Regulatory Matters

3 Months Ended

Mar. 31, 2024

Regulated Operations [Abstract]

Regulatory Matters

2. REGULATORY MATTERS

Regulatory Rate Review

On April 17, 2024, the IURC issued an order (the “2024 Rate Order”) approving the Stipulation and Settlement Agreement that AES Indiana entered into on November 22, 2023, with the OUCC and the other intervening parties in AES Indiana’s base rate case filing. Among other matters and consistent with the Stipulation and Settlement Agreement, the 2024 Rate Order approves an increase in AES Indiana's total annual operating revenue of $71 million for AES Indiana’s electric service and provides a return on common equity of 9.9% and cost of long-term debt of 4.90% on a rate base of approximately $3.5 billion. Updated customer rates and charges are expected to be effective in May 2024.

Storm Outage Restoration Inquiry

On July 11, 2023, the OUCC and the Citizens Action Coalition of Indiana (“CAC”) filed a Joint Petition through which they requested the IURC open an investigation into AES Indiana’s practices and procedures regarding storm outage restoration. A technical conference was held on October 2, 2023, to discuss AES Indiana’s response to outages and storm restoration; particularly the storms that occurred between June 29, 2023 and July 2, 2023. In its 2024 Rate Order, the IURC stated, "The uncontested evidence established that AES Indiana’s response to the June 29 storm was equal to or better than the response provided by other utilities, as evidenced by a comparison of storm response with the information other utilities provided at a September 28, 2023 technical conference regarding their respective response. The evidence also established that the priorities used to guide each utility’s restoration efforts and overall effort were the same." Contemporaneous with the 2024 Rate Order, this Joint Petition was dismissed with prejudice.

IRP Filings and Replacement Generation

2022 IRP

In December 2022, AES Indiana filed its 2022 IRP with the IURC, which describes AES Indiana’s Preferred Resource Portfolio for meeting generation capacity needs for serving AES Indiana’s retail customers over the next several years. The Preferred Resource Portfolio is AES Indiana’s reasonable least cost option and provides a cleaner and more diverse generation mix for customers. The 2022 IRP short-term action plan includes converting the two remaining coal units at Petersburg to natural gas.

Petersburg Repowering

On March 11, 2024, AES Indiana filed for approval of a CPCN with the IURC to convert Petersburg Units 3 and 4 from coal to natural gas and to recover costs through future rates. The conversion of Unit 3 is expected to begin in February 2026 and be completed by June 2026 and the conversion of Unit 4 is expected to begin in June 2026 and be completed by December 2026. A hearing for this case is expected to be held in August 2024, and we expect the IURC to issue an order on this proceeding during the fourth quarter of 2024.

Hardy Hills Solar Project

In December 2023, the first stage of construction for the Hardy Hills Solar Project was completed and placed in service, with initial operations for over half of the project commencing on December 28, 2023. Construction was completed for the remaining MW and the project achieved full commercial operations in May 2024.

Hoosier Wind Project

In August 2023, AES Indiana filed for IURC issuance of a CPCN approving the acquisition of 100% of the membership interests in Hoosier Wind Project, LLC (the “Hoosier Wind Project”), which is an existing 106 MW wind facility located in Benton County, Indiana. IURC approval was received on January 24, 2024, and the transaction closed on February 29, 2024. Immediately following the acquisition of the Hoosier Wind Project, the legal entity was dissolved by AES Indiana. The transaction was accounted for as an asset acquisition that did not meet the definition of a business. Of the total consideration transferred of $92.6 million, including transaction costs, approximately $48.8 million was allocated to the identifiable assets acquired on a relative fair value basis, primarily consisting of tangible wind farm assets and typical working capital items. The remaining consideration was allocated to the termination of the pre-existing power purchase agreement between AES Indiana and the Hoosier Wind Project, which was deferred as a long-term regulatory asset.