U.S. Gypsum, Inc. v. Indiana Gas Co., Inc., 93A02-9710-EX-667
| Decision Date | 08 October 1998 |
| Docket Number | No. 93A02-9710-EX-667,93A02-9710-EX-667 |
| Citation | 705 N.E.2d 1017 |
| Parties | UNITED STATES GYPSUM, INC., et al., Appellants, v. INDIANA GAS COMPANY, INC., et al., Appellees. |
| Court | Indiana Appellate Court |
The Petitioners-Appellants in this case fall into three distinct categories. The first category shall be designated as the "Transportation Customers," and it consists of United States Gypsum, Inc., General Motors Corporation, Reid Hospital & Healthcare Services, Belden Wire & Cable Company, Eli Lilly & Company, Knauf Fiber Glass GmbH, Dana Corporation, Aluminum Company of America, Hayes Wheels International, Thomson Consumer Electronics, and Visy Paper Inc. The second category shall be designated as the "Residential Customers," and it consists of Jerome E. Polk, Grant Smith, Julia L. Vaughn, Mark S. Bailey, William G. Simmons, Timothy E. Peterson, and Robert V. Benge. This category also includes the Citizens Action Coalition of Indiana, Inc. (the "Coalition") and the United Senior Action, Inc. The third category shall be designated as the "OUCC," and it consists of the Indiana Office of Utility Consumer Counselor. When possible, the three categories shall be designated collectively as the "Appellants."
The Appellants appeal the decision of the Indiana Utility Regulatory Commission (the "Commission") to deny their petition filed pursuant to Ind.Code 8-1-2-54 seeking "Disapproval Of Joint Venture To Provide Gas Supply Management and Gas Marketing Services, Disapproval Of Contracts and Agreements Between The Utilities And The Joint Venture, Disapproval of the Assignment Of Utility Assets To The Joint Venture, And A Determination That The Joint Venture Is Impressed With A Public Interest and Is Subject To Regulation As A Public Utility." The petition was filed to achieve the disapproval of an agreement (the "agreement") between Respondents-Appellees Indiana Gas Company, Inc. ("Indiana Gas"), the 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 ("Citizens Gas"), and ProLiance Energy, LLC ("ProLiance").
We reverse and remand.
The following issue is dispositive: whether the Commission lacked the authority to deny the Appellant's petition when Indiana Gas and Citizens Gas failed to follow the dictates of the Alternative Utility Regulation Statute.
Indiana Gas and Citizens Gas have territories in Indiana within which they distribute natural gas through pipeline systems they own and operate subject to the Commission's regulation. Gas utilities of this type are commonly referred to as local distribution companies or "LDCs." LDCs transport gas through their intrastate pipeline systems to retail customers, subject to the Commission's jurisdiction. Interstate pipelines transport gas from producing areas to interconnection delivery points on LDC systems (the LDCs' "city gates"), and are subject to the jurisdiction of the Federal Energy Regulatory Commission ("FERC"). Gas is brought to the utilities from Oklahoma, Kansas and Texas, primarily by the Panhandle, Texas Gas, and ANR interstate pipelines.
Historically, interstate pipelines have acquired gas at the wellhead from gas producers at FERC-regulated prices, and then sold to LDCs both the wholesale gas and its interstate transportation as a single ("bundled") product, also at FERC-regulated prices. LDCs then sold both the gas and its local transportation (also called "distribution") to retail customers as a single product. The price of such product and local transportation is regulated by the Commission.
Congress began restructuring the natural gas industry with the Natural Gas Policy Act of 1978, which phased out price regulation of gas sold to the interstate pipelines. FERC continued the restructuring through a series of orders in the 1980s which required the pipelines to sell their transportation as a stand-alone product ("unbundled"), thereby creating a competitive market for the gas itself. A 1992 FERC order carried unbundling further and also developed a complex secondary market for pipeline transportation, allowing purchasers to resell that service (called "capacity release").
The competitive market for gas and the secondary market for pipeline transportation have led to the development of large interstate "marketers." These marketers sell gas and interstate transportation not only to LDCs but also directly to end users. Large gas customers like the Transportation Customers now purchase much of their gas directly from interstate marketers and gas producers, and purchase transportation services within a local territory from LDCs. Furthermore, in response to the changing and increasingly complex interstate gas market, many LDCs have contracted with interstate marketers to provide their gas supply.
In light of the ongoing gas industry changes, affiliates of Indiana Gas and Citizens Gas agreed in 1996 to form an alliance for purposes of procuring gas supply. ProLiance was formed as a separate entity, and it entered into supply agreements with Indiana Gas and Citizens Gas. Under the supply agreements, ProLiance delivers the entire gas supply requirements to the city gates of Indiana Gas and Citizens Gas. In doing so, it supplies both the gas and the interstate transportation. Initially, ProLiance will provide this service by administering Indiana Gas' and Citizens Gas' existing supply contracts for gas and transportation. As these supply contracts expire, ProLiance will be responsible for negotiating new ones. In addition, ProLiance will be responsible for preparing and submitting proposed supply plans and scheduling gas deliveries pursuant to final supply plans approved by Indiana Gas and Citizens Gas. It is intended that Indiana Gas and Citizens Gas will maintain control over their gas supply in a competitive market through the enhanced bargaining power of ProLiance.
The Appellants filed a petition with the Commission alleging that the supply agreements between Indiana Gas, Citizens Gas, and ProLiance were improper and should be disapproved. The Commission found that the supply agreements were in the public interest under Ind.Code 8-1-2-42, and it refused to disapprove the agreements. However, the Commission did express its intention to further review the agreements in extended gas cost adjustment ("GCA") hearings. The Appellants now appeal the Commission's refusal to disapprove the agreements.
The Appellants contend the Commission lacked the authority to approve the supply agreements because Indiana Gas and Citizens Gas (hereinafter referred to as the "Utilities") failed to comply with the Alternative Utility Regulation Act (the "Act"). The Appellants argue that compliance with the Act was necessary because, inter alia, the portion of the agreement dealing with the cost of gas sold by ProLiance to the Utilities constituted "index pricing" allowable only under the Act.
In addressing the issue of the Commission's authority, we are guided by the language of various sections of the Act. The purpose of the Act is found in its first section, which provides:
(1) That the provision of safe, adequate, efficient, and economical retail energy service is a continuing goal of the commission in the exercise of its jurisdiction.
(2) That competition is increasing in the provision of energy services in Indiana and the United States.
(3) That traditional commission regulatory policies and practices, and certain existing statutes are not adequately designed to deal with an increasingly competitive environment for energy services and that alternatives to traditional policies and practices may be less costly.
(4) That an environment in which Indiana consumers will have available state-of-the-art energy services at economical and reasonable cost will be furthered by flexibility in the regulation of energy services.
(5) That flexibility in the regulation of energy services providers is essential to the well-being of the state, its economy, and its citizens.
(6) That the public interest requires the commission to be authorized to issue orders and to formulate and adopt rules and policies that will permit the commission in the exercise of its expertise to flexibly regulate and control the provision of energy services to the public in an increasingly competitive environment, giving due regard to the interests of consumers and the public, and to the continued availability of safe, adequate, efficient, and economical service.
Ind.Code 8-1-2.5-1. The Act allows an energy utility to deviate from traditional regulation by "voluntarily submit[ting] a verified petition to the commission stating the energy utility's election to become subject to [Sections 5 and 6 of the Act]." 1
An energy utility may petition the Commission to "adopt alternative regulatory practices, procedures, and mechanisms" that are "in the public interest" and that "enhance or maintain the value of the...
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United States Gypsum, Inc. v. Indiana Gas Co.
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