NIPSCO Industrial Group, and, Indiana Office of Utility Consumer Counselor v. Northern Indiana Public Service Company
2015 Ind. App. LEXIS 292
| Ind. Ct. App. | 2015Background
- NIPSCO filed two companion petitions under Indiana Code ch. 8-1-39 (TDSIC): one seeking approval of a seven-year transmission/distribution/storage capital plan and one seeking approval of associated rate adjustments.
- The seven-year plan proposed ~ $1 billion in upgrades; NIPSCO provided detailed project descriptions and costs only for Year 1 and provided category-level spending estimates for Years 2–7.
- The Indiana Utility Regulatory Commission (IURC) substantially approved the plan and rates, but: (1) found Year 1 projects sufficiently detailed; (2) created a presumption that Years 2–7 categories were eligible for TDSIC treatment and required informal annual updates; (3) approved NIPSCO’s method for calculating the 2% TDSIC cap; (4) declined to require netting (deducting) return/depreciation on retired assets; and (5) allowed an adjustment to prior allocation factors to remove non‑firm load but also adjusted for transmission vs. distribution.
- The OUCC and the NIPSCO Industrial Group appealed various aspects of the IURC’s orders; the Court of Appeals consolidated the appeals.
- The Court reviewed statutory interpretation de novo, gave deference to IURC fact-finding and ratemaking expertise, and framed several disputed issues as statutory interpretation or exercises of agency discretion.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Plan sufficiency (Years 2–7) | Industrial Group: seven-year plan must "designate" projects and provide enough detail for a best cost estimate; Years 2–7 lacked required specificity. | IURC/NIPSCO: statute allows reasonable flexibility; agency discretion supports approving a category-level plan with future updates. | Court: Reversed insofar as IURC approved the seven-year plan lacking required detail for Years 2–7; IURC erred and may not create a presumption of eligibility for those years. |
| Presumption of eligibility for Years 2–7 | Industrial Group: presumption improperly shifts burden to intervenors and lacks statutory support. | IURC/NIPSCO: presumption is a reasonable administrative measure to balance utility needs and customer protections. | Court: IURC improperly established a presumption of eligibility; no statutory basis and it shifts burden—must not do so on remand. |
| Statutory 2% cap (I.C. § 8-1-39-14) | Industrial Group: cap should be an aggregate 2% over the entire seven-year plan. | NIPSCO/IURC: plain text limits increases to 2% in any 12‑month period measured against prior 12 months’ retail revenues (i.e., effectively annual 2% limit). | Court: Affirmed IURC interpretation; plain language supports the 12‑month measurement and annual application. |
| Recovery on retired assets (double recovery) | OUCC: IURC should require netting—deduct return/depreciation embedded in base rates for assets retired and replaced to avoid double recovery. | NIPSCO/IURC: TDSIC statutes don’t require netting; Commission has discretion and prior precedent supports amortization of used-and-useful retired assets. | Court: Affirmed IURC discretion and methodology; declined to order netting given statutory silence and deference to agency ratemaking (but expressed concern; issue may be revisited on remand). |
| Rate allocation factors (use of prior base-case factors) | OUCC: statute requires use of the allocation factor from the most recent base rate case without modification; settlement-based factors must be used as approved. | NIPSCO/IURC: the settlement factors included non‑firm load and other distortions; adjusting to remove non‑firm load (and align cost causation) is appropriate. | Court: Split: affirmed IURC authority to adjust the allocation factors to remove non‑firm load, but reversed IURC’s adjustment that reallocated based on transmission vs. distribution because statute requires using the most recent base-case allocation factors. |
Key Cases Cited
- N. Indiana Pub. Serv. Co. v. U.S. Steel Corp., 907 N.E.2d 1012 (Ind. 2009) (describing IURC’s expertise and limits of statutory authority)
- United States Gypsum Co. v. Indiana Gas Co., 735 N.E.2d 790 (Ind. 2000) (agency action review and implicit powers)
- U.S. Steel Corp. v. N. Indiana Pub. Serv. Co., 951 N.E.2d 542 (Ind. Ct. App. 2011) (standards for appellate review of IURC findings)
- Citizens Action Coal. of Indiana v. N. Indiana Pub. Serv. Co., 485 N.E.2d 610 (Ind. 1985) (distinguishing recovery for cancelled projects from amortization of used-and-useful retired plant)
- Citizens Action Coalition v. NIPSCO, 804 N.E.2d 289 (Ind. Ct. App. 2004) (allowing use of a more recent allocation study when supported by evidence)
- Office of Util. Consumer Counselor v. Citizens Tel. Corp., 681 N.E.2d 252 (Ind. Ct. App. 1997) (deference to agency ratemaking methodology)
- Duke Energy Indiana, Inc. v. Office of Util. Consumer Counselor, 983 N.E.2d 160 (Ind. Ct. App. 2012) (courts give agencies greater deference on technical ratemaking matters)
- Indiana Office of Util. Consumer Counselor v. Lincoln Utilities, Inc., 834 N.E.2d 137 (Ind. Ct. App. 2005) (scope of agency authority in utility regulation)