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NIPSCO Industrial Group v. Northern Indiana Public Service Co.

Court of Appeals of Indiana

May 31, 2018

NIPSCO Industrial Group, Appellant-Intervenor,
Northern Indiana Public Service Company and Office of the Utility Consumer Counselor, Appellees-Petitioner.

          Appeal from the Indiana Utility Regulatory Commission The Honorable David Veleta, Senior Administrative Law Judge Cause No. 44733-TDSIC-2

          ATTORNEYS FOR APPELLANT Todd A. Richardson Bette J. Dodd Joseph P. Rompala Lewis & Kappes, PC Indianapolis, Indiana.

          ATTORNEYS FOR APPELLEES Brian J. Paul Daniel E. Pulliam Faegre Baker Daniels LLP Indianapolis, Indiana Claudia J. Earls M. Bryan Little Nisource Corporate Services Indianapolis, Indiana William I. Fine Randall C. Helmen Tiffany T. Murray Office of Utility Consumer Counselor Indianapolis, Indiana.

          RILEY, JUDGE.


         [¶1] Appellant-Intervenor, NIPSCO Industrial Group, appeals the Order of the Indiana Regulatory Commission (Commission) in which the Commission authorized Appellee-Petitioner, Northern Indiana Public Service Company (NIPSCO), to impose a statutory regulated rate adjustment based on total load on its utility customers.

         [¶2] We reverse.


         [¶3] NIPSCO Industrial Group presents us with two issues on appeal, one of which we find dispositive and which we restate as: Whether the Commission failed to comply with Indiana Code section 8-1-39-9(a)(1), which requires the allocation of a rate adjustment to be based on firm load, by approving NIPSCO's computation which utilized an allocation based on total load.


         [¶4] NIPSCO is a public electric and gas utility that services over 461, 000 residential, commercial, industrial, wholesale, and other customers in Indiana. The NIPSCO Industrial Group represents a group of five of NIPSCO's largest industrial customers.

         [¶5] As with other utilities, NIPSCO recovers its costs for providing electric service through rates approved by the Commission. Traditionally, a utility's rates charged to customers are adjusted through periodic rate cases, which are expensive, time consuming, and sometimes result in large, sudden rate hikes for customers. Another method to set rates is through 'tracker' proceedings, which allow incremental increases for specific projects and costs between general rate case proceedings. 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 Transmission, Distribution, and Storage System Improvement Charge or TDSIC (TDSIC Statute). Thus, in contrast to traditional regulation in which utility rates are determined through general rate cases based on comprehensive review of the utility's finances and operations, the TDSIC permits incremental rate adjustments at six-month intervals to reflect specific costs associated with defined infrastructure projects. Pursuant to section 10 of the TDSIC Statute, an energy utility must first secure regulatory approval for a 7-year plan designating an eligible project that the utility proposes to construct. See Ind. Code § 8-1-39-10. Once a 7-year plan is approved, the utility may then file petitions every six months under Section 9, seeking rate adjustments that reflect costs as they are incurred on approved projects. See I.C.§ 8-1-39-9. Specifically, section 9 mandates that a periodic adjustment of the basic rate must, among others, "use the customer class revenue allocation factor based on firm load approved in the utility's most recent retail base rate case order[.]" I.C. § 8-1-39-9(a)(1).

         [¶6] The statutory phrase "based on firm load" refers to a distinction between utility services rendered on a firm as opposed to an interruptible basis. See I.C. § 8-1-39-9(a)(1). For customers electing firm service, the utility is required to provide service with a high degree of reliability, whereas interruptible service is subject to interruption as needed to meet the needs of customers, and is thus less reliable. Because the utility does not have to build capacity and maintain resources to meet interruptible demand, the service promotes efficiency and reduces the level of needed investment, to the benefit of the interruptible load ratepayers. Accordingly, NIPSCO serves distinct customer classes under different rate schedules that reflect the service each class elects. NIPSCO's tariff includes seventeen different rate classes and large volume customers, like the NIPSCO Industrial Group, who receive firm services under three different industrial rate schedules. Within the limits defined in the three industrial rate schedules, the customers may designate a portion of their load as interruptible, with the rest of their demand falling within the firm load service.

         [¶7] The aggregate TDSIC costs recoverable in a given six-month period are used to compute revenue requirements, which is the amount of additional dollars that NIPSCO seeks to collect from its customers collectively. Those revenue requirements are then divided among the different customer classes based on allocation factors derived from the most recent general rate case. See I.C. ยง 8-1-39-9(a)(1). Once the dollar amount to be recovered from each customer class is determined, specific rate ...

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