Board of Directors for Utilities of Dept. of Public Utilities of City of Indianapolis v. Office of Utility Consumer Counselor, 2-783-A-233
| Citation | 473 N.E.2d 1043 |
| Decision Date | 07 February 1985 |
| Docket Number | No. 2-783-A-233,2-783-A-233 |
| Parties | BOARD OF DIRECTORS FOR UTILITIES OF the DEPARTMENT OF PUBLIC UTILITIES OF the CITY OF INDIANAPOLIS, As Successor Trustee of a Public Charitable Trust d/b/a Citizens Gas & Coke Utility, Appellant (Petitioner Below), v. OFFICE OF the UTILITY CONSUMER COUNSELOR, Public Service Commission of Indiana, Appellees, Citizens Action Coalition of Indiana, Inc., Industrial Energy Consumers, Nelson G. Grills, Appellees (Intervenors Below). |
| Court | Court of Appeals of Indiana |
William P. Diener, Indianapolis, Michael B. Cracraft, Smith, Morgan & Ryan, Indianapolis, for appellant.
Ronald L. Dyer, Indianapolis, for appellee, Office of the Utility Consumer Counselor.
The Board of Directors for Utilities of the Department of Public Utilities of the City of Indianapolis, Successor Trustee of a Public Charitable Trust d/b/a Citizens Gas & Coke Utility (Citizens Gas) appeals from a Public Service Commission (Commission) order entered on June 20, 1983. The Commission's Order (Order) disallowed the portion of Citizens Gas' proposed revenue requirements which requested a four percent return on net utility plant, and separate line amounts for working capital and extensions and replacements.
On appeal, Citizens Gas states five issues which can be consolidated as follows:
1. Whether the Commission's findings disallowing revenues for a rate of return and working capital and limiting the amount for extensions and replacements are supported by substantial evidence pursuant to I.C. 8-1-2-96. (Burns Code Ed.1982, Compiler's Notes)
2. Whether the Commission erred in refusing to allow rebuttal evidence in opposition to the Commission's Staff Reports admitted into the record pursuant to I.C. 8-1-1-5. (Burns Code Ed.1982)
3. Whether the Commission erred in discussing miscellaneous matters not placed in issue by the parties before it.
Citizens Gas is a municipal gas utility subject to the jurisdiction of the Commission and charged with the duty of providing gas service to Indianapolis and the surrounding communities in Marion County, Indiana. As of June 20, 1982, Citizens Gas provided service to approximately 206,838 residential, commercial, and industrial customers in Marion County. The Board of Directors of Citizens Gas is empowered to prescribe rules setting rates for service, subject to approval by the Commission. 1
On September 17, 1982, Citizens Gas petitioned the Commission for authority to increase its existing gas service rates and charges, for approval of new schedules of rates and charges and for approval of new terms and conditions for gas service within Marion County.
After due notice a Prehearing Conference and Preliminary Hearing were scheduled and held on October 25, 1982. The Prehearing Conference is designed to expedite the hearing on the merits by encouraging the parties to discuss and stipulate to certain preliminary matters. At the Prehearing Conference, appearances were entered on behalf of Citizens Gas, and on behalf of the consumers by the Office of the Utility Consumer Counselor (Consumer Counselor). Thereafter, Citizens Gas filed a supplemental petition requesting approval to implement rates and charges sufficient to produce annual revenues of $290,340,178 an increase of $31,317,798 over past operating revenues. 2
Between the Prehearing Conference and commencement of the public hearing, the Commission granted the Petitions to Intervene of three additional parties, Citizens Action Coalition of Indiana, Inc., Industrial Energy Consumers, and Nelson G. Grills. All petitions were granted subject to the state of the record as of the date of intervention. None of the intervenors below have filed an Appellee's response to Citizens Gas' appeal of the Order.
The public hearing commenced on February 1, 1983. Citizens Gas presented evidence in support of its requested rate increase. Following evidence taken on February 2, the hearing was continued to March 21 and 22 to allow evidence in opposition to the rate increase and to afford members of the general public an opportunity to testify and challenge the proposed increase.
On March 22, over the objections of Citizens Gas, the Commission admitted into the record three reports made by its own staff. Staff Report 2 was thereafter struck from the record as not prepared under the direction of the Commission and is not at issue in this appeal.
Staff Reports 1 and 3 recommended an increase of rates and charges sufficient to provide Citizens Gas an additional $18,879,764 and $18,571,642, respectively, in annual operating revenues. The Order permitted an increase of $11,545,043 in annual operating revenues, denied the requested amount for working capital and limited the allowance for extensions of services and replacements of existing facilities. The requested rate of return of four percent of net utility plant, $5,462,769, was also denied as unnecessary and unreasonable in light of Citizens Gas' "sound physical and financial condition."
In addition, the findings discussed several miscellaneous, extrinsic matters, not placed in issue by any of the parties. The Commission made critical references to an apparent dispute over management and operation of the utility as indicated by an unsworn written statement of the Mayor of Indianapolis. The Commission also alluded to the failure of the chief executive officer of Citizens Gas to appear and defend or explain salary increases and other management decisions. The findings and Order also included a prohibition against further charitable contributions by Citizens Gas and threatened to require personal indemnification for future contributions from the trustees, officers and directors.
Subsequent to the Order and pending appeal, the Tariff Division of the Engineering Department of the Commission approved a new schedule of rates and charges which permitted Citizens Gas to collect the higher of the rates fixed by the Order or the previous rates. 3
The Commission is vested with authority to approve a municipal utility's rates and charges which are reasonable and just, in accordance with the factors enumerated in I.C. 8-1-2-96. 4 On appeal, the Commission's decision and findings are subject to a two-tiered standard of review. 5 Citizens Action Coalition v. Public Service Commission (4th Dist.1983) Ind.App., 450 N.E.2d 98, 101, reh. denied; L.S. Ayres & Co. v. Indianapolis Power & Light Co. (2d Dist.1976) 169 Ind.App. 652, 661, 351 N.E.2d 814, 821, tr. denied; City of Evansville v. Southern Indiana Gas and Electric Co. (2d Dist.1975) 167 Ind.App. 472, 482, 339 N.E.2d 562, 571.
Initially, the Commission's decision or order must include basic findings upon all material facts in issue. These findings must be drawn with sufficient specificity to enable the Court of Appeals to intelligently review the decision. The degree of specificity required will vary in each individual case depending upon the factual complexity and the amount and quality of evidence introduced. Perez v. United States Steel Corp. (1981) Ind., 426 N.E.2d 29, 33; Charles W. Cole & Son, Inc. v. Indiana & Michigan Electric Co. (1st Dist.1981) Ind.App., 426 N.E.2d 1349, 1353. The basic findings, however, must provide the underlying reasons from which the ultimate findings or conclusions will reasonably flow. As stated by the Indiana Supreme Court, "[the] findings of basic fact must reveal the [Commission's] analysis of the evidence and its determination therefrom regarding the various specific issues of fact which bear on the particular claim." Perez, supra, 426 N.E.2d at 33. A finding is insufficient if in fact it is merely a summary or recitation of the evidence which does not manifest the Commission's expertise in analyzing such evidence. Talas v. Correct Piping Co. (1981) Ind., 426 N.E.2d 26, 28.
At the second level of review, the Court determines whether the Commission's basic findings of fact are supported by substantial evidence of record. Capital Improvement Board v. Public Service Commission (2d Dist.1978) 176 Ind.App. 240, 245, 375 N.E.2d 616, 622. In this respect, the court is not empowered to substitute its judgment for that of the Commission and where a reasonably sound basis of evidentiary support exists, the Commission's findings will be upheld. L.S. Ayres & Co., supra, 169 Ind.App. at 664, 351 N.E.2d at 823.
With these principles in mind, we turn to the specific issues presented upon appeal.
Citizens Gas alleges error in the Commission's findings regarding the requested amounts for a rate of return, for working capital and for extensions and replacements. Specifically, Citizens Gas argues that the findings are unsupported by substantial evidence of record and that in fact the substantial evidence of record requires a contrary result. Citizens Gas also argues that such findings are contrary to law in that the Commission disregarded specific statutory mandates. We will address each of these contentions separately.
As part of its revenue requirements, Citizens Gas included a request for $5,462,769, which represented a four percent rate of return upon net utility plant in service. 6 During the hearings before the Commission, both Consumer Counselor and the Commission's Staff Report 3 recommended that Citizens Gas receive the requested rate of return. In this appeal, the parties present varying interpretations of I.C. 8-1-2-96, which generally directs the Commission to approve charges which are sufficient to include a reasonable return if so elected by the governing board of the utility.
Citizens Gas interprets this language to mean that once an election to include a rate of return is made by its governing board, the Commission has no discretion to deny that request to the extent that the rate of return is reasonable, and that a sound financial and physical condition does not preclude an otherwise reasonable return. Consumer Counselor initially supported...
To continue reading
Request your trial