Section 170IAC4-4.1-9. Rates for capacity purchase

   (a) A basic, unadjusted monthly avoided cost of capacity for a generating utility shall be calculated as follows:

Where:	C	=	Unadjusted monthly capacity payment per kilowatt of contracted capacity year of completion of unit.
	D	=	Present value of carrying charges for one dollar ($1) of investment over n years with carrying charges assumed to be paid at the end of each year.
	V	=	Investment amount in year of completion, including allowance for funds used during construction, of the avoidable or deferrable unit, stated on a per kilowatt basis and including rated share of common costs.
	n	=	Expected life of the avoidable or deferrable unit.
	ip	=	Annual escalation rate associated with the avoidable or deferrable unit.
	io	=	Annual escalation rate associated with the operation and maintenance expenses, less fuel and fuel-related expenses, of the avoidable or deferrable unit.
	r	=	Purchasing utility's after tax cost of capital.
	O	=	Expected total fixed and variable yearly operating and maintenance expenses, less fuel and fuel-related expenses, in expected first year of avoidable or deferrable unit's operation stated on a per kilowatt basis.
	l	=	Line losses, expressed as a percentage, for the previous year.
	t	=	Contract term in years, with t = 1 to t.

  (b) Capacity payments which will begin before the avoidable or deferrable unit is expected to become used and useful, shall be calculated as follows:

Where:	Ca	=	Adjusted monthly capacity payment.
	Δt	=	In-service date of avoidable or deferrable unit less in-service date of qualifying facility.
			C, ip, r as previously defined in equation of subsection (a).

  (c) Except as permitted by subsection (g), the unadjusted rate per kilowatt for purchase of capacity shall not be lower in any year than the levelized annual economic carrying charge per kilowatt on a new combustion turbine, which shall be calculated by application of subsection (a) wherein the variable V shall be for a combustion turbine completed in the first year of any contract for purchase of capacity.

  (d) Monthly payments for capacity calculated in subsections (a) through (b) shall be adjusted by the following factor:

Where:	F	=	Capacity payment adjustment factor.
	Ep	=	Kilowatt-hours delivered to the electric utility during the peak period by the qualifying facility.
	K	=	Kilowatts of capacity the qualifying facility contracts to provide.
	Tp	=	Number of hours in peak period.

  (e) A basic, unadjusted monthly rate per kilowatt for purchase of capacity by a nongenerating utility from a qualifying facility shall be the utility's current weighted average cost per kilowatt paid to the utility's other suppliers.

  (f) Monthly payments for capacity calculated in subsection (e) shall be adjusted by application of a factor developed from subsection (d).

  (g) An electric utility and a qualifying facility may negotiate a rate for capacity which differs from the results of subsections (a) through (f). (Indiana Utility Regulatory Commission; 170 IAC 4-4.1-9; filed Mar 7, 1985, 10:04 a.m.: 8 IR 763; filed Jun 8, 1989, 2:00 p.m.: 12 IR 1837; readopted filed Jul 11, 2001, 4:30 p.m.: 24 IR 4233; errata, 25 IR 2521; readopted filed Apr 24, 2007, 8:21 a.m.: 20070509-IR-170070147RFA; readopted filed Aug 2, 2013, 2:16 p.m.: 20130828-IR-170130227RFA)