from the Indiana Utility Regulatory Commission Hon. James F.
Huston, Interim Chairman Hon. Sarah E. Freeman, Commissioner
Hon. Angela Rapp Weber, Commissioner Hon. David E. Ziegner,
Commissioner Hon. Carol Sparks Drake, Administrative Law
Judge Cause No. 44976
Attorney for Appellant J. David Agnew Lorch Naville Ward LLC
New Albany, Indiana
Attorneys for Appellee Indiana-American Water Company David
L. Pippen General Counsel Indiana-American Water Company
Greenwood, Indiana Peter J. Rusthoven Nicholas K. Kile
Hillary J. Close Barnes & Thornburg LLP Indianapolis,
ATTORNEYS FOR APPELLEE CITY OF CHARLESTOWN Karl L. Mulvaney
Alex E. Gude Bingham Greenebaum Doll LLP Indianapolis,
Indiana David T. McGimpsey Bingham Greenebaum Doll LLP
Sharpnack, Senior Judge.
of the Case
The City of Charlestown, Indiana, executed an agreement to
sell its water utility to Indiana-American Water Company,
Inc., subject to approval by the Indiana Utility Regulatory
Commission. NOW!, Inc., a not-for-profit entity opposed to
the sale, filed a petition asking the IURC to reject the
agreement. Charlestown and Indiana-American filed a separate
petition asking the IURC to approve the sale.
The IURC consolidated the petitions, determined that the sale
of the water utility was in the public interest, and issued
an order approving the transaction. NOW appeals. We conclude
the IURC's order is supported by the facts and fulfills
statutory requirements. We affirm.
NOW raises three issues, which we restate as:
I. Whether the IURC erred in determining that the purchase
price for the utility was reasonable.
II. Whether the IURC erred in determining that Charlestown
substantially complied with the statute requiring that
information related to utility appraisals be made available
to the public.
III. Whether the IURC erred in determining that Charlestown
complied with the statute governing public hearings to
discuss sales of municipal utilities.
and Procedural History
Charlestown is a community of approximately 8, 000 people in
Clark County, Indiana. The city has owned and operated a
water utility for over fifty years. The utility's
equipment consists of a well field, four raw water wells, 15,
000 feet of raw water transmission main, a 1.5 million gallon
ground storage tank, a pump station and treatment facility, a
250, 000 gallon stand pipe, a 500, 000 gallon elevated tank,
approximately 290, 000 feet of water mains, 488 valves, and
296 hydrants. The system serves 2, 898 metered accounts.
Over the years, Charlestown neglected to maintain its water
distribution system, and as a result manganese and other
minerals have built up in storage tanks and water mains,
causing some utility customers to see "brown water"
in their taps. Appellant's App. Vol. 3, p. 6. The city
also experienced water main leaks. The problem was
exacerbated by Charlestown's failure to maintain adequate
records, such as a map of the water system, prior to 2000.
Charlestown officials, including Mayor G. Robert Hall,
attempted to correct the problems, but as of 2017 they still
encountered two to three water main leaks per month and eight
to ten complaints of brown water per month. The mayor
consulted with an engineer, who estimated that eliminating
the brown water problem and addressing other defects would
cost $7.2 million. City officials ultimately concluded that
Charlestown could not fix the water utility's failing
infrastructure without a large increase in customer rates.
Indiana-American is an Indiana corporation based in
Greenwood, Indiana, that provides water utility services to
approximately 300, 000 customers across Indiana, including in
Clark County. In the spring of 2016, Mayor Hall met with
Indiana-American to discuss the sale of Charlestown's
water utility. City officials concluded Indiana-American
could fix the utility infrastructure problems with fewer
increases in customer rates because the company could spread
improvement costs across its entire customer base.
While discussions were ongoing, Charlestown's engineering
contractor, Saegesser Engineering, obtained appraisals of the
water utility. The appraisers' reports were provided to
Charlestown in November 2016. The appraisers
"recertified" their reports and returned them to
Charlestown on April 1, 2017. Appellant's App. Vol. 3, p.
18. The appraisers valued the utility's property at $13,
449, 711. Id. at 158.
Charlestown and Indiana-American negotiated a purchase
agreement, subject to the IURC's approval of the
transaction and the IURC's recognition of the full
purchase price in Indiana-American's net original cost
rate base. Charlestown agreed to turn over all the
utility's assets, except the well fields, which
Charlestown would lease to Indiana-American by separate
agreement. Indiana-American agreed to pay $13, 403, 711 for
Charlestown's water system, an amount equal to the total
appraised value minus the appraised value of the wells and
well pumps that Charlestown would retain and lease to
Indiana-American. Appellant's App. Vol. 2, pp. 16-17.
The Charlestown City Council held a meeting on April 3, 2017,
during which they scheduled a public meeting for May 11,
2017, to discuss the sale. Notice of the meeting was
published in the local newspaper on April, 11, 2017. The
notice stated that a copy of "the appraisal" was
available for review in the Charlestown Clerk-Treasurer's
office. Appellee Charlestown's App. Vol. 2, p. 125.
The public meeting was held as scheduled. On July 3, 2017,
the city council introduced an ordinance to sell the utility
and then adopted the ordinance on July 6, 2017.
On July 7, 2017, NOW filed a complaint against Charlestown
and Indiana- American under IURC cause number 44964, asking
the IURC to reject the utility sale. On August 17, 2017,
Charlestown and Indiana-American filed a joint petition and
case-in-chief under IURC cause number 44976. Charlestown and
Indiana-American asked the IURC to approve their transaction
and to include the purchase price and related costs in
Indiana-American's rate base for ratemaking purposes. The
IURC consolidated the cases under cause number 44976,
granting NOW permission to intervene.
Next, NOW moved to strike or dismiss Charlestown and
Indiana-American's case-in-chief. The Indiana Office of
the Utility Consumer Counselor (OUCC), an entity that
represents the public in IURC proceedings, appeared in the
case and moved to dismiss Charlestown and
Indiana-American's joint petition. The IURC denied the
motions of NOW and the OUCC. NOW next filed a motion for
The IURC presided over a three-day evidentiary hearing,
during which Charlestown, Indiana-American, NOW, and the OUCC
presented evidence. After the hearing, the parties submitted
proposed orders. The IURC issued an order concluding, in
1. Joint Petitioners are authorized to consummate the
acquisition of the Charlestown Water System by
Indiana-American on the terms described in the Asset Purchase
Agreement and as discussed herein.
2. The acquisition of the Charlestown Water System by
Indiana-American on the terms and conditions described in the
Asset Purchase Agreement and in the evidence is in the public
interest as defined in Ind. Code § 8-1.5-2-6.1(d) and
(e), and the same is approved.
3. Indiana-American is authorized to record for ratemaking
purposes as net original cost rate base of the assets being
acquired an amount equal to the full purchase price, actual
incidental expenses, and other actual costs of acquisition
reasonably incurred, allocated among utility plant in service
accounts as Indiana-American proposed.
4. Indiana-American is authorized to charge customers
currently served by the Charlestown Water System the current
rates and charges and apply the same rules and regulations
for water service and private and public fire service
applicable in Indiana-American's Area One rate group on
file with and approved by the Commission, as the same are in
effect from time to time.
5. Indiana-American is authorized to reflect the acquisition
of the Charlestown Water System on its books and records as
of the closing by making the accounting and journal entries
described in Attachment GMV-R1, as adjusted to actual,
reasonable incidental expenses and other actual costs of the
6. The net original cost, as defined herein, of the acquired
property shall be used for accounting, depreciation, and rate
base valuation purposes after closing.
7. Indiana-American is authorized to apply its depreciation
accrual rates on and after the closing date of the
acquisition to depreciable property purchased from
Charlestown pursuant to the Asset Purchase Agreement.
8. Indiana-American is authorized to encumber the properties
comprising the Charlestown Water System with the lien of
Indiana-American's mortgage indenture.
9. The relief sought in NOW's Amended Complaint is
10. NOW's Motion for Summary Judgment is denied.
Appellant's App. Vol. 2, pp. 51-52. This appeal
Standard of Review
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. N. Ind.
Pub. Serv. Co. v. U.S. Steel Corp., 907 N.E.2d 1012,
1015 (Ind. 2009). The IURC's assignment is to ensure that
public utilities provide constant, reliable, and efficient
service to the citizens of Indiana. Id.
When reviewing an IURC order, we must first determine whether
the order contains "specific findings on all the factual
determinations material to its ultimate conclusions."
Ind. Gas Co. v. Ind. Fin. Auth., 999 N.E.2d 63, 66
(Ind. 2013) (quotation omitted). We then determine whether
the findings of fact are supported by substantial evidence in
the record. Id. We neither reweigh the evidence nor
assess the credibility of witnesses, and we consider only the
evidence most favorable to the IURC's findings.
Id. Factual findings will stand unless no
substantial evidence supports them. U.S. Steel, 907
N.E.2d at 1016.
Both Charlestown and Indiana-American claim that we should
defer to the IURC's interpretations of statutes that it
is charged with enforcing. To the contrary, the Indiana
Supreme Court recently held that appellate courts review
questions of law de novo, with "no deference" to an
administrative tribunal. NIPSCO Indus. Group v. N. Ind.
Pub. Serv. Co., 100 N.E.3d 234, 241 (Ind. 2018), on
reh'g. "Separation-of-powers principles do not
contemplate a 'tie-goes-to-the-agency' standard for
reviewing administrative decisions on questions of law."
Reasonableness of Sale Price
NOW argues that the IURC misapplied the statutes that govern
the sale of utilities. Specifically, NOW claims that the IURC
erred in determining that the sale price of Charlestown's
water utility was reasonable, as that term is defined by
statute, and further claims that the proposed sale cannot
move forward unless Charlestown residents approve the
transaction in a referendum.
The parties agree that Charlestown's proposed sale of its
water utility is governed by Indiana Code section 8-1.5-2-1
et seq., which governs the sale of utilities by
municipalities. In particular, Indiana Code section
8-1.5-2-6.1 (2016) governs the sale of "nonsurplus
utility property." It provides:
(a) This section applies to a municipality that adopts an
ordinance under section 5(d) of this chapter ...