United States Gypsum, Inc. v. Indiana Gas Co.
| Decision Date | 22 September 2000 |
| Docket Number | No. 93S02-9904-EX-251.,93S02-9904-EX-251. |
| Citation | 735 N.E.2d 790 |
| Parties | UNITED STATES GYPSUM, INC.; General Motors Corp.; Reid Hospital & Healthcare Services; Belden Wire & Cable Co.; Eli Lilly & Co.; Knauf Fiber Glass GmbH; Dana Corp.; Aluminum Co. of America; Hayes Wheels Int'l; Thompson Consumer Electronics; Visy Paper, Inc.; Jerome E. Polk; Grant Smith; Julia L. Vaughn; Mark S. Bailey; William G. Simmons; Timothy E. Peterson; Robert V. Benge; Citizens Action Coalition of Indiana, Inc.; United Senior Action, Inc.; Indiana Office of Utility Consumer Counselor; and Enron Capital & Trade Resources Corp., Appellants (Petitioners and Intervenors below), v. INDIANA GAS CO., INC.; Board of Directors For Utilities of the Dept. of Public Utilities of the City of Indianapolis, as Successor Trustee of a Public Charitable Trust, d/b/a Citizens Gas & Coke Utility; and ProLiance Energy, LLC, Appellees (Respondents below). |
| Court | Indiana Supreme Court |
John F. Wickes, Jr., Todd A. Richardson, Pamela H. Sherwood, Indianapolis, IN, Attorneys for Appellants United States Gypsum, et al.
Anne E. Becker, Christopher C. Earle, Timothy Stewart, Indianapolis, IN, Attorneys for Appellants Office of Utility Consumer Counselor.
C. Kirby Mullen, Michael A. Mullett, Reed W. Cearley, Indianapolis, IN, Attorneys for Appellants Citizens Action Coalition, et al.
L. Parvin Price, George T. Patton, Jr., Jeffrey M. Reed, Indianapolis, IN, Attorneys for Appellant Enron Capital & Trade.
Ronald E. Christian, Robert E. Heidorn, Daniel W. McGill, Stanley C. Fickle, Indianapolis, IN, Attorneys for Appellee Indiana Gas.
Harry V. Huffman, Michael B. Cracraft, Philip B. McKiernan, Indianapolis, IN, Attorneys for Appellee Citizens Gas & Coke.
Wayne C. Turner, Steven M. Sherman, Indianapolis, IN, Attorneys for Appellee ProLiance Energy.
George A. Porch, Evansville, IN, Peter L. Hatton, Merrillville, IN, Attorneys for Amici Curiae Ohio Valley Gas Corp., et al. SHEPARD, Chief Justice.
Affiliates of two Indiana natural gas utilities created ProLiance Energy for the purpose of procuring wholesale natural gas supply for the utilities. Opponents complained that ProLiance was an improper attempt to avoid state regulation and petitioned the Indiana Utility Regulatory Commission to disapprove ProLiance as against the public interest. The Commission concluded that ProLiance was in the public interest, however, and denied the opponents' petition. We affirm.
Facts and Procedural History
Indiana Gas Company, Inc., and Citizens Gas & Coke Utility (collectively "the Utilities") provide natural gas to retail customers through their intrastate pipelines at rates regulated by the Commission. The Utilities, known as local distribution companies ("LDCs"), receive gas at city gates where interstate pipelines connect to the LDCs' intrastate pipelines.
Historically, LDCs purchased both gas and transportation of that gas as a single "bundled" product from interstate pipelines. Beginning in 1978, Congress and the Federal Energy Regulatory Commission ("FERC") took steps to stimulate competition, leading interstate pipelines to offer transportation as a separate service. This created a competitive market for the gas itself and allowed customers to sell or "release" pipeline capacity that they did not need. With these changes emerged interstate marketers who sell gas to LDCs and large volume consumers. These large volume consumers are known as transportation customers because they buy gas directly from the marketer but rely on LDCs to provide local, intrastate pipeline transportation.1
Against this background, IGC Energy, Inc. (Indiana Gas's sister company)2 and Citizens By-Products Coal Co. (a wholly owned subsidiary of Citizens Gas) entered into a Fundamental Operating Agreement in March 1996 creating ProLiance Energy, a limited liability company. ProLiance was designed to allow the Utilities to benefit from the synergistic effects of combined gas supply and planning functions, including enhanced leverage in the wholesale gas marketplace and non-duplication of resources previously devoted by each Utility to those functions. Each of ProLiance's creators owns 50% of ProLiance and, through a board, maintains 50% control over it, thus allowing the Utilities the advantages of dealing with an affiliate rather than a third-party marketer.
ProLiance, in turn, entered into separate Gas Sales and Portfolio Administration Agreements with each of the Utilities, covering four and a half years. These agreements made ProLiance responsible for procuring wholesale gas supply and interstate pipeline transportation service for the Utilities. To that end, ProLiance took over the Utilities' existing gas supply contracts and pipeline capacity and assumed responsibility for negotiating new supply contracts when current ones expire. ProLiance also became responsible for scheduling gas delivery to the Utilities and for developing future supply plans, subject to the Utilities' approval. These agreements were filed with the Commission.
The agreements provide that the Utilities will purchase gas from ProLiance at index prices established in trade publications, although the price that ProLiance actually pays for gas may differ from the index price. Additionally, the agreements say the Utilities will pay ProLiance an annual administration fee for performing gas-supply and planning services that the Utilities previously performed themselves. ProLiance also provides the Utilities with a transportation credit in exchange for ProLiance's right to sell off any unused pipeline capacity available once ProLiance has met the gas needs of the Utilities and their gas customers. The transportation credit and the administration fee are partially based on historic benchmarks.
Some of the Utilities' transportation customers petitioned the Commission to disapprove the ProLiance agreements. Ten residential customers of Citizens Gas filed "joinders" purporting to add themselves as petitioners. The Office of Utility Consumer Counselor ("OUCC") appeared on behalf of the public and opposed the ProLiance agreements. Some citizen groups and gas marketers also intervened and opposed the agreements. We refer to these customers and groups adverse to the ProLiance agreements collectively as "Opponents."
The Commission conducted a five-day hearing. On September 12, 1997, the Commission concluded, in lengthy findings, that the ProLiance agreements were in the public interest, so it refused to disapprove them.
The Court of Appeals reversed and instructed the Commission to disapprove the agreements. United States Gypsum, Inc. v. Indiana Gas Co., 705 N.E.2d 1017 (Ind. Ct.App.1998). It concluded that ProLiance's index-based pricing arrangement was an attempt by the Utilities to circumvent traditional regulation and that their failure to offer a proposal under the Alternative Utility Regulation Act, Indiana Code Chapter 8-1-2.5, required the Commission to disapprove the ProLiance agreements. 705 N.E.2d at 1021-22.
After hearing oral argument, we granted transfer at the request of the Utilities and ProLiance.
Our Standard of Review
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. Citizens Action Coalition of Indiana, Inc. v. Public Serv. Co., 582 N.E.2d 330 (Ind.1991). On matters within its jurisdiction, the Commission enjoys wide discretion. See In re Northwestern Indiana Telephone Co., 201 Ind. 667, 171 N.E. 65 (1930). The Commission's findings and decision will not be lightly overridden just because we might reach a contrary opinion on the same evidence. Public Serv. Comm'n v. City of Indianapolis, 235 Ind. 70, 131 N.E.2d 308 (1956).
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." United Rural Elec. Membership Corp. v. Indiana & Mich. Elec. Co., 549 N.E.2d 1019, 1021 (Ind.1990) ("UREMC"). Its authority "includes implicit powers necessary to effectuate the statutory regulatory scheme." Office of Utility Consumer Counselor v. Public Serv. Co., 608 N.E.2d 1362, 1363-64 (Ind. 1993). Still, as a creation of the legislature, the Commission may exercise only that power conferred by statute. UREMC, 549 N.E.2d at 1021.
Opponents petitioned under a statute that allows the Commission to investigate a complaint by a sufficient number of complainants "against any public utility" that "any regulation ... practice or act whatsoever affecting or relating to the service of any public utility, or any service in connection therewith, is in any respect unreasonable, unsafe, insufficient or unjustly discriminatory...." Ind.Code § 8-1-2-543 (emphasis added). A "public utility" is defined, in pertinent part, as any "corporation, company, partnership, [or] limited liability company ... that may own, operate, manage, or control any plant or equipment within the state for the ... production, transmission, delivery, or furnishing of heat, light, water, or power...." Ind. Code § 8-1-2-1(a).
Opponents named both Utilities and ProLiance as respondents to their petition and believe that all three are subject to investigation under Section 54. It is undisputed that Indiana Gas is a public utility. However, the Commission granted ProLiance's motion to dismiss, in part, after finding that ProLiance is not a public utility. The Commission found that ProLiance does not own, operate, manage, or control any plant or equipment for producing, transmitting, delivering or furnishing gas, and that the Utilities retained control over their facilities. (R. at 1603.) It found that all distribution functions remained with the Utilities. Consequently, the Commission concluded that Section 54 did not provide it with jurisdiction over ProLiance itself.
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