Office of Utility Consumer Counselor v. Public Service Co. of Indiana, Inc.

• Decision Date: 17 May 1984
• Docket Number: No. 2-283A50,2-283A50
• Parties: OFFICE OF UTILITY CONSUMER COUNSELOR, Appellant, v. PUBLIC SERVICE COMPANY OF INDIANA, INC., Appellee (Petitioner Below).
• Court: Indiana Appellate Court

Page 499

463 N.E.2d 499

OFFICE OF UTILITY CONSUMER COUNSELOR, Appellant, v. PUBLIC SERVICE COMPANY OF INDIANA, INC., Appellee (Petitioner Below).

No. 2-283A50.

Court of Appeals of Indiana,

Third District.

May 17, 1984.

Jan E. Helbert, Deputy Consumer Counselor, Indianapolis, for appellant.

Jon D. Noland, Duejean C. Garrett, Plainfield, for appellee.

HOFFMAN, Judge.

The instant dispute centers on the ratemaking procedures applied by the Public Service Commission to a rate request tendered by Public Service Company of Indiana (P.S.C.). P.S.C. requested that its recently completed 625 megawatt, coal fired, electric generation facility, known as Gibson Unit No. 5, be included in its rate base. After an extensive hearing on the matter, the Commission allowed P.S.C. to include 50.5% of the Gibson Unit in its rate base. ¹ The Office of the Utility Consumer Counselor appeals.

Two issues are presented for review:

(1) whether the evidence is sufficient to support the Commission's judgment; ² and

(2) whether the Commission erred in finding the excess capacity generated by the Gibson Unit used and useful, thus included in the rate base.

As a base for this appeal the parties entered into a set of stipulations. These stipulations are of paramount importance to the first issue raised by appellant. Stipulation No. 3 agreed to by the parties states: "3. The parties agree that there was sufficient evidence in the record upon which the Commission based its findings of fact set forth in Finding No. 6 of its order of January 20, 1982." Stipulations of fact agreed to by the parties are binding. A party cannot properly challenge facts on appeal which it has stipulated to below. Lyons v. State, (1982) Ind., 431 N.E.2d 78; Indiana State Bd. of Tax Com'rs v. Stanadyne, (1982) Ind. App., 435 N.E.2d 278. This being the case appellant has presented no error for review by this Court insofar as the sufficiency of the evidence is concerned.

The actual argument forwarded by appellant is somewhat harder to discern. Stipulation No. 4 entered into by the parties indicates appellant seeks to require the Commission merely to set an abstract standard establishing a maximum level of reserve generating capacity that will be considered used and useful against which at least this request if not all utilities' rate requests may be judged.

"4. The parties also agree that the Commission's decision contains specific findings on all factual determinations material to its ultimate conclusion regarding the used and useful status of Gibson Unit No. 5, except that Appellant contends that the Commission failed to make a specific finding of the reserve margin necessary to the efficient and reliable provision of utility service. Appellee disagrees that such finding was not made and also contends such finding was unnecessary." (Emphasis added.)

As will be discussed more thoroughly in the rest of the opinion, this is an act the Commission is not required to perform.

Apparently conceding this point appellant spends the majority of its time, both in brief and oral argument, contending the Commission failed to apply a coherent analytical process in reaching its determination. In order to address this issue it is necessary to establish the standard of review this Court applies to ratemaking cases.

A discussion of this matter could find no better starting point than L.S. Ayres & Co. et al. v. IPALCO et al., (1976) 169 Ind.App 652, 351 N.E.2d 814. The Ayres opinion is perhaps the keystone decision in this area of law and provides a scholarly and thorough discussion of the principles applicable to the case at bar. A succinct statement of this Court's standard of review in ratemaking cases was stated in Ayres:

"At the first level of review, the statutory standard requires that the Commission's decision contain specific findings on all the factual determinations material to its ultimate conclusions.

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"The second level of factual review prescribed by IC 1971, 8-1-3-1 (Burns Code Ed.) requires a reviewing court to inquire whether there is substantial evidence in light of the whole record to support the Commission's findings of basic fact." (Citations omitted.) 169 Ind.App. at 661-663, 351 N.E.2d at 822. See also Southern Ry. Co. v. Board of Com'rs, etc. (1981) Ind.App. 426 N.E.2d 445; City of Muncie et al. v. PSC et al., (1978) 177 Ind.App. 155, 378 N.E.2d 896; City of Evansville v. So. Ind. Gas, (1975) 167 Ind.App. 472, 339 N.E.2d 562.

In the case at bar the parties agreed, in Stipulation No. 4, the Commission made all material findings of fact necessary to its determination. ³ Thus, appellant has waived any error in this regard and the Court need not apply the first tier of our standard of review. Likewise in Stipulation No. 3 the parties agreed the evidence was sufficient to support the trial court's finding at issue. Thus, appellant has waived any error in that regard and this Court need not apply the second tier of the review process.

Consequently, this Court need only consider whether the Commission considered some factor which it should not have or failed to consider some factor it should have. Pub. Ser. Comm. v. City of Indianapolis, (1956) 235 Ind. 70, 131 N.E.2d 308. Again the Ayres opinion, written by Judge Staton, provides an excellent framework for analysis of this issue.

Judge Staton commented on our limited role in reviewing ratemaking decisions of the Commission:

"The appropriate standard of review therefore limits our inquiry to whether, on the facts of this case, the test-year and adjustment method selected by the Commission were reasonably related to the purpose they were intended to serve--the fixing of 'reasonable and just' rates. This standard of review does not authorize the substitution of judicial judgment on matters committed to Commission discretion nor does it require that the reviewing tribunal concur in the wisdom or correctness of the Commission's decision. Our function of review is limited to a determination that the actual choice made by the Commission was based on a consideration of the relevant factors and was reasonably related to the discharge of its statutory duty. In other words, we must determine that there has been no clear error in judgment, and that the Commission's action is founded upon a reasonable basis of support in the whole record." (Citations omitted.) 169 Ind.App. 652, at 676, 351 N.E.2d 814, at 830.

Also discussed was the necessity that this Court be provided with clear, concise, and precise findings of fact:

"Moreover, the rate-making function involves innumerable technical determinations which are peculiarly within the Commission's competence and expertise. When the Commission provides the reviewing court with basic findings of fact on all issues material to its decision, its expert reasoning process and subtle policy judgments provide an intelligible framework for the judicial non-expert. Since 'basic findings' afford a rational and informed basis for review, the danger of judicial substitution of judgment on complex evidentiary issues and policy determinations is substantially reduced."

(Citations omitted.) 169 Ind.App. 652, at 662, 351 N.E.2d 814, at 822.

From this basis we proceed into the arcane world of utility ratemaking proceedings.

The Commission's purpose is to insure that public utilities provide constant, reliable, and efficient service to its customers, the citizens of this state. In meeting this obligation the Commission may allow a utility to include in its rate base only those facilities which are used and useful pursuant to IND.CODE Sec. 8-1-2-6 which states in relevant part:

"Sec. 6. (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 can be imagined different people have different definitions in mind when considering whether a given facility is "used and useful" as contemplated by the statute. Therein lies the question in the case at bar.

Appellant argues the Commission should be required to adopt some set procedure or analytical process to be applied in every ratemaking case. This argument inherently implies the Commission has failed to apply an analytical method in this and past ratemaking decisions. This Court has already recognized that ratemaking decisions do not adhere to rigid, set procedures. In Ayres, Judge Staton noted:

"The Commission's policy determinations (legal decisions) are made on a case-by-case basis, and, of necessity, are inextricably intertwined with evidentiary conclusions (factual decisions). The subject matter of the regulatory process is too complex to permit the judicial non-expert any clear insight concerning the legal and factual issues which the Commission thought 'material' to its decision. In light of these difficulties inherent in judicial review of rate proceedings, we are compelled to require the Commission to articulate the policy and evidentiary factors underlying its resolution of all issues which are put in dispute by the parties." 169 Ind.App. 652, at 676, 351 N.E.2d 814, at 830.

In short this Court is faced with a dilemma. The Commission is imbued with broad discretion necessary for it to perform its function and arrive at its goals. The procedures...