Office of Public Counselor v. Indianapolis Power and Light Co.

• Decision Date: 22 December 1980
• Docket Number: No. 2-779A200,2-779A200
• Citation: 413 N.E.2d 672
• Parties: OFFICE OF the PUBLIC COUNSELOR, Appellant, v. INDIANAPOLIS POWER AND LIGHT COMPANY, Appellee.
• Court: Indiana Appellate Court

Page 672

413 N.E.2d 672

OFFICE OF the PUBLIC COUNSELOR, Appellant, v. INDIANAPOLIS POWER AND LIGHT COMPANY, Appellee.

No. 2-779A200.

Court of Appeals of Indiana, Fourth District.

Dec. 22, 1980.

John J. Metts, Deputy Public Counselor, Indianapolis, for appellant.

Christopher J. Weber, Jon D. Noland, Barnes, Hickam, Pantzer & Boyd, Indianapolis, for appellee.

MILLER, Judge.

Appellant, the Office of the Public Counselor (Public Counselor), appeals the order of the Public Service Commission (the Commission) approving the petitioner-appellee's, Indianapolis Power & Light Company (IPALCO), application for an increase in its fuel cost charge for electrical service. Specifically, the Public Counselor attacks the Commission's finding number 4 as supported by insufficient evidence and as being contrary to law. This finding stated that:

"The actual increases in Applicant's fuel costs since the Commission's Order of August 30, 1978, in Cause No. 35132 approving Applicant's present basic rates and charges through April 30, 1979, have not been offset by actual decreases in other operating expenses, and the foregoing fuel cost charge of $.002621 per kilowatt-hour will not result in Applicant earning a return in excess of the return authorized by the Commission in that Order."

We affirm in part and reverse in part for the reasons stated below.

FACTS AND ISSUES

On May 16, 1979, IPALCO filed with the Commission its application for an increase in its fuel cost charge for electrical service. The required notices were published by the Commission and IPALCO. Also, the required reports were filed with the Public Counselor, the Commission's engineering department and IPALCO. The Commission held a public hearing on IPALCO's application on June 13, 1979. The testimony and exhibits offered at this hearing, which are pertinent to this appeal can be summarized as follows:

IPALCO's last basic rate increase was approved by the Commission through its order dated August 30, 1978. The Commission approved a rate of return equal to 7.25% on a fair value rate base of $993,366,000. The resulting utility income equalled $72,019,000. In arriving at this rate base, the Commission included the Petersburg Unit 3 and the Hanna to Petersburg transmission line neither of which were in service at that time. Significantly, they were valued at their gross original cost.

Returning to the present application, IPALCO sought an increase in the fuel cost charge for electrical service from approximately July 18, 1979 to October 18, 1979. In seeking this increase IPALCO estimated its average fuel cost for July, August and September, 1979, as required by IND.CODE 8-1-2-42(b). ¹ Pursuant to IND.CODE 8- 1-2-42(d)(4) these estimates were premised upon IPALCO's actual and estimated fuel costs for February, March and April, 1979. ²

At the time IPALCO filed this application, April, 1979 was the most recent month for which it knew its actual fuel costs. As a result, IPALCO's pre-filed evidence showed its actual operating revenue, expenses and utility operating income for the twelve month period ending April 30, 1979. The operating revenue was calculated for the first four months at the previous, lower basic rate and the last eight months at the then-current higher basic rate. In calculating its fair value rate base, IPALCO utilized the same procedure as employed by the Commission in analyzing IPALCO's basic rate increase application the previous August. The Commission had valued the Petersburg Unit 3 and the Hanna to Petersburg transmission line at their gross original cost. This increased its fair value rate base to $1,000,243,000 and decreased its rate of return to 6.36%. The Commission's staff accounting report noted that both calculations were "true and accurate." Nevertheless, this report observed that instead of valuing the Petersburg Unit 3 and the Hanna to Petersburg transmission line at the gross original cost, they could have been valued at the net accumulated depreciation value since they had been in service for a few months. This valuation method would reduce the fair value rate base to $992,360,000 while increasing the rate of return to 6.41%. Significantly, as noted by this report as well as the testimony of John D. Wilson (IPALCO's controller), utilization of either the gross original cost or the net accumulated depreciation value provided rates of return which were not in excess of the 7.25% rate of return approved by the Commission on August 30, 1978. The Commission's engineering department also filed a report on IPALCO's application. Neither report found any material discrepancies with IPALCO's pre-filed data nor any basis for denying IPALCO's application for an increase in the fuel cost charge.

After properly perfecting its appeal, the Public Counselor raises two issues for our consideration:

1) Is the Commission's finding number 4 supported by sufficient evidence?

2) Is the Commission's finding number 4 contrary to Indiana law?

DECISION AND DISCUSSION

A. Issue One

This Court is reluctant to disturb administrative findings. Motor Freight Corp. v. Jarvis, (1975) 163 Ind.App. 442, 324 N.E.2d 500. Generally, a party seeking to overturn an administrative finding has the burden of showing the existence of reversible error due to a lack of substantial facts supporting the finding. Kinzel v. Rettinger, (1972) 151 Ind.App. 119, 277 N.E.2d 913; Thomas Prods. Co. v. Review Bd. of the Ind. Employment Securities Div., (1969) 145 Ind.App. 425, 251 N.E.2d 473. In reviewing the sufficiency of the evidence to support a finding made by an administrative agency, this Court will reverse the agency's finding only if it appears from an examination of the evidence in the agency's record of proceedings that the evidentiary basis of the finding was devoid of any probative value or was so meager as to lead to the conclusion that there is no rational basis for the finding. Additionally, we will reverse if it appears that the result of the hearing must have been influenced by an improper consideration. City of Muncie v. Public Service Comm., (1978) Ind.App., 378 N.E.2d 896, appeal after remand 396 N.E.2d 927. In conducting this examination, the Court of Appeals may not weigh the evidence. International Steel Co. v. Review Bd. of Ind. Employment Securities Div., (1969) 146 Ind.App. 137, 252 N.E.2d 848.

Initially, the Public Counselor attacks the first portion of finding number 4 which stated that "(t)he actual increases in (IPALCO's) fuel costs since the Commission's Order of August 30, 1978, ... approving (IPALCO's) present basic rates and charges through April 30, 1979, have not been offset by actual decreases in other operating expenses, ...." The Public Counselor does not claim that IPALCO's fuel costs had not increased. Further, the Public Counselor has failed to point out any evidence that IPALCO's "other operating expenses" had decreased. Our examination of the record as referenced by the litigant's briefs reveals substantial evidence that the "other operating expenses" had not decreased, but were at the level projected by IPALCO in support of its basic rate increase request the previous August.

The Public Counselor next challenges the second part of finding number 4 which stated that an increased "fuel cost charge of $.002621 per kilowatt-hour will not result in (IPALCO) earning a return in excess of the return authorized by the Commission in" August, 1978. Expert testimony relative to this portion of the finding established that either accounting formula for calculating IPALCO's fair value rate basis (i. e., the gross original cost or the net accumulated depreciated value of the Petersburg Unit 3 and the Hanna to Petersburg transmission line) would provide rates of return equalling 6.36% and 6.41% respectively. Either rate is less than the authorized rate of 7.25%. Therefore, our examination of the evidence leads us to conclude that it is sufficient to support finding number 4 and, consequently, the Public Counselor has failed to establish any reversible error in that regard.

B. Issue Two

The Public Counselor also challenges finding number 4 as contrary to Indiana law. Initially, the Public Counselor argues that this finding violates IND.CODE 8-1-2-6 which provides that:

"(a) The commission shall value all property of every public utility actually used and useful for the convenience of the public at its fair value, giving such consideration as it deems appropriate in each case to all bases of valuation which may be presented or which the commission is authorized to consider by the following provisions of this section. As one (1) of the elements in such valuation the commission shall give weight to the reasonable cost of bringing the property to its then state of efficiency. In making such valuation, the commission may avail itself of any information in possession of the state board of tax commissioners or of any local authorities. The commission may accept any valuation of the physical property made by the interstate commerce commission of any public utility subject to the provisions of this act.

(b) The lands of such public utility shall not be valued at a greater amount than the assessed value of said lands exclusive of improvements as valued for taxation. In making such valuation no account shall be taken of presumptive value resting on natural resources independent of any structures in relation thereto, the natural resource itself shall be viewed as the public's property. No account shall be taken of good will for presumptive values growing out of the operation of any utility as a going concern, all such values to rest with the municipality by reason of the special and exclusive grants given such utility enterprises. No account shall be taken of construction costs unless such costs were actually incurred and paid as part of the cost entering into the construction of the utility. All public utility valuations shall be based upon tangible...