Hamilton Southeastern Utilities, Inc. v. Indiana Utility Regulatory Commission, 101 N.E.3d 229

Hamilton Southeastern Utilities, Inc. (HSE), an Indiana for‑profit sewage utility, experienced low returns (avg. 1.9% from 2009–2015) after rising maintenance costs and sought a rate increase in 2015.
HSE originally requested an 8.42% rate increase (later reduced to 6.27% after agreements with the OUCC) to produce about $1M/year more revenue; the Commission had previously authorized a 9.8% return in 2010.
The Indiana Utility Regulatory Commission (Commission) held a hearing, authorized only a 1.17% increase, excluded certain SAMCO‑related expenses from rates, but allowed HSE to recover passed‑through shareholder income taxes.
HSE appealed the Commission’s exclusions; the OUCC cross‑appealed the inclusion of passed‑through shareholder income taxes because HSE is an S corporation.
HSE moved to dismiss the Commission as a respondent on appeal; the Court of Appeals granted that motion over the Commission’s objection and decided several substantive issues, including affirming the tax‑recovery ruling.
The Indiana Supreme Court granted transfer to decide whether the Commission is a proper appellee on appeal and summarily affirmed the tax issue while reversing the Court of Appeals’ dismissal of the Commission and remanding for briefing on the SAMCO expenses issue.

Issue	Plaintiff's Argument (HSE)	Defendant's Argument (Commission)	Held
Whether the Commission is a proper party on appeal	The Commission is a neutral factfinder and not a proper partisan appellee; dismissal appropriate when opposing parties exist	The Commission has long custom/practice of defending its orders; it has distinct institutional interests that may not be fully represented by other appellees	Commission is a proper party; Court reverses dismissal and remands to allow Commission to defend its order
Whether SAMCO‑related expenses should have been excluded from HSE’s rates	Commission arbitrarily excluded SAMCO contract increase and management fee from rate base	Commission argued exclusion was within its discretion for rate‑making/working capital adjustments	Court reversed Court of Appeals on dismissal ground and remanded so Commission can brief defense; remand on this issue
Whether HSE may recover passed‑through shareholder income tax in rates	HSE (and Court of Appeals) allowed recovery of state and federal income taxes passed to shareholders	OUCC argued S‑corp has no corporate tax liability so taxes cannot be included in utility revenue requirement	Supreme Court summarily affirmed the Court of Appeals: Commission may permit recovery of passed‑through shareholder income tax in rates

Winfield v. Pub. Serv. Comm’n, 118 N.E. 531 (Ind. 1911) (early example of Commission defending its orders on appeal)
Kosciusko County Rural Elec. Membership Corp. v. Pub. Serv. Comm’n, 77 N.E.2d 572 (Ind. Ct. App. 1948) (Commission appearing to defend orders)
Sizemore v. Pub. Serv. Comm’n, 177 N.E.2d 743 (Ind. Ct. App. 1961) (Commission defending rate‑related orders)
Stucker Fork Conservancy Dist. v. Ind. Util. Regulatory Comm’n, 600 N.E.2d 955 (Ind. Ct. App. 1992) (Commission appearing to defend classification/order)
Nextel W., Corp. v. Ind. Util. Regulatory Comm’n, 831 N.E.2d 134 (Ind. Ct. App. 2005) (Commission defending administration of utility fund)
Pub. Serv. Comm’n v. City of Indianapolis, 131 N.E.2d 308 (Ind. 1956) (rate‑making is a legislative, not judicial, function)
Filter Specialists, Inc. v. Brooks, 879 N.E.2d 558 (Ind. Ct. App. 2007) (agency interest in enforcement supports its participation on appeal)
N. Indiana Pub. Serv. Co. v. U.S. Steel Corp., 907 N.E.2d 1012 (Ind. 2009) (Commission’s role to ensure reliable public utility service)