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Citizens Action Coalition of Indiana, Inc. v. Northern Indiana Public Service Company

Court of Appeals of Indiana

April 19, 2017

Citizens Action Coalition of Indiana, Inc., Appellant-Intervenor,
v.
Northern Indiana Public Service Company; NIPSCO Industrial Group; and United States Steel Corporation, Appellees-Petitioners

         Appeal from the Indiana Utility Regulatory Commission Cause No. 44688 The Honorable David Veleta, Administrative Law Judge The Honorable Carol Stephan, Chair

          Attorney for Appellant Jennifer A. Washburn Citizens Action Coalition of Indiana, Inc. Indianapolis, Indiana

          Attorneys for Appellee - Northern Indiana Public Service Company Peter J. Rusthoven 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

          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.

         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 U.S. 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 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 entities[2] 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.

         [¶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, 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.
***
. . . 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 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.
. . . 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 ...

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