Member System Profiles: Citizens Gas & Coke Utility

So, to insulate the utility from ”corporate takeover and the vagaries of political change," as CGCU Communications Manager Dan Considine put it, the city fathers, including pharmaceutical pioneer Colonel Eli Lilly, chartered the company in 1887 as a Public Charitable Trust.

While there have been attempts over the years by various politicians to try to gain control and to sell the gas company, all have failed, because they would violate the main precept of the trust, that of benefiting the citizens of Marion county. Citizens Gas & Coke Utility exists only for the benefit of the citizens of Marion County.

The assets are now owned by the city of Indianapolis, but not governed by the city in any way. It is instead governed by a Board of Trustees and a Board of Directors made up of Marion county citizens. When a vacancy occurs on one Board, the other appoints a replacement, and vice versa. Board members receive minimal compensation of only 50 dollars a year, making the position almost voluntary.

If the system makes a profit, that profit has to either be given back to the ratepayers in the form of lower rates or reinvested to make the company’s facilities more reliable and efficient. “When Citizens Gas says that customer service is No. 1, we really mean it,” says Considine. Citizens has the data to prove it, having consistently been among top three of utilities in the Midwes for customer service in an annual J.D. Powers survey. “Three years ago we were No. 1!”

Community service is also a very important goal, for more reasons than just philanthropy. They are active in neighborhood redevelopment through their Community Investment Program, which provides financial backing for redevelopment as a way of reinvigorating stranded gas lines. For example, five blocks north of Citizen’s Headquarters is Fall Creek Place, which was a rundown largely vacant neighborhood ten years ago. Today, it is cited as national example of revitalization. Citizens joined with other corporations and the city to restore existing homes and build new homes. The utility is still involved in similar projects throughout the city.

The Gas Operations Division distributes natural gas to more than 266,000 customers, most in Marion County. Since 2004, this number has also included Westfield in Hamilton County through Citizens Energy Services.
The Gas Operations Division operates and maintains more than 3,800 miles of pipeline. To help meet winter heating demand, the utility operates two liquefied natural gas facilities in Indianapolis and underground storage fields in Central Indiana. To ensure safe and reliable natural gas delivery, Citizens Gas continually invests millions of dollars to replace steel mains with more durable, longer-lasting plastic mains.

The system is also unique in the width of its operations.
The second part of Citizens name –“Coke Utility” still applies to Indianapolis Coke as it has since 1908, when it was originally founded to provide manufactured gas to the city after the system’s original gas supply in Indiana started running out in the late 1890’s. This large coke manufacturing business now continues to provide coke to steel mills and foundries.
Citizens Gas also ended up with an Oil Division, purely by accident. In the early 1960s, Citizens began to develop the previously mentioned natural gas storage fields about 70 miles southwest of Terra Haute, Indiana. In process of doing so, their crews inadvertently struck oil! This field has so far produced over 6 million barrels of oil. This has been a stable revenue stream ever since, bringing in $1-2 million in profit in recent years.

In 2000, Citizens Gas acquired the second largest steam and chilled water operation in the nation from Indianapolis Power and Light (IPL). This operation is now serving over 200 buildings in the downtown Indianapolis area – and growing.

Through Citizens By-Products (CBP), a Citizens Gas affiliate, the company can operate in industries unregulated by the Indiana Utility Regulatory Commission (IURC). CBP has existed in its present form since 1935. Among these subsidiaries is Citizens Mechanical Services, which provides commercial hot water installations, boilers, and the like, and Remittance Processing Services, a joint billing operation established with IPL.

It also includes a 39% stake in APGA Associate ProLiance Energy, one of Midwest’s largest gas marketing companies. This was established 10 years ago; in cooperation with what is now Veteran’s energy, who owns the other 61%.
To help people deal with the high prices of the recent past, Citizens has been proactive in communication at all levels, using every medium possible, such as conservation events, TV, and bill stuffers. The system has been trying to raise awareness of the need to conserve energy, and to educate the customers that the company is not benefiting from high prices.

The Indiana Utility Regulatory Commission recently granted Citizens Gas a 3.6 percent increase in its base delivery rate, which was the utility’s first base rate increase in 15 years. However, the Commission rejected the utility’s request for a new rate design that would decouple gas sales volume from revenue collection. “By tying gas sales volumes to revenue collection, the current rate methodology penalizes the company for encouraging customers to conserve energy. We will continue seeking Commission approval of a so-called decoupled rate design that allows the company to recover its fixed operating costs, which means customers would only be charged what it costs the utility to serve them, no more and no less.” Even after the recent rate increase, Citizens Gas continues to have among the lowest gas rates in Indiana and similar sized cities in the northern half of the United States.

As it works to hold down operating costs and make wise gas purchasing decisions, Citizens Gas is working with state and local officials to find additional sources of funding to provide for financially struggling customers. For example, they participate in the state’s new Help Thy Neighbor program, which provides aid for people just above the federal poverty level. The three largest utilities in Indiana provided donations (in Citizen’s case, $500,000) to start it, and the governor provided additional funding. The utility also created a Universal Service Program (USP), with funding provided from the revenues of unregulated affiliates. “In 2005, $3 million was put into the USP, which provided all 16,000 LIHEAP eligible customers a 9-24% discount based on a sliding scale, in addition to LIHEAP funding.“

Citizens Gas is a member of APGA because they want to be affiliated with other municipality owned, which play quite a different role than a typical investor-owned utility. “With our fellow municipality owned systems, community service and customer services rises to a higher level of importance than it may for other systems.” APGA gives them access to various resources. “Anything we can get from APGA and AGA to not reinvent the wheel helps. We are always looking for ideas.” Citizens’ executives serve on APGA boards.

In addition to finding ways to increase the nation’s supply of natural gas to lower prices, Citizens Gas management team believes APGA should advocate for increased LIHEAP funding and decoupled rate design to align utility’s interests with those of customers.

Originally in November 20, 2006 Public Gas News