NIPSCO Indus. Grp. v. N. Ind. Pub. Serv. Co.

• Decision Date: 08 April 2015
• Docket Number: No. 93A02–1403–EX–158.,93A02–1403–EX–158.
• Citation: 31 N.E.3d 1
• Parties: NIPSCO INDUSTRIAL GROUP, and, Indiana Office of Utility Consumer Counselor, Appellants–Intervenor and Statutory Party below, v. NORTHERN INDIANA PUBLIC SERVICE COMPANY, et al., Appellees–Petitioner and Parties below.
• Court: Indiana Appellate Court

31 N.E.3d 1

NIPSCO INDUSTRIAL GROUP, and, Indiana Office of Utility Consumer Counselor, Appellants–Intervenor and Statutory Party below

v.NORTHERN INDIANA PUBLIC SERVICE COMPANY, et al., Appellees–Petitioner and Parties below.

No. 93A02–1403–EX–158.

Court of Appeals of Indiana.

April 8, 2015.

Todd A. Richardson, Bette J. Dodd, Jennifer W. Terry, Joseph P. Rompala, Lewis & Kappes, P.C., Indianapolis, IN, Attorneys for Appellant, NIPSCO Industrial Group.

A. David Stippler, Randall C. Helman, Lorraine Hitz–Bradley, Jeffrey Reed, Indianapolis, IN, Attorneys for Appellant, Indiana Office of Utility Consumer Counselor.

Wayne C. Turner, Patrick Z. Ziepolt, Bingham Greenebaum Doll, LLP, Indianapolis, IN, Attorneys for Amicus Curiae, Indiana Energy Association.

David Lee Steiner, Deputy Attorney General, Office of the Indiana Attorney General, Beth Krogel Roads, Andrew J. Wells, Indiana Utility Regulatory Commission, Indianapolis, IN, Attorneys for Appellee, Indiana Utility Regulatory Commission.

Brian J. Paul, Kay E. Pashos, Kelly S. Earls, Ice Miller, LLP, Claudia J. Earls, Erin Casper Borissov, NiSource Corporate Services—Legal, Indianapolis, IN, Attorneys for Northern Indiana Public Service Company.

Richard E. Aikman, Jr., Anne E. Becker, Lewis & Kappes, P.C., Indianapolis, IN, Attorneys for NLMK, Indiana, A Division of NLMK USA.

BARNES

, Judge.

Case Summary

[1] In this consolidated appeal, the Indiana Office of Utility Consumer Counselor (“OUCC”) and the NIPSCO Industrial Group (“Industrial Group”) appeal the decision of the Indiana Utility Regulatory Commission (“Commission”) regarding two petitions filed by Northern Indiana Public Service Company (“NIPSCO”) to establish increased rates under a new statute, Indiana Code Chapter 8–1–39. We affirm in part, reverse in part, and remand.¹

Issues

[2] The Industrial Group raises three issues, which we consolidate and restate as:

I. whether the Commission erred by allowing NIPSCO to specifically identify the proposed projects for only the first year of the seven-year plan and by establishing a presumption that the proposed projects for years two through seven of the plan were eligible for special ratemaking treatment; and

II. whether the Commission erred by approving costs allegedly in excess of a statutory cap on aggregate increases.

[3] The OUCC raises two issues, which we restate as:

III. whether the Commission erred by allowing NIPSCO to continue rate recovery of retired equipment while also recovering for replacement assets; and

IV. whether the Commission erred by approving NIPSCO's proposed rate allocation methodology.

Facts

[4] NIPSCO is a public electric and gas utility that services over 457,000 customers in northern Indiana. The OUCC is the statutory representative of the public before the Commission. See Ind.Code § 8–1–1–5(c)

. The Industrial Group is a group of some of NIPSCO's largest industrial customers.

[5] Traditionally, a utility's rates charged to customers are adjusted through periodic rate cases, which are expensive, time consuming, and sometimes result in large, sudden rate hikes for customers. NIPSCO's last rate case was finalized in December 2011. There, the Commission issued an order in Cause No. 43969 and approved a settlement regarding NIPSCO's proposed general rate increase. See In Re Petition of NIPSCO to Modify its Rates, Cause No. 43969, 2011 WL 6837714 (Ind. U.R.C. Dec. 21, 2011)

.

[6] Another way to set rates is through “tracker” proceedings, which allow smaller increases for specific projects and costs between general rate case proceedings. The General Assembly has authorized several trackers, including a fuel charge tracker, see Ind.Code § 8–1–2–42(d)

, a tracker for qualified pollution control projects under construction, see Ind.Code § 8–1–2–6.8, a tracker for federally mandated costs, see Ind.Code § 8–1–8.4–7, and a tracker for clean energy projects, see Ind.Code §§ 8–1–8.8–11 and 8–1–8.8–12. In 2013, the General Assembly enacted Indiana Code Chapter 8–1–39, which allows a utility to petition for a tracker for certain proposed new or replacement electric or gas transmission, distribution, or storage projects. The new statute is referred to as the “TDSIC” statute.

[7] In July 2013, NIPSCO filed two petitions with the Commission under the new TDSIC statute. In Cause No. 44370, NIPSCO sought approval of a seven-year plan pursuant to Indiana Code Section 8–1–39–10

. The plan included over $1 billion in improvements and replacements to NIPSCO's transmission and distribution systems. In Cause No. 44371, NIPSCO sought approval of the rate increases associated with the seven-year plan. The two petitions were treated as companion cases. The parties prefiled evidentiary submissions, and an evidentiary hearing was held in November 2013.

[8] On February 17, 2014, the Commission issued its final orders. In Cause No. 44370, the Commission substantially approved NIPSCO's seven-year plan. However, the Commission found that NIPSCO had provided sufficient detail of the plan for only the first of the seven years. For years two through seven, the Commission established a “presumption of eligibility” and required NIPSCO to annually update the plan through an informal process. Industrial Group's App. pp. 25–26.

[9] In Cause No. 44371, the Commission also substantially approved NIPSCO's proposed rate increases. The Commission approved NIPSCO's adjustments to the customer class revenue allocation factors based on firm/non-firm load and distribution/transmission considerations. The Commission rejected the OUCC's argument that NIPSCO should be required to reduce its return and depreciation so that it was not recovering on both replaced assets and the new replacement assets. Finally, the Commission rejected the Industrial Group's interpretation of the two-percent cap found in Indiana Code Section 8–1–39–14

.

[10] The OUCC filed a petition to reconsider in Cause No. 44371. The OUCC argued that “the recoverable TDSIC costs should be adjusted to reflect the removal of any return and depreciation expenses embedded in base rates that are associated with original transmission and distribution investments that will be retired as a result of new TDSIC investments.” Id. at 34. The OUCC also argued that “NIPSCO's request to apply adjusted customer class allocation factors should be denied and they should be required to apply the customer class revenue allocators from the Commission's Order in Cause No. 43969.” Id. The Commission did “not find statutory support for the netting of investment in determining the appropriate investment to be afforded cost recovery” and declined “to require NIPSCO to adjust TDSIC costs to reflect the removal of any return and depreciation expenses embedded in base rates that are associated with original transmission and distribution investments that will be retired as a result of new TDSIC investments.” Id. at 34–35. As for the allocation factors, the Commission found that its original order addressed the issue adequately. Consequently, the Commission denied OUCC's petition to reconsider.

[11] The OUCC appealed the Commission's order in Cause No. 44371, and the Industrial Group appealed the Commission's order in Cause No. 44370. We granted NIPSCO's motion to consolidate the appeals. In addition to filing an appellant's brief, the Industrial Group also filed an appellee's brief addressing the rate allocation issue raised by the OUCC. The Commission and NIPSCO also filed appellee's briefs. Finally, we granted the Indiana Energy Association permission to file an amicus curiae brief.

Analysis

[12] The OUCC and the Industrial Group appeal the Commission's order regarding NIPSCO's TDSIC petitions. The General Assembly created the Commission primarily as a fact-finding body with the technical expertise to administer the regulatory scheme devised by the legislature. N. Indiana Pub. Serv. Co. v. U.S. Steel Corp., 907 N.E.2d 1012, 1015 (Ind.2009)

; I.C. § 8–1–1–5. The Commission's assignment is to ensure that public utilities provide constant, reliable, and efficient service to the citizens of Indiana. Id. The Commission only can exercise power conferred upon it by statute. Id. Its authority also “includes implicit powers necessary to effectuate the statutory regulatory scheme.” United States Gypsum, Inc. v. Indiana Gas Co., 735 N.E.2d 790, 795 (Ind.2000). Any doubts regarding the Commission's statutory authority must be resolved against the existence of such authority. U.S. Steel Corp. v. N. Indiana Pub. Serv. Co., 951 N.E.2d 542, 550 (Ind.Ct.App.2011), trans. denied.

[13] An order of the Commission is subject to appellate review to determine whether it is supported by specific findings of fact and by sufficient evidence, as well as to determine whether the order is contrary to law. United States Gypsum, 735 N.E.2d at 795

. On matters within its jurisdiction, the Commission enjoys wide discretion. Id. The Commission's findings and decision will not be lightly overridden just because we might reach a contrary opinion on the same evidence. Id. We first review the entire record to determine whether there is substantial evidence to support the Commission's findings of basic fact. U.S. Steel Corp., 951 N.E.2d at 551

. Next, we review ultimate facts, or mixed questions of fact and law, for their reasonableness with the amount of deference owed depending on whether the issue falls or does not fall within the Commission's expertise. Id. Finally, legal propositions are reviewed for their correctness. Id. More precisely, “an agency action is always subject to review as contrary to law, but this constitutionally preserved review is limited to whether the Commission stayed within its jurisdiction and conformed to the statutory standards and legal principles involved in producing its decision, ruling, or order.” Id.

[14] Many of the issues here involve the interpretation of the new TDSIC statute. Generally, an agency's reasonable interpretation of a statute it is charged with enforcing is...