57%.

OUCC witness Mr. Grosskopf agreed the cut-off date of September 30, 2018 is appropriate for calculating NIPSCO's WACC used in determining the FMCA rate factors.

Ms. Dousias explained the calculation of the return on portion ofNIPSCO's semi-annual revenue requirement for capital costs related to the Pipeline Safety Compliance Projects as of September 30, 2018. She testified that the annual revenue requirement for the return on investment is calculated by multiplying the total eligible net book value of federally mandated capital costs related to the Pipeline Safety Compliance Projects as of September 30, 2018, by the debt and equity components of its WACC as of September 30, 2018. She stated that the product ofthis calculation is then multiplied by 50% in order to calculate a semi-annual revenue requirement.

Ms. Dousias explained that PISCC is calculated by multiplying the net book value of completed project costs that have been placed in service, which are not receiving Construction Work in Progress ratemaking, by NIPSCO's effective WACC rate for the period in which the costs

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are in-service. She stated the semi-annual PISCC amount is added to the semi-annual revenue requirement to get a combined total capital revenue requirement. She explained that 20% of the combined total capital revenue requirement is deferred, and the remaining 80% of the combined capital semi-annual revenue requirement is then multiplied by the revenue conversion factor for a total capital semi-annual revenue requirement adjusted for taxes.

Ms. Dousias explained the computation of the revenue conversion factor used to compute the revenue requirement before income tax. She stated the revenue conversion factor is calculated for debt and equity in order to properly synchronize interest for the purpose of calculating the revenue requirement.

B. Depreciation Expense. In this proceeding, NIPSCO requests approval of total depreciation expense associated with assets related to the Pipeline Safety Compliance Project for the period November 8, 2017 through August 31, 2019, of $29,825 (Pet'r's Ex. No. 1, Attach. 1, Revised Sched. 4, P. 1, Line 2, Col. D). 10 Ms. Dousias stated the forecast of depreciation expense is based on projected in-service dates, FERC account unitization, and the related FERC account depreciation rates approved in the 44988 Order.

C. O&M Expense. In this proceeding, NIPSCO requests approval of total O&M expense associated with the Pipeline Safety Compliance Project for the period November 8, 2017 through August 31, 2019, of $12,262,158 (Pet'r's Ex. No. 1, Attach. 1, Revised Sched. 4, P. 1, Line 1, Col. D).11

D. Property Tax Expense. In this proceeding, NIPSCO requests approval of total property tax expense associated with the Pipeline Safety Compliance Project for the period September 1, 2018 through August 31, 2019 of $1,397 (Pet'r's Ex. No. 1, Attach. 1, Revised Sched. 4, P. 1, Line 3, Col. D). 12

E. Total Revenue Requirement. NIPSCO's Adjusted Semi-Annual Return on Capital Revenue Requirement (before tax gross-up) is $2,537 (Pet'r's Ex. No. 1, Attach. 1, Revised Sched. 2, Line 6). Eighty percent of this amount, $2,030 (Pet'r's Ex. No. 1, Attach. 1, Revised Sched. 2, Line 8), will be recovered through the FMCA. The remaining 20%, or $507

10 Since this is the first FMCA filing following approval of the Pipeline Safety Compliance Project, NIPSCO included the recovery of the historical actual period from November 8, 2017 (Line 2, Col. B), and forecasted amounts for the period September 2018 through August 2019 (Line 2, Col. C), which is the end of the billing period.

11 Since this is the first FMCA filing following approval of the Pipeline Safety Compliance Project, NIPSCO included the recovery of the historical actual period from November 8, 2017 (Line 1, Col. B), and forecasted amounts for the period September 2018 through August 2019 (Line 1, Col. C), which is the end of the billing period

12 Since this is the first FMCA filing following approval of the Pipeline Safety Compliance Project, NIPSCO included the recovery of the historical actual period from November 8, 2017 (Line 3, Col. B), and forecasted amounts for the period September 2018 through August 2019 (Line 3, Col. C), which is the end of the billing period. Ms. Dousias stated there is no actual property tax expense associated with eligible assets related to the Pipeline Safety Compliance Project in this filing.

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(Pet'r's Ex. No. 1, Attach. 1, Revised Sched. 2, Line 7), will be deferred and recovered in NIPS CO' s next general rate case.

Based on the evidence presented, we find that NIPSCO's request to begin earning a return on the $38,469 (Pet'r's Ex. No. 1, Attach. 1, Revised Sched. 2, Line 1) from the value of the Pipeline Safety Compliance Project capital projects complies with the 45007 Order. We further find that NIPSCO's proposed Semi-Annual Return on Capital Revenue Requirement of $2,572 (Pet'r's Ex. No. 1, Attach. 1, Revised Sched. 2, Line 10) was properly calculated. Therefore, we approve NIPSCO's request to begin earning a return on the value of the Pipeline Safety Compliance Project capital projects and recovery of 80% of the proposed revenue requirement through the FMCA for bills rendered during the billing month of April 2019, to remain in place until replaced by different factors approved in a subsequent filing.

Based on the evidence presented, we find that NIPSCO's proposed Return of Expense Revenue Requirement of $9,834,704 was properly calculated (Attach. 1, Revised Sched. 5, Line 2). Therefore, we approve NIPSCO's request to begin earning a return of the expenses for the Pipeline Safety Compliance Project and recovery of 80% of the proposed revenue requirement through the FMCA for bills rendered during the billing month of April 2019, to remain in place until replaced by different factors approved in a subsequent filing.

i. Allocation of Federally Mandated Costs. Petitioner's Ex. No. 1, Attach. 1, Revised Sched. 7, includes the allocation percentages attributable to each of Petitioner's rate schedules as reflected in Joint Ex. F to the Stipulation and Settlement Agreement approved in the 45007 Order, which allows NIPSCO to request modification of the allocation percentages to reflect significant migration of customers among the various rate schedules. Ms. Dousias stated that NIPSCO has not proposed any adjustment to its allocation percentages in this filing.

Mr. Grosskopf testifie~ that NIPSCO's allocation of the revenue requirements is consistent with the allocation methodology approved by the Commission.

Based on the evidence presented, we find that NIPSCO's FMCA factors were properly allocated in accordance with our 45007 Order.

ii. Reconciliation. Petitioner's Ex. No. 1, Attach. 1, Sched. 6, P. 1, allows for the reconciliation of the prior FMCA revenue requirement to actual FMCA revenues relating to the Pipeline Safety Compliance Project for the prior period. No prior period revenue was billed or collected from customers, so no variance is included on Pet'r's Ex. No. 1, Attach. 1, Sched. 6, P. 1. Petitioner's Ex. No. 1, Attach. 1, Sched. 6, P. 2, provides the total expense variance, which is a combination of the allocation of the reconciliation of forecasted expenses as shown in Pet'r's Ex. No. 1, Attach. 1, Sched. 3 and the reconciliation of expense revenues as shown in Attach. 1, Sched. 6, P. 1. Ms. Dousias testified that since this is the first filing for the Pipeline Safety Compliance Project, there are no amounts to reconcile in this proceeding.

111. Calculation of FMCA Factors. Ms. Dousias sponsored Pet'r's Ex. No. 1, Attach. 1, Second Revised Sched. 8 showing the calculation of the FMCA factors by rate code based on the previously calculated revenue requirements. The factors are calculated by combining the various components of the revenue requirement, which are allocated by rate code,

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and dividing those components by forecasted volumes to compute a billing factor for bills rendered during the billing month of April 2019, to remain in place until replaced by different factors approved in a subsequent filing.

Ms. Dousias sponsored Pet'r's Ex. No. 1, Second Revised Attach. 3 (App. G- Federally Mandated Cost Adjustment Mechanism Factor) showing the FMCA factors proposed to be applicable for bills rendered during the billing month of April 2019, to remain in place until replaced by different factors approved in a subsequent filing. Ms. Dousias testified the estimated average monthly bill impact for a typical residential customer using 69 therms per month is $2.49, which is based on the average therm per month usage level in Cause No. 44988.

Mr. Grosskopf testified that he reviewed the calculations and flow of inputs from other schedules in Pet'r's Ex. No. 1, Attach. 1 and agreed Attach. 1, Revised Sched. 8 accurately reflects the calculations and flow of data inputs from Schedules 1 through 7.

Mr. Grosskopf also testified that NIPSCO's FMCA calculation schedules, Pet'r's Ex. No. 1, Attach. 1, Scheds. 1-9, and Attach. 2, Scheds. 1-4, accurately calculate and track FMCA costs based on NIPSCO's proposal and recommended approval of NIPSCO's FMCA rate Factors reflected on NIPSCO's revised Pet'r's Ex. No. 1, Attach. 3.

Based on the evidence presented, we approve the proposed FMCA factors in NIPSCO's Pet'r's Ex. No. 1, Attach. 1, Second Revised Sched. 8 as applicable to bills rendered during the billing month of April 2019, to remain in place until replaced by different factors approved in a subsequent filing.

7. Deferred Federally Mandated Costs. In the 45007 Order, we authorized NIPSCO to: (1) defer 20% of the federally mandated costs incurred in connection with the Pipeline Safety Compliance Project for recovery in its next general rate case as allowed by Ind. Code§ 8-l-8.4-7(c)(2); and (2) record ongoing carrying charges based on each month's total WACC on all deferred federally mandated costs including deferred PISCC and return on capital, depreciation, property tax, and O&M expenses until the deferred federally mandated costs are included for recovery in NIPSCO's base rates in its next general rate case.

In this proceeding, Ms. Dousias sponsored Pet'r's Ex. No. 1, Attach. 1, Revised Sched. 9, which is an illustrative ratemaking schedule that accumulates deferred federally mandated costs as well as the ongoing carrying charges on all deferred federally mandated costs until such time as the costs can be recovered as part ofNIPSCO's next general rate case. She explained the amounts included in Pet'r's Ex. No. 1, Attach. 1, Sched. 9 (Line 1) represent 20% of the total capital requirement calculated in Pet'r's Ex. No. 1, Attach. 1, Sched. 2 (Col. D, Line 7), total expense requirement on Pet'r's Ex. No. 1, Attach. 1, Sched. 4, P. 1 (Col. D, Line 5), and total variance related revenue requirements calculated in Pet'r's Ex. No. 1, Attach. 1, Sched. 3 (Col. D, Line 5). The amounts included in Col. E represent the ongoing carrying charges calculated by multiplying the deferred recoverable costs by each month's total WACC through August 31, 2018. These costs will be included for recovery in NIPSCO's base rates in its next general rate case. She stated that the ongoing carrying charges included in this filing specifically relate to depreciation, property tax

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and O&M expenses incurred through August 31, 2018. 13 These ongoing carrying charges were calculated by m~ltiplying the deferred recoverable costs by each month's total W ACC.

Mr. Grosskopf testified that he traced all data inputs in Pet'r' s Ex. No. 1, Attach. 1, Sched. 9 to the source schedules and verified the calculations.

Based on the evidence presented and pursuant to the 45007 Order, we find that FMCA 1 cost to be deferred and recovered in NIPSCO's base rates in its next general rate case is $2,473,946 (Pet'r's Ex. No. 1, Attach. 1, Revised Sched. 9, Col. F, Line 2).

8. Confidentiality. On February 7, 2019, Petitioner filed a motion seeking a determination that designated confidential information involved in this proceeding be exempt from public disclosure under Ind. Code§ 8-1-2-29 and Ind. Code ch. 5-14-3. The request was supported by the affidavit of Benjamin C. Kanoy, showing documents offered into evidence by the OUCC at the Evidentiary Hearing were trade secret information within the scope oflnd. Code§ 5-14-3-4(a)(4) and Ind. Code§ 24-2-3-2. On February 8, 2019, the Presiding Officer issued a docket entry finding such information confidential on a preliminary basis. After reviewing the designated confidential information, we find all such information qualifies as confidential trade secret information pursuant to Ind. Code § 5-14-3-4 and Ind. Code § 24-2-3-2. This information has independent economic value from not being generally known or readily ascertainable by proper means. Petitioner has taken reasonable steps to maintain the secrecy of the information and disclosure of such information would cause harm to Petitioner. Therefore, we affirm the preliminary ruling and find this information should be exempted from the public access requirements contained in Ind. Code ch. 5-14-3 and Ind. Code§ 8-1-2-29, and held confidential and protected from public disclosure by this Commission.

IT IS THEREFORE ORDERED BY THE INDIANA UTILITY REGULATORY COMMISSION that:

1. NIPSCO is authorized to defer and recover 80% of the approved federally mandated costs incurred in connection with the Pipeline Safety Compliance Project identified in Finding No. 6 in its rates and charges for gas service in accordance with NIPSCO's FMCA beginning with the April 2019 billing month.

2. NIPSCO is authorized to recover the FMCA factors in Petitioner's Exhibit 1, Attachment 1-A, Attachment A, Second Revised Schedule 8 to become effective for bills rendered by NIPSCO during the billing month of April 2019, to remain in place until replaced by different factors approved in a subsequent filing, as set out in Finding No. 6 above.

3. Prior to implementing the approved FMCA factors, NIPSCO shall file for approval by the Commission's Energy Division the tariff and an amendment to its rate schedule with reasonable references reflecting that the charges are applicable to the rate schedules reflected on the amendment.

13 Consistent with the Commission's approval in the 45007 Order, NIPSCO incurred O&M associated with the Pipeline Safety Compliance Project beginning November 8, 2017.

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4. NIPSCO is authorized to defer 20% of the federally mandated costs incurred in connection with the federally mandated Pipeline Safety Compliance Project described in Finding No. 7 and to recover those deferred costs in its next general rate case, and NIPSCO is authorized to record ongoing carrying charges based on the current overall W ACC on all deferred federally mandated costs until the deferred federally mandated costs are included for recovery in NIPSCO's base rates in its next general rate case.

5. NIPSCO's Pipeline Safety Compliance Project, as described in NIPSCO's First Progress Report on Petitioner's Exhibit 1, Attachment PR-1, is approved, and NIPSCO is authorized to recover 80% of the costs incurred in connection with the modified Pipeline Safety Project through the FMCA and to defer 20% of the federally mandated costs incurred in connection with the revised Pipeline Safety Compliance Project, including ongoing carrying charges on all deferred federally mandated costs, for recovery in its next general rate case. As set out in Finding No. 5 above, NIPSCO is directed to revise its Pipeline Safety Compliance Plan to remove the $30,000 from the Annual Plan Improvements Project (Project No. PS4) associated with 2018 in its next tracker filing.

6. The information filed by Petitioner in this Cause pursuant to its Motion for Protective Order is deemed confidential pursuant to Ind. Code§ 5-14-3-4 and Ind. Code§ 24-2-3-2, is exempt from public access and disclosure by Indiana law, and shall be held confidential and protected from public access and disclosure by the Commission.

7. This Order shall be effective on and after the date of its approval.

KREVDA, OBER, AND ZIEGNER CONCUR; HUSTON AND FREEMAN ABSENT:

APPRovEn: MAR .2 '7 2ms

I hereby certify that the above is a true and correct copy of the Order as approved.

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