BY KEITH BENMAN
kbenman@nwitimes.com
219.933.3326 | Thursday, February 05, 2009 |

As NIPSCO officials made their case for an electric rate increase Wednesday in Indianapolis, parent company NiSource Inc. reported it beat earnings expectations for the fourth quarter of 2008.

NiSource Inc. profits rose to $162 million, or 59 cents per share, from $67 million, or 24 cents per share, in the same quarter last year, the Merrillville-based company reported Wednesday morning.

Full-year results for 2008 came in at the high end of the company's expectations, with income from continuing operations of $369.8 million, or $1.35 per share, as compared to $302.9 million, or $1.10 per share, in 2007.

NiSource stock shot up more than 9 percent in trading later in the day on the New York Stock Exchange.

Opponents of NIPSCO's request for a 15.6 percent increase in residential electric rates said those earnings results were one more reason regulators should take a hard line with the company regarding a rate increase.

"How much do they have to make?" asked Hammond Mayor Thomas McDermott Jr.

The mayor said NIPSCO should have to cut costs in the same way local governments are doing before regulators consider a rate increase.

Since Jan. 12, NIPSCO officials have been undergoing cross-examination by consumer groups in front of the Indiana Utility Regulatory Commission in Indianapolis.

Those hearings wrap up this week. There will be a public hearing on the rate increase request March 3 in Gary. Later in the year, there will be more hearings before regulators in Indianapolis. The case could drag into 2010.

NiSource owns NIPSCO and utilities in a number of other states.

NiSource's earnings report was not all rosy Wednesday.

It revised earnings expectations for this year downward to between $1 and $1.10 per share for the entire year. Previously, it had predicted earnings of $1.25 to $1.35 per share.

To cut costs, NiSource reported it will reduce expenditures for operations and maintenance, limit hiring, freeze base compensation for senior executives and postpone pay increases for some other employees, NiSource Chief Executive Officer Robert Skaggs Jr. said.

Also on the cost-cutting side, the utility is reducing planned capital spending for this year to $800 million from $1 billion.

Skaggs told analysts in a morning conference call the company was dealing with the "one-two punch" of pension expenses and the economic downturn.

NiSource plans to plow an additional $100 million into its employee pension plan in the wake of the stock market collapse, he said. That will shave about 24 cents per share off earnings.

NIPSCO's results as reported Wednesday in turn were not as rosy as NiSource's. NIPSCO electric operating earnings dropped to $220.2 million in 2008 from $283.1 million in 2007.

Some analysts quizzing Skaggs on the conference call had concerns that were the opposite of those expressed by consumer groups. They wanted to know if the proposed NIPSCO rate increase will be enough to take the company through the tough times ahead.

One asked Skaggs if NIPSCO might have to "pancake" a second electric rate case on top of the current one.

Skaggs said industrial demand clearly will lag for some time, and the pension situation remains subject to market conditions.

"Those things could indicate a need to reopen the rate case at some point," Skaggs replied. "But we are nowhere near that point at this time."