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NIPSCO Industrial Group v. Northern Indiana Public Service Co.

Court of Appeals of Indiana

June 20, 2017

NIPSCO Industrial Group, Appellant-Intervenor,
Northern Indiana Public Service Company, Appellee-Petitioner.

         Appeal from the Indiana Utility Regulatory Commission Cause No. 44403-TDSIC-4 The Honorable Lorraine L. Seyfried, Chief Administrative Law Judge The Honorable Carol A. Stephan, Chair The Honorable James F. Huston, Commissioner The Honorable David E. Ziegner, Commissioner

          Attorneys for Appellant Todd A. Richardson Jennifer W. Terry Joseph P. Rompala Lewis Kappes, P.C. Indianapolis, Indiana

          Attorneys for Appellee Brian J. Paul Daniel E. Pulliam Faegre Baker Daniels LLP Indianapolis, Indiana Claudia J. Earls Christopher C. Earle NiSource Corporate Services-Legal Indianapolis, Indiana

          Kirsch, Judge.

         [¶1] NIPSCO Industrial Group ("Industrial Group") appeals the decision of the Indiana Utility Regulatory Commission ("the Commission") that approved Northern Indiana Public Service Company's ("NIPSCO") petition for a plan update, pursuant to Indiana Code section 8-1-39-9, to its previously Commission-approved 7-year plan. Industrial Group raises two issues, which we consolidate and restate as: whether the Commission erred in approving NIPSCO's petition for a plan update, finding certain categories of improvements as eligible to be treated as transmission, distribution, and storage system improvement charges ("TDSIC") because the Industrial Group claims that the projects within the categories were not identified with enough specificity.

         [¶2] We affirm.

         Facts and Procedural History

         [¶3] NIPSCO is a public electric and gas utility that services customers in northern Indiana and owns, operates, manages, and controls plants and equipment in Indiana used for the generation, transmission, distribution, and furnishing of gas utility service to the public. NIPSCO provides gas utility service to more than 821, 000 residential, commercial, and industrial customers in northern Indiana. Industrial Group is a group comprised of some of NIPSCO's largest industrial customers.

         [¶4] The rates a utility charges to its customers are traditionally adjusted through periodic rate cases, which are expensive, time consuming, and comprehensive. Another way to set rates is through tracker proceedings, which allow smaller increases for specific projects and costs between general rate case proceedings. The General Assembly has authorized several trackers, including a fuel charge tracker, a tracker for qualified pollution control projects under construction, a tracker for federally mandated costs, and a tracker for clean energy projects. In 2013, the General Assembly enacted Indiana Code chapter 8-1-39, which allows a utility to petition for a tracker for certain proposed new or replacement electric or gas transmission, distribution, or storage projects. The statute is referred to as the "TDSIC" statute.

         [¶5] Under the TDSIC statute, the utility seeks approval of a 7-year plan, pursuant to Indiana Code section 8-1-39-10 ("Section 10"), that designates improvements to transmission, distribution, and storage systems. If the Commission determines that the 7-year plan is reasonable, reflects the best estimate of the costs of the improvements, demonstrates that the improvements are required for public convenience and necessity, and shows that the eligible improvements are cost-justified, then the Commission approves the plan and designates the improvements as eligible for TDSIC treatment. Ind. Code § 8-1-39-10(b). After the 7-year plan is approved, periodic tracker proceedings may occur, pursuant to Indiana Code section 8-1-39-9 ("Section 9"), to allow rate adjustments for specific projects as they are completed. These petitions should include an update of the 7-year plan, and any costs that exceed the approved expenditures and TDSIC costs require "specific justification by the public utility and specific approval by the [C]ommission before being authorized for recovery in customer rates." Ind. Code § 8-1-39-9(f).

         [¶6] On October 3, 2013, NIPSCO filed a petition under Section 10 seeking approval of its 7-year plan for its gas system, which included improvement projects to transmission, distribution, and storage systems. By order, the Commission approved the 7-year plan and found that NIPSCO's cost estimates for the 7-year plan were reasonable. Industrial Group appealed the Commission's order approving the 7-year plan, but on Industrial Group's own motion, the appeal was dismissed with prejudice on September 23, 2014.

         [¶7] On August 28, 2014, NIPSCO filed its first tracker petition for its gas system, which sought approval of updates to the 7-year plan, including actual and proposed capital expenditures and TDSIC costs that exceeded the amounts approved in the original 7-year plan. NIPSCO's petition projected the estimated capital costs for the 7-year plan to be $862.2 million, which was an increase of $149.1 million over the original plan. This tracker petition was approved by the Commission, including NIPSCO's proposed methodology for calculating the TDSIC adjustment.

         [¶8] NIPSCO filed its second tracker petition ("TDSIC-2") on February 27, 2015. Before the Commission issued an order on TDSIC-2, a panel of this court issued a decision in the appeal of NIPSCO's electric TDSIC case 7-year plan ("the Electric Decision"), in which the Commission's order was reversed in part, affirmed in part, and remanded to the Commission. See NIPSCO Indus. Grp. v. N. Ind. Pub. Serv. Co., 31 N.E.3d 1 (Ind.Ct.App. 2015). This court held that NIPSCO's 7-year plan for its electric TDSIC lacked sufficient detail for the Commission to determine whether "NIPSCO's plan for years two through seven was 'reasonable' or to determine a 'best estimate of the cost' of the improvements." Id. at 8. The court also found that it was impermissible for the Commission to establish a "'presumption of eligibility' regarding the undefined projects for years two through seven" because such a presumption "inappropriately shifts the burden of showing a project's eligibility for TDSIC treatment from NIPSCO." Id. at 9. After the Electric Decision was issued, because it impacted the TDSIC filings in its gas systems, NIPSCO moved to dismiss its TDSIC-2 petition in its gas system with the understanding that it would request to recover the expenditures and costs covered in TDSIC-2 through its third tracker petition ("TDSIC-3"), and the trial court dismissed TDSIC-2 without prejudice.

         [¶9] On August 31, 2015, NIPSCO filed its TDSIC-3, which again sought approval of its updated 7-year plan and included actual and proposed estimated capital expenditures and TDSIC costs that exceeded those amounts approved in TDSIC-1. In TDSIC-3, NIPSCO sought to provide more specificity with respect to the projects contained in the project groups in response to the Electric Decision. In its TDSIC-3 order approving the petition, the Commission found that, based on the Electric Decision in Nipsco Industrial Group, approval of a 7-year plan requires a finding that the proposed projects in the plan contain enough detail for the Commission to determine that the projects meet the definition of eligible improvements. Appellant's App. at 159. The Commission also recognized that TDSIC-3 presented a "unique situation" because although the Commission had previously approved NIPSCO's 7-year plan, the Electric Decision showed that such approval was not proper under the statute. ...

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