National Rural Utilities Co-op. Finance Corp. v. Public Service Com'n of Indiana, 93S02-9003-EX-215

Citation552 N.E.2d 23
Case DateMarch 21, 1990
CourtSupreme Court of Indiana

Page 23

552 N.E.2d 23
Association, Inc., Office of the Utility Consumer Counselor,
City of Fort Wayne, Indiana, Public Service Company of
Indiana, Inc., Fruit Belt Electric Cooperative, Jay County
REMC, United REMC, Warren County REMC, Boone County REMC,
Kankakee Valley REMC, and United States of America on Behalf
of Its Rural Electrification Administration, Department of
Agriculture, Appellees.
UNITED STATES of America, Appellant,
No. 93S02-9003-EX-215.
Supreme Court of Indiana.
March 21, 1990.

Page 24

Thomas E. Kieper and Jan Helpert, Office of Utility Consumer Counselor, Indianapolis, for Office of Utility Consumer Counselor.

William M. Evans, Bose, McKinney & Evans, Indianapolis, for Kankakee Valley REMC.

Leo Clifford, Clifford, Clauden & Alea, Valparaiso, for appellee.

Alan Kornberg, Milbank, Tweed, Hadley & McCloy, New York City, Fred E. Schlegel, Michael J. Huston, Mary M. Stanley, Baker & Daniels, Citizens Action Coalition, Indianapolis, Dennis Eicher, Vice President, Power Systems Engineering, Ham Lake, Mich., James R. McClarnon, Michael B. Cracraft, Hackman, McClarnon & McTurnan, and Thomas D. Titsworth, Bamberger & Feibleman, Indianapolis, for appellant.

Linley E. Pearson, Atty. Gen., for appellee.

John Coldren, Coldren & Frantz, Portland, Albert Ernst and Jon R. Robinson, Dykema, Gossett, Spencer, Goodnow & Trigg, Lansing, Mich., for Fruit Belt Elec. Co-op., Warren County REMC, United REMC, Boone County REMC, and Jay County REMC.

Robert L. Thompson, P.C., Fort Wayne, for City of Fort Wayne, Ind.

Dujean C. Garrett, Greg K. Kimberlin, Public Service Co. of Indiana, Plainfield, and Jerry P. Belknap, Barnes & Thornburg, Indianapolis, for Public Service Co. of Indiana.

Don F. Morton and Carol Sparks, Parr, Richely, Obremskey & Morton, and Wabash Valley Power Ass'n, Inc., Indianapolis, for Wabash Valley Power Ass'n, Inc.

DeBRULER, Justice.

Appellants here are the Rural Electrification Administration of the United States government (REA) and National Rural Utilities Cooperative Finance Corporation (CFC), lenders who advanced funds to the Wabash Valley Power Association (Wabash) to be used toward the completion of the Marble Hill nuclear power generation plant, a joint enterprise Wabash had undertaken in conjunction with Public Service Company of Indiana. Following the abandonment of construction at Marble Hill, Wabash filed a petition with the Public Service Commission of Indiana (now the Indiana Regulatory Commission) for a fifty-one percent rate increase intended to generate funds to pay project-related debts. The commission dismissed Wabash's petition with prejudice, noting that under this Court's holding in Citizens Action Coalition v. Northern Indiana Public Service Co. (1985), Ind., 485 N.E.2d 610

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(NIPSCO ), 1 a utility may not recover sunk costs associated with the cancellation of a nuclear power project through a rate increase. The Court of Appeals affirmed the commission's decision, fully addressing the issues raised by REA and CFC in their appeal. National Rural Utils. Coop. Fin. Corp. v. Public Serv. Comm'n (1988), Ind.App., 528 N.E.2d 95. We grant the petitions for transfer and affirm pursuant to Indiana Rule of Appellate Procedure 11(B)(3). A brief summary of the resolution of the issues raised on appeal follows.

I. The commission acted within its jurisdiction when it entered its order since the order constituted neither an advisory opinion nor a declaratory judgment.


REA argued that because Wabash did not strongly support its petition for a rate increase, there was no case or controversy before the commission and that the resulting order was therefore merely an advisory opinion, which the commission had no jurisdiction to enter. Jurisdiction requires an actual, existing justiciable controversy between adverse parties. One aspect of adverseness is the propriety and ability of one of the parties to call upon the tribunal to adjudicate its cause. Because all rate increases must be approved by the commission, it had primary jurisdiction to hear the petition, and as the entity seeking the increase, Wabash was the proper party to invoke the commission's jurisdiction. The validity and desirability of the proposed rate increase, which would have had an immediate and substantial impact on Wabash, its ratepayers, and its creditors, was vigorously contested by adversarial, interested parties and intervenors. The commission's order was a ruling on a live case or controversy and not an advisory opinion.


REA argued that the commission exceeded its jurisdiction by issuing what amounted to a declaratory judgment. The commission's duty is to enter orders based on impartial findings of fact, and the commission is not empowered to enter declaratory judgments. REA contended that because no factual record existed as to whether Wabash was entitled to emergency rate relief, the commission had issued a premature legal opinion, i.e., an impermissible declaratory judgment. However, these parties appeared before the commission to contest the merits of a proposed rate increase, not to have their rights, status, and relations determined. The commission's order was a ruling on a pending petition, and the commission was not stripped of its jurisdiction because this ruling was based on the legal conclusion that NIPSCO controlled the outcome of the controversy at hand nor because the rights of Wabash's creditors would be affected by its decision.

II. The commission did not abuse its discretion by dismissing Wabash's petition on the merits rather than for lack of prosecution.

REA and CFC argued that since Wabash's petition could have been dismissed procedurally for failure to prosecute under 170 I.A.C. 1-1-21, the commission committed error when it dismissed the petition on its merits. The cited provision gives the commission the discretion to dismiss a petition for failure to prosecute if there has been no activity on the petition for six months and after notice has been given to the parties that the dismissal will occur. Wabash requested and was granted a stay in the proceedings pending the decision of this Court in NIPSCO. The commission did not exercise its discretion to dismiss for failure to prosecute and did not

Page 26

give the requisite notice of dismissal. In light of Wabash's request and the determinative impact that NIPSCO had on the case at hand, the commission did not err in dismissing Wabash's petition on its merits.

III. The commission did not err in concluding that Wabash was not entitled to the rate relief it requested.

This Court held in NIPSCO that an investor-owned utility cannot implement a rate increase to recover costs associated with a facility which was never used or useful in the production of energy. This holding is applicable to and determinative of the issue at hand, appellants' efforts to distinguish their situation from that in NIPSCO notwithstanding.


REA and CFC sought to distinguish this case from NIPSCO on the basis that the ratepayers here were the owners, and therefore the risk-bearers, of the utility. In NIPSCO, the utility was investor-owned, and the ratepayers were simply customers paying for service, not investors seeking returns. Appellants contend that, as members of a cooperative association, the ratepayers here were not merely customers, but had invested in the utility and were therefore subject to the risk of loss inherent in any investment activity.

In support of their view, appellants advanced as persuasive authority case law from other jurisdictions in which the courts stated that members of electrical cooperatives were both customers and stockholders of the utility. However, the question presented here, who must bear the risk of loss for a cancelled nuclear power project, is clearly distinguishable from the issues presented in those cases, whether cooperative members are competent to sit on a jury in a trial where the utility is one of the parties and whether a utility has the power of eminent domain. The cases cited by appellants have no applicability, and therefore no persuasive effect, here.

Appellants also advanced a statement made by the commission in an unrelated case, In re Hoosier Energy Rural Elec. Coop., Inc. (August 12, 1987 Cause No. 38315), and a quotation from an interim order issued by the commission in this case as evidence that the Wabash ratepayers were investors and should be held subject to risk of loss for the failed Marble Hill project. In Hoosier Energy, the commission discussed the financial responsibility of cooperative membership, but the resolution of the case turned on principles unrelated to the "used and useful" standard and is wholly inapplicable here. In an interim order issued in this case, the commission noted that the application of NIPSCO to the facts at hand would have the apparent result that no one would be...

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