FILED
Apr 19 2017, 9:25 am
CLERK
Indiana Supreme Court
Court of Appeals
and Tax Court
ATTORNEY FOR APPELLANT ATTORNEYS FOR APPELLEE –
Jennifer A. Washburn NORTHERN INDIANA PUBLIC
Citizens Action Coalition SERVICE COMPANY
of Indiana, Inc. Peter J. Rusthoven
Indianapolis, Indiana Nicholas K. Kile
Barnes & Thornburg LLP
Indianapolis, Indiana
Claudia J. Earls
Christopher C. Earle
Northern Indiana
Public Service Company
Indianapolis, Indiana
ATTORNEYS FOR APPELLEE –
NIPSCO INDUSTRIAL GROUP
Todd A. Richardson
Bette J. Dodd
Jennifer W. Terry
Joseph P. Rompala
Lewis Kappes, P.C.
Indianapolis, Indiana
ATTORNEYS FOR APPELLEE –
UNITED STATES STEEL
CORPORATION
Nikki G. Shoultz
Bryan H. Babb
Bose McKinney & Evans LLP
Indianapolis, Indiana
IN THE
COURT OF APPEALS OF INDIANA
Court of Appeals of Indiana | Opinion 93A02-1608-EX-1854 | April 19, 2017 Page 1 of 25
Citizens Action Coalition of April 19, 2017
Indiana, Inc., Court of Appeals Case No.
Appellant-Intervenor, 93A02-1608-EX-1854
Appeal from the Indiana Utility
v. Regulatory Commission
The Honorable David Veleta,
Northern Indiana Public Service Administrative Law Judge
Company; NIPSCO Industrial The Honorable Carol Stephan,
Group; and United States Steel Chair
Corporation, Cause No.
Appellees-Petitioners 44688
Baker, Judge.
[1] Northern Indiana Public Service Company (NIPSCO) filed a petition with the
Indiana Utility Regulatory Commission (IURC) seeking to implement a new
rate design, pursuant to which certain rates would increase. NIPSCO and other
entities, including NIPSCO Industrial Group (Industrial Group) and United
States Steel Corporation (US Steel), engaged in settlement negotiations and
reached an agreement. Citizens Action Coalition of Indiana, Inc. (CAC), had
intervened in the proceeding and objected to the agreement. The IURC
ultimately approved the settlement agreement, and CAC now appeals, arguing
that there is not substantial evidence supporting the IURC’s order and that the
IURC should have required the inclusion of a low-income payment assistance
plan and the collection and reporting of customer data by NIPSCO. Finding
substantial evidence and no other error, we affirm.
Court of Appeals of Indiana | Opinion 93A02-1608-EX-1854 | April 19, 2017 Page 2 of 25
Facts
[2] NIPSCO is a public utility that provides electric service in all or parts of twenty
northern Indiana counties. Its customers’ electric bills generally consist of a
fixed monthly charge (the “fixed charge”) plus a variable energy charge (the
“energy charge”) based on the amount of energy used by the customer, and any
additional riders. The customers pay the fixed charge even if they consume no
energy in a month; the energy charge equals the approved rate multiplied by the
number of kilowatt hours consumed by the consumer in a month.
[3] In October 2015, NIPSCO filed a petition with the IURC seeking authority to
increase its rates and charges for providing electric utility service. A number of
entities intervened in the legal proceeding, including CAC, the Industrial
Group, and US Steel. The Office of Utility Consumer Counselor (OUCC),
which represents ratepayers, consumers, and the public, was also a party to the
proceeding. NIPSCO sought the rate increase based on a cost of service
analysis, which caused NIPSCO to conclude that a fixed rate increase would
improve recovery of its fixed costs.
[4] Initially, NIPSCO proposed an increase in the fixed charge for residential and
small commercial customers from $11 to $20 and from $20 to $30 per month,
respectively. At some point, a subset of entities involved in the proceeding,
including the appellees and the OUCC but excluding CAC, engaged in
settlement negotiations. On February 19, 2016, those entities jointly submitted
to the IURC a Settlement Agreement. Among other things, the Settlement
Court of Appeals of Indiana | Opinion 93A02-1608-EX-1854 | April 19, 2017 Page 3 of 25
Agreement provided that the increase in the fixed charges for residential and
small commercial customers would be from $11 to $14 and from $20 to $24 per
month, respectively.1
[5] CAC and other entities2 opposed the Settlement Agreement. Throughout the
process, the parties filed settlement testimony and evidence, filed rebuttal
testimony and evidence, and engaged in voluminous discovery. Relevant to
this appeal are CAC’s arguments related to the fixed charge increase, the low-
income payment assistance program, and a request that NIPSCO be required to
collect and report certain consumer data. First, as to the fixed charge increase
in the Settlement Agreement, CAC offered two basic arguments:
(1) the fixed charge increase was unreasonable and not in the
public interest because it would erect barriers to energy
conservation and energy efficiency investments; and
(2) the fixed charge increase was unjust because it would
disproportionately impact low income, elderly, and Black
consumers, who CAC contends use less energy on
average.
CAC advocated for a different rate design, such that NIPSCO would collect its
needed revenue based on an increase in the energy charge rather than the fixed
charge.
1
The Settlement Agreement also increases the energy charge, but that increase is not at issue in this appeal.
2
The other entities are not parties to this appeal.
Court of Appeals of Indiana | Opinion 93A02-1608-EX-1854 | April 19, 2017 Page 4 of 25
[6] Second, in its initial petition, NIPSCO proposed a low-income payment
assistance program wherein qualified residential customers would receive a $50
credit on their June bills each year. OUCC opposed this proposal because
NIPSCO would benefit from the program by reducing expenses and lowering
uncollected revenue but would not lower its charges to reflect those reduced
costs. OUCC advocated for a voluntary donation program targeted at
ratepayers, shareholders, and employees with a donation match from NIPSCO.
CAC disliked both of those proposed plans, recommending a plan that includes
a low-income rate class and an arrearage program to help low-income
ratepayers pay down balances over time. CAC’s program would be funded by
mandatory surcharges on other customers. In response to OUCC’s opposition,
NIPSCO withdrew its proposed low-income assistance program; the Settlement
Agreement does not contain such a program at all. In opposing the Settlement
Agreement, CAC argued that its own low-income assistance program should be
included in the settlement.
[7] Third, CAC asked that the IURC require NIPSCO to collect and report the
following data: number of general residential and low-income customer
accounts, bills, receipts, arrearages, notices of disconnections, bill payment
agreements, disconnections of service for nonpayment, reconnections of service
after disconnection for non-payment, accounts written off as uncollectible, and
accounts sent to collection agencies. According to CAC, this data is critical for
the ability of NIPSCO, service organizations, ratepayers, and the general public
to understand affordability issues. CAC testified that without timely trend data,
Court of Appeals of Indiana | Opinion 93A02-1608-EX-1854 | April 19, 2017 Page 5 of 25
it is not possible to appropriately respond to the payment troubles experienced
within the low-income population. Moreover, the IURC has stated in the past
that it will not force the adoption of a low-income payment assistance program
without sufficient data to determine what is appropriate, but CAC is unable to
obtain that data absent a requirement that NIPSCO collect and report it.
[8] The IURC held an evidentiary hearing on April 13, 2016, and on July 18, 2016,
it approved the Settlement Agreement without modification in a ninety-six-page
order. In relevant part, the order notes as follows:
Dr. Gaske[, a NIPSCO witness,] determined that the proposed
rate levels and structure establish rates that are just, reasonable,
and not unreasonably preferential or discriminatory. Dr. Gaske
opined that the proposed rate structure and rates should provide
NIPSCO a reasonable opportunity to earn a reasonable return on
its invested capital and recover its necessary and reasonable
operating expenses.
***
Mr. Shambo[, a NIPSCO witness,] testified that NIPSCO’s
policy objectives with respect to this proceeding are to achieve
rates that are reasonable and just—rates that better align with the
recovery of costs from the customers that drive those costs, as
well as afford NIPSCO a reasonable opportunity to recover its
expenses and earn an appropriate return on its used and useful
assets. . . . He emphasized that establishing rates that will allow
NIPSCO to recover both its prudently incurred costs to serve
customers and a fair return to investors is necessary for NIPSCO
to continue to provide safe and reliable electric service to its
customers.
Court of Appeals of Indiana | Opinion 93A02-1608-EX-1854 | April 19, 2017 Page 6 of 25
***
. . . With respect to fixed charges, Mr. Shambo explained that
NIPSCO proposed to take a relatively small step toward further
fixed-variable alignment, by increasing the customer charge
applicable to residential and small commercial customers, albeit
not to the full cost of service level for the customer costs (let
alone full fixed costs). Mr. Shambo testified that this increased
customer charge would not disproportionately impact low-
income customers because NIPSCO’s data indicates that the
average monthly usage for low-income customers is actually
higher than the normal customer population’s average monthly
usage.
***
. . . Mr. Rábago[, a CAC witness,] testified that NIPSCO’s
proposed fixed customer charges would create significant barriers
and impediments to energy efficiency, conservation, and
renewables that would result in improper discrimination against
customers investing in these options. . . .
Mr. Rábago argued that the proposed increases in fixed customer
charges have a larger impact on some customers over others with
the largest burden on low use customers without regard for why
they are low users, and minimize impacts on high use customers.
. . . He further contended that increasing fixed charges have a
disproportionate impact on low usage customers and those that
have pursued energy efficiency. He noted that NIPSCO did
provide a measure to mitigate the impact on low-income
customers, namely, a single bill credit of $50 to be applied to the
June bills of [qualified customers]. Mr. Rábago stated that he
was not satisfied with a one-time $50 credit offset, an amount
that is less than half of the proposed fixed customer charge
increase, and the credit will not encourage energy efficiency, and
Court of Appeals of Indiana | Opinion 93A02-1608-EX-1854 | April 19, 2017 Page 7 of 25
will not address high bills in other months. . . . Mr. Rábago noted
that using volumetric rates instead of fixed customer charges
would be more beneficial, noting policy and being less
burdensome to low-income customers.
. . . [Mr. Howat, a CAC witness,] recommend[ed] that the
Commission direct NIPSCO to implement a comprehensive low-
income bill payment assistance program that targets current bill
benefits to [eligible customers] and includes an arrearage
management design component. Mr. Howat’s proposed program
would provide fixed credits and a 25% discounted rate for . . .
eligible customers. He also recommended that NIPSCO report
monthly to the Commission and stakeholders data regarding
general residential and low-income customer accounts . . . .
Mr. Howat further argued that increasing utility cost recovery
from the volumetric to the monthly customer charge portion of
bills disproportionately harms low volume consumers within a
rate class. He argued that low-income households, households
headed by an African American, and seniors use less electricity
than their counterparts. Therefore, he claimed that increased
monthly fixed or customer charges cause disproportionate harm.
Lastly, he argued that higher fixed charges discourage energy
efficiency. . . .
***
. . . [In rebuttal,] Mr. Shambo stated that there are better ways to
address energy efficiency and renewable energy than to subsidize
it implicitly through rate design. Mr. Shambo also does not
believe that the higher customer charge has a negative impact on
low-income customers. He provided data that showed that
NIPSCO’s 18,000 low-income customers show higher usage than
NIPSCO’s average customer.
Court of Appeals of Indiana | Opinion 93A02-1608-EX-1854 | April 19, 2017 Page 8 of 25
. . . He explained that a specific low-income rate [for a payment
assistance program] should not be established, as it sends a
negative price signal. He also stated that there should not be an
arrears program, as that is currently available through assistance
agencies and programs and added that NIPSCO’s current billing
system is not set up to administer such a program so a great deal
of time and expense would be needed to make necessary
modifications.
***
Mr. Shambo also addressed NIPSCO’s initial proposed low-
income program. He noted that both the OUCC and CAC
opposed the program as proposed. Accordingly the Settlement
Agreement does not provide for such a program and NIPSCO is
no longer proposing such a program in this case. However, he
emphasized that NIPSCO will agree to meet with the OUCC and
any other interested parties, independent of this rate case, to
discuss the parameters of a similar program that could be
requested in the Company’s next base rate case.
. . . He noted that the Settlement Agreement is consistent with
the public interest by providing all customer segments with a
reasonable outcome and providing NIPSCO with a solid
foundation from which it can invest in northern Indiana’s energy
infrastructure, help fuel job creation and economic growth, and
provide customers with means to manage their energy
consumption and bills. . . .
***
. . . [T]he OUCC, as the statutory representative of all ratepayers,
believes the Settlement Agreement is a fair resolution, supported
by evidence and should be approved.
Court of Appeals of Indiana | Opinion 93A02-1608-EX-1854 | April 19, 2017 Page 9 of 25
***
. . . Mr. Rábago argued that the compromise between NIPSCO
and the OUCC is an inadequate foundation for the approval of
the fixed customer charge increase. . . . He recommended that
the Commission disapprove any proposed increase in a fixed
customer charge, and adopt [CAC’s payment assistance]
proposal.
***
. . . Mr. Shambo pointed out that the evidence in this case
establishes that NIPSCO’s fixed customer and distribution costs
for each residential customer are greater than $14.00 per month,
and that a $3.00 customer charge increase, from $11.00 to
$14.00, is reasonable. . . .
. . . He further noted that [CAC’s] low-income proposal is
burdensome, including the adverse impact on industrial
customers who would see no benefit from the program. . . .
***
Commission Discussion and Findings. . . .
***
. . . Mr. Rábago was the only witness in opposition to the
proposed Settlement Agreement increase to the customer charge,
suggesting that it is inconsistent with “sound ratemaking
principles.” We disagree with Mr. Rábago. . . . [T]he
Commission finds that the increase in the monthly customer
charge from $11.00 to $14.00 for residential customers and from
$20.00 to $24.00 for small commercial customers is cost-based
Court of Appeals of Indiana | Opinion 93A02-1608-EX-1854 | April 19, 2017 Page 10 of 25
based upon the evidence presented, consistent with gradualism,
and is reasonable and should be approved.
***
In its case-in-chief, NIPSCO proposed a low-income program.
However, the OUCC and CAC both opposed the program as
proposed by NIPSCO, and offered their own proposals for
alternative programs. NIPSCO withdrew its request for approval
of a low-income program in this case. NIPSCO stated it may
present a similar program in the future and indicated its
willingness to continue discussing such a program with its
stakeholders. No other party supported the form of program
proposed by CAC, which was actively opposed by several
parties. . . . [In a prior rate case,] we recognized the importance
of the issue raised by the CAC, but found that there are
numerous implementation and policy related concerns and
declined to adopt the CAC’s program in that case. The CAC
provided us with no better record or rationale in this case as to
why we should adopt such a program . . . . The OUCC filed
testimony in this case opposing NIPSCO’s proposed low-income
program and . . . provided testimony concerning certain utilities’
voluntary “Round Up” programs that might be more appropriate
from the OUCC’s perspective. . . .
Notwithstanding, the Commission is perplexed over the sequence
of events that led to NIPSCO’s decision to ultimately not offer a
low-income proposal. NIPSCO, not the CAC, was the first to
propose a low-income program. The CAC offered an alternative
program in response. It would have made sense for NIPSCO to
engage the CAC and other parties to discuss alternatives and to
reach a consensus on an alternative. The evidence points to the
CAC being left out of any settlement discussion. . . . It is
confounding to understand the exclusion of parties with mutually
held goals. Few initial proposals are accepted by all parties at the
onset. When offering a proposal, the expectation would be for
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the utility to act in good faith and afford all the parties the
opportunity to dialogue, with the goal of reaching consensus.
Further, as for CAC’s recommendation that NIPSCO collect and
report on trend data on arrearages, disconnections, and related
data points, as we noted in [an earlier order in a different case],
“we decline to order such collection and reporting solely on the
basis of the evidence before us. We believe that any such effort is
best pursued by the utility and interested stakeholders outside the
regulatory constraints of a specific Commission directive.”
Indianapolis Power & Light, 2016 WL 1118795, at *72.
[9] Appealed Order p. 13, 27, 28, 45-46, 58, 71-72, 74, 78-80, 88, 90-91. CAC now
appeals.
Discussion and Decision
I. Standard of Review
[10] The General Assembly created the IURC “primarily as a fact-finding body with
the technical expertise to administer the regulatory scheme devised by the
legislature.” Ind. Gas Co. v. Ind. Fin. Auth., 999 N.E.2d 63, 65 (Ind. 2013)
(internal quotation removed). Because the “complicated process of
ratemaking” is “a legislative rather than judicial function,” it “is more properly
left to the experienced and expert opinion present in the Commission.” Office of
Util. Consumer Counselor v. Pub. Serv. Co. of Ind., 463 N.E.2d 499, 503 (Ind. Ct.
App. 1984).
[11] An order from the IURC is presumed valid unless the contrary is clearly
apparent. Citizens Action Coalition of Ind., Inc. v. S. Ind. Gas and Elec. Co., 70
Court of Appeals of Indiana | Opinion 93A02-1608-EX-1854 | April 19, 2017 Page 12 of 25
N.E.3d 429, 438 (Ind. Ct. App. 2017). More specifically, “[o]n matters within
its jurisdiction, the IURC enjoys wide discretion and its findings and decision
will not be lightly overridden simply because we might reach a different
decision on the same evidence.” Id. at 439. Essentially, “so long as there is any
substantial evidence to support the rates as fixed by the Commission as
reasonable, the judicial branch of the government will not interfere with such
legislative functions” and has “no power or authority to substitute [its] personal
judgment for what [it] might think is fair or reasonable in lieu of the [IURC’s]
administrative judgment.” Boone Cty. Rural Elec. Membership Corp. v. Pub. Serv.
Comm’n, 239 Ind. 525, 532, 159 N.E.2d 121, 124 (1959) (emphasis added).
[12] In reviewing an IURC decision, we apply a multi-tiered standard of review.
Citizens Action Coalition of Ind., Inc. v. S. Ind. Gas and Elec. Co., 45 N.E.3d 483,
491 (Ind. Ct. App. 2015). First, we must determine whether specific findings
exist as to all factual determinations material to the ultimate conclusions. Id.;
see also Capital Improvement Bd. of Mgrs. v. Pub. Serv. Comm’n, 176 Ind. App. 240,
260, 375 N.E.2d 616, 631 (1978) (holding that the findings “must be specific
enough to enable the court to review intelligently the Commission’s decision”).
Second, we must consider whether substantial evidence supports the IURC’s
findings of fact. Citizens Action, 45 N.E.3d at 491; see also N. Ind. Pub. Serv. Co. v.
U.S. Steel Corp., 907 N.E.2d 1012, 1016 (Ind. 2009) (observing that the IURC’s
order will stand “unless no substantial evidence supports it”) (emphasis added).
Finally, we must determine whether the decision is contrary to law. Citizens
Action, 45 N.E.3d at 491. In conducting our review, we neither reweigh the
Court of Appeals of Indiana | Opinion 93A02-1608-EX-1854 | April 19, 2017 Page 13 of 25
evidence nor assess witness credibility and will focus solely on the evidence
most favorable to the IURC’s findings. Ind. Gas, 999 N.E.2d at 66.
[13] Furthermore, where, as here, we are considering the IURC’s approval of a
settlement contract, substantial deference is required. Because approval of
settlement agreements is intrinsic to the IURC’s supervision and regulation of
utility rates, “substantial deference [is] owed to the Commission in supervising
settlements and even modifying or revoking orders entered attendant thereto.”
U.S. Gypsum, Inc. v. Ind. Gas Co., 735 N.E.2d 790, 803-04 (Ind. 2000). This is
especially true when, as here, the OUCC—which represents ratepayers,
consumers, and the public—has joined the settlement agreement. See Citizens
Action Coalition of Ind., Inc. v. N. Ind. Pub. Serv. Co., 796 N.E.2d 1264, 1268 (Ind.
Ct. App. 2003) (rejecting CAC challenge to settlement agreement, including
CAC claim that an IURC-approved settlement should be subject to the more
rigorous inspection of a settlement in class action cases).
II. Rate Design
[14] Any change to a utility charge “shall be reasonable and just, and every unjust or
unreasonable charge for such service is prohibited and declared unlawful.” Ind.
Code § 8-1-2-4. Here, CAC contends that the rate design included in the
Settlement Agreement (and the IURC Order), which incorporates an increase
in the fixed charge for residential and small commercial consumers, is unjust
and unreasonable. CAC has three primary reasons for this position: first, CAC
contends that NIPSCO did not produce substantial evidence to support the
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increase to the fixed charge; second, CAC argues that this rate design
discourages energy efficiency and conservation; and third, it contends that this
rate design will have a disparate, deleterious impact on low-income, Black, and
elderly populations.3
A. Substantial Evidence
[15] CAC insists that NIPSCO has failed to produce evidence proving that its
proposal is just and reasonable:
it produced no evidence of actual cost shifts or “cross subsidies”
resulting from its existing rate design that would require raising
fixed charges for all residential and small commercial customers.
NIPSCO has further failed to demonstrate that it faces any
financial harm due to current fixed cost recovery mechanisms
that would justify its attempt to guarantee earnings through fixed
charges.
Appellant’s Br. p. 25. According to the CAC, the IURC’s Order “advances the
common, but flawed, ratemaking premise that fixed costs should be collected
through fixed charges. Yet, NIPSCO offered no evidence to support the concept
that the nature of a cost, as either fixed or variable, should dictate the form of
the charge used to recover such a cost.” Id. at 25-26 (emphases original). CAC
3
CAC also argues that the IURC improperly relied upon a 2016 Order from a different case in reaching its
conclusions in this case. We agree with CAC that it would be problematic if the IURC had considered a
separate case with different parties and different issues to be binding on this case, but it is apparent that it did
not. Instead, IURC simply cited to its analysis in that case, finding its reasoning and rationales to be equally
applicable here. We see no problem with this approach. Additionally, we note that another panel of this
Court just affirmed the IURC’s order in that case. Citizens Action Coalition of Ind., Inc. v. Indianapolis Power &
Light Co., --- N.E.3d ---, 93A02-1604-EX-804 (Ind. Ct. App. Apr. 5, 2017).
Court of Appeals of Indiana | Opinion 93A02-1608-EX-1854 | April 19, 2017 Page 15 of 25
argues that NIPSCO did not prove that raising the fixed charge is preferable to
the many other alternative rate designs available to it.
[16] Whether or not there is another rate design that is preferable, however, is not
our inquiry. Our inquiry is limited to whether there is substantial evidence
supporting the IURC’s acceptance of the Settlement Agreement. The record
reveals the following evidence supporting the rate design contained in the
agreement:
A NIPSCO witness attested that “recovering fixed costs in a fixed
customer charge, and variable costs in a variable energy charge, gives
consumers appropriate price signals that allow them to efficiently
determine whether the marginal cost justifies the marginal benefit of
additional consumption.” Tr. Ex. Vol. 11 p. 114.
Another NIPSCO witness testified that with this rate design, NIPSCO
sought “rates that better align with the recovery of costs from the
customers that drive those costs[.]” Appellant’s App. Vol. II p. 45.
The increase in the fixed charge would “reduce subsidies between and
among customer classes” (in other words, reducing the degree to which
larger customer rates subsidized lower rates for residential and small
commercial customers), but “moderate any rate shock by incorporating
gradualism” (in other words, refraining from increasing the fixed charge
to an amount that fully reflects NIPSCO’s fixed costs). Id.
This rate design is not a true “straight fixed variable” structure, because
while there is a small increase in the fixed charge, “a substantial amount
of fixed costs would continue to be recovered in the [usage-based] energy
charge[.]” Tr. Ex. Vol. 11 p. 124.
Furthermore, the increase in the fixed charge will “significantly reduce
the percentage increase in the [usage-based] energy charges that would
otherwise be required” to meet NIPSCO’s revenue requirement. Id. at
129.
This rate design, including the increase in the fixed charge, is
“commensurate with other electric utilities in the state.” Id. at 130.
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Moreover, this rate design will recover “only a small minority of
[NIPSCO’s] fixed costs[.]” Id. at 125.
CAC’s proposal—that NIPSCO recover its revenue with an increase in
the energy charge as opposed to the fixed charge—provides “inefficient
price signals that distort consumers’ consumption decisions by setting the
marginal price far above the marginal cost of either consuming, or
foregoing consumption of, additional kilowatt-hours of electricity.” Id. at
113. This proposed structure, therefore, would “discourage[]
consumption that would be efficient in the sense that the marginal benefit
of consuming additional units of electricity exceed[s] the marginal cost of
the energy required to produce that electricity.” Id. at 115.
OUCC engaged in robust negotiations with NIPSCO that ultimately
resulted in an increase in the fixed charge of 27%, as opposed to the 82%
increase originally proposed by NIPSCO. OUCC, which represents all
ratepayers, testified that this compromise “is a fair resolution, supported
by evidence, and should be approved.” Appellant’s App. Vol. II p. 92.
CAC may genuinely believe that a different rate design is preferable, and some
reasonable ratepayers may agree with that belief, but the evidence in the record
readily supports the IURC’s decision to accept the Settlement Agreement. The
IURC has the expertise to analyze and weigh the complex competing evidence
on this issue, and we can only conclude that there is substantial evidence
supporting its decision to accept the proposed rate design, including the
increase in the fixed charge.
B. Energy Conservation
[17] Next, CAC argues that the IURC failed to make specific findings of fact or an
ultimate finding of reasonableness with respect to CAC’s argument that the
fixed charge increase would discourage energy conservation and efficiency.
Specifically, this rate design “allows NIPSCO to shift cost recovery more to the
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flat fee for all customers which limits a customer’s ability to reduce his bill by
reducing consumption and discourages energy conservation by reducing the
economic incentive for efficiency.” Appellant’s Br. p. 28. According to CAC,
the IURC failed to adequately address this contention.
[18] We find the analysis of this Court on this precise issue in a very recent case to
be instructive. In Citizens Action Coalition of Ind., Inc. v. Indianapolis Power & Light
Co., --- N.E.3d ---, 93A02-1604-EX-804 (Ind. Ct. App. Apr. 5, 2017), CAC
argued that the IURC had failed to make sufficient findings as to whether the
rate design in that case discouraged energy conservation and efficiency, asking
that this Court remand for specific findings on the issue. We disagreed:
We do not find this particular relief warranted. Joint Intervenors
did not bring a declaratory judgment action; rather, they
intervened in a rate case. Rate-making is a legislative as opposed
to a judicial function, and our Indiana Legislature has seen fit to
establish a commission for the express purpose of hearing
evidence and balancing and weighing the many complicated
factors which must be taken into consideration in setting utility
rates. State ex rel. Indianapolis Water Co. v. Boone Circuit Court, 261
Ind. 583, 586-87, 307 N.E.2d 870, 872 (1974). The enabling act
does not authorize the Commission to issue declaratory rulings.
See U.S. Steel Corp. v. No. Ind. Public Serv. Co., Inc., 482 N.E.2d
501, 506 (Ind. Ct. App. 1985), trans. denied.
In their insistence upon particular language, Joint Intervenors
attempt to shift the focus from the reasonableness of the order
approving the rate change as a whole to one component. . . .
Court of Appeals of Indiana | Opinion 93A02-1608-EX-1854 | April 19, 2017 Page 18 of 25
Slip op. p. 17-18. Here, likewise, the IURC was not required to make specific
findings on this particular argument raised by CAC. Instead, it was required to
consider NIPSCO’s rate design scheme as a whole, making specific findings as
to all factual determinations material to the ultimate conclusions. Citizens
Action, 45 N.E.3d at 491. The IURC made specific findings about the rate
design, including the increase in the fixed rate charge:
As we found recently in [another] rate case . . . , the increase in
the [fixed] customer charge was a “move toward a more fixed
and variable rate design consistent with traditional causation
principles,” while being “demonstratively short of [straight fixed
variable] rates.” We further found that, “[c]ost recovery design
alignment with cost causation principles sends efficient price
signals to customers, allowing customers to make informed
decisions regarding their consumption of the service being
provided.” Lastly, we note that, “this structure does not violate
principles of gradualism, because gradualism is best considered in
the context of the entire customer bill and not discrete charges
within the bill.” For these same reasons, the Commission finds
that the increase in the [fixed] monthly customer charge . . . is
cost-based upon the evidence presented, consistent with
gradualism, and is reasonable and should be approved.
Appealed Order p. 88 (internal citations omitted). These findings are specific to
the factual determinations material to the ultimate conclusions, and we have
already found that there is sufficient evidence supporting these findings. We
disagree with CAC that it was incumbent upon IURC to address its specific
argument regarding energy conservation.
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[19] Here, as in the recent case quoted above, CAC also argues that the approval of
this rate design “despite its deleterious effect on conservation and energy-
efficiency is contrary to federal law and state rule.” Appellant’s Br. p. 32.
Again, we find the analysis of this Court helpful and on point:
. . . The parties do not dispute the proposition that public policy,
federal and State, favors and encourages conservation.
Nonetheless, encouragement is not a mandate. Joint Intervenors
direct us to no statutory requirement that each individual
component of a rate scheme reflect the most environmentally
conservative approach or that abandonment of older
methodology be immediate and total. At bottom, Joint
Intervenors suggest a reweighing of evidence, with conservation
– based upon their interpretation of customer usage signals –
being paramount. They do not demonstrate the unreasonableness
of the rate increase as a whole.
Citizens Action, No. 93A02-1604-EX-804, at slip op. p. 19. Here, likewise, CAC
has not directed our attention to any federal law or state rule mandating a
different result in this case. Again, reasonable people may, and likely do, agree
with CAC that this rate design scheme is less than ideal with respect to the
important issues of energy conservation and efficiency. But that is immaterial
to our review of the IURC’s decision, which contains sufficient findings and is
supported by substantial evidence.
C. Impact on Certain Populations
[20] Similar to its energy conservation argument, CAC contends that the IURC
failed to make specific findings or an ultimate finding of reasonableness
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regarding its allegation that the fixed rate increase will have a disproportionate
impact on low-income, elderly, and Black consumers. CAC insists that
NIPSCO’s “presentation of data [on this issue] was very misleading,
incomplete, and was effectively rebutted by CAC. Regardless, the Commission
failed to make a basic finding of fact or conclusion of law on the material issue
raised of how an increased fixed charge affects low volume users of electricity,
who in NIPSCO’s service territory are low income customers, elderly
customers, and African American customers.” Appellant’s Br. p. 31. CAC
asks us to remand so that the IURC can make specific findings on this issue.
[21] As noted above, however, this is not a declaratory judgment action, and the
IURC is required to make specific findings only on factual determinations that
are material to the ultimate issue, which is the justness and reasonableness of
the rate design and its effect on ratepayers as a whole. As this Court recently
held,
[e]ven assuming that [the proposed rate design] has a
disproportionate negative impact upon certain groups of
customers, the Commission is required by statute to approve
rates that are fair and reasonable inclusive of the entire customer
base. There is no statutory requirement that the impact upon
particular sub-groups be separately addressed. Joint Intervenors
have not demonstrated that the Commission failed to conform to
statutory standards.
Citizens Action, No. 93A02-1604-EX-804, at slip op. p. 20. Here, likewise, there
was no requirement that the IURC make specific findings related to particular
sub-groups of ratepayers. It found the rate design to be just and reasonable as a
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whole as related to all ratepayers, see Appealed Order p. 87, and given our
standard of review, we are compelled to defer to that conclusion as there is
substantial evidence supporting it.
III. Payment Assistance Program and Data Collection
[22] Finally, CAC argues that the IURC erred because it did not require NIPSCO to
include a low-income payment assistance program as part of the rate design or
to collect and report data on its customers. At the beginning of the settlement
negotiations, NIPSCO had included a payment assistance program as part of its
rate design, but OUCC objected to that particular program. Consequently,
NIPSCO withdrew its proposed payment assistance program from the final
Settlement Agreement. CAC proposed its own version of a payment assistance
program, but none of the other involved entities approved of its proposal. In
the end, therefore, the IURC’s order does not contain a payment assistance
program at all.
[23] Initially, we note that we share in the IURC’s concern and perplexment as to
how and why CAC was left out of the settlement negotiations. Had CAC been
included, it is entirely possible, if not likely, that a compromise could have been
reached such that a payment assistance program would have been included in
the Settlement Agreement. It seems as though all agree that it would be
preferable to have such a program included. We echo the IURC’s strong
encouragement that, in future cases, the utilities will act in good faith by
including all parties in the negotiations.
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[24] That said, the IURC dedicated a lengthy paragraph in its order explaining why
it declined to order the adoption of CAC’s proposed payment assistance plan:
No other party supported the form of program proposed by CAC,
which was actively opposed by several parties. Mr. Rábago
addressed the elimination of NIPSCO’s proposed low-income
program of an annual credit of $50 applied to the June bill in his
opposition to the Settlement Agreement. He noted that the
residential customers face an annual fixed customer charge
increase of $36, but stated there are also increases in volumetric
rates. . . . [In a prior rate case], we recognized the importance of
the issue raised by the CAC, but found that there are numerous
implementation and policy related concerns and declined to
adopt the CAC’s program design in that case. The CAC
provided us with no better record or rationale in this case as to
why we should adopt such a program . . . The implications and
policy concerns expressed in [the other case] persist in this Cause.
Appealed Order p. 90. The IURC, which is the entity statutorily charged with
negotiating these complex regulatory waters, found that there are “numerous
implementation and policy related concerns” with respect to the program
proposed by CAC. We will not second-guess the IURC’s assessment in that
regard.
[25] NIPSCO elected to withdraw its own proposed payment assistance plan when
it faced resistance from OUCC, the entity charged with representing all
ratepayers.4 We think it best for the General Assembly to address legislatively
4
CAC argues that NIPSCO’s payment assistance plan was included (by mistake) in the final Settlement
Agreement as approved by the IURC. It is apparent, however, that NIPSCO explicitly withdrew this plan
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whether and how utilities should be required to collect and report such data on
a statewide basis. The IURC was certainly not required to force NIPSCO to re-
insert its proposal. It is extremely regrettable that the result of this process is a
rate design including rate increases with no assistance available for low-income
consumers. But under these circumstances, we cannot say that the IURC erred
in entering the order without such a program included.
[26] CAC also contends that NIPSCO should be required to collect and report data
about its consumers so that, in the future, CAC would be able to provide the
evidence on these matters that the IURC has found to be lacking. The IURC,
however, concluded that “any such effort is best pursued by the utility and
interested stakeholders outside the regulatory constraints of a specific
Commission directive.” Id. at 91. In addition to the IURC’s conclusion, we
would also point out that the cost of undertaking the collection and reporting of
this sought-after data would certainly be passed onto the consumers whose rate
increases CAC is attempting to minimize. Furthermore, the type of sensitive
data that CAC believes should be collected would potentially intrude on the
privacy of ratepayers. Under these circumstances, we decline to reverse the
IURC’s order on the basis that it did not order the collection and reporting of
this information.
during the proceedings. To force its inclusion under these circumstances would be to countenance the
“gotcha” litigation of which we disapprove. We decline to do so.
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[27] The judgment of the IURC is affirmed.
Barnes, J., and Crone, J., concur.
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