Argued: November 1, 2018
from the Indiana Utility Regulatory Commission No.
Petition to Transfer from the Indiana Court of Appeals No.
ATTORNEYS FOR APPELLANT Todd A. Richardson Bette J. Dodd
Joseph P. Rompala Lewis & Kappes, P.C. Indianapolis,
ATTORNEYS FOR APPELLEE NORTHERN INDIANA PUBLIC SERVICE
COMPANY Brian J. Paul Daniel E. Pulliam Faegre Baker Daniels
LLP Indianapolis, Indiana Claudia J. Earls M. Bryan Little
NiSource Corporate Services - Legal Indianapolis, Indiana.
ATTORNEYS FOR APPELLEE OFFICE OF THE UTILITY CONSUMER
COUNSELOR Jeffrey M. Reed William I. Fine Randall C. Helmen
Tiffany T. Murray Office of the Utility Consumer Counselor
reaps a benefit when utilities are allowed to plan for
investments in necessary and reasonable infrastructure
projects. The "TDSIC Statute" at issue in this
appeal promotes this beneficial behavior through a complex,
integrated process that aims to protect all sides involved.
On the utilities' side, the statute allows utilities to
seek pre-approval from the Indiana Utility Regulatory
Commission for certain electric or gas infrastructure
projects and to recoup the costs of those projects through
periodic petitions to the Commission for increases to its
rates. On the consumers' side, the statute requires the
Commission to make determinations regarding the public
convenience, necessity, and reasonableness of planned
projects before approving a plan to complete them. This
process protects both suppliers and consumers of electric and
gas services, improves the stability of the provision of
these services, and increases the predictability of costs
associated with providing and using these services.
the process started off well but eventually broke down. The
parties to this appeal agreed to two expansive, multi-year
settlements regarding rates and infrastructure investments
under the TDSIC Statute, and they asked the Commission to
approve the agreements, which it did. These agreements
specified how, in the utility's periodic petitions to the
Commission, rate increases should be calculated and allocated
among the utility's various rate classes. Despite being a
party to the underlying agreements, a group of some of the
utility's largest industrial customers opposed the
utility's second periodic petition, arguing that the
utility's rate calculation and allocation based on the
underlying agreements was contrary to the TDSIC Statute. The
Commission rejected this argument, and the customer group
sought judicial review.
case, at its core, involves a party to and proponent of two
complex administrative settlement agreements raising a
challenge to specific parts of those settlements in a later
proceeding. Concluding that the customer group is estopped
from raising this delayed challenge and further concluding
that the Commission's order contains sufficient findings,
we affirm the Commission.
and Procedural History
the lengthy and interwoven background of this appeal, our
discussion of the factual and procedural history proceeds in
three parts. We begin with a summary of some of the ways in
which the Indiana Utility Regulatory Commission regulates
utility rates and an overview of the specific challenge to
the regulatory activity raised here. Then, we discuss two
large-scale regulatory proceedings that provide the basis for
the proceeding below. We conclude with a summary of the
proceedings before the Commission and the Court of Appeals
Regulation of utility rates generally and the specific
challenge to the rate regulation here
year, in litigation between some of the same parties involved
in this appeal, we discussed the general processes by which
utility rates are set and adjusted. See NIPSCO Indus.
Grp. v. N. Ind. Pub. Serv. Co. (NIPSCO 2018),
100 N.E.3d 234, 238-39 (Ind. 2018), modified on
reh'g. We find a brief summary of these processes
helpful in placing this appeal in the proper context.
utility rates are traditionally set or adjusted through a
general ratemaking case (variously referred to as a general
rate case or base rate case) before the Commission. This is a
comprehensive process in which the Commission
"examine[s] every aspect of the utility's operations
and the economic environment in which the utility functions .
. . ." Id. at 238 (quoting U.S. Gypsum,
Inc. v. Ind. Gas Co., 735 N.E.2d 790, 798 (Ind. 2000)).
Such a detailed review allows the Commission to ensure that
utility rates are fair to both the utility and its customers.
addition to the comprehensive process of a base rate case,
utility rates can be adjusted to reflect specific projects
and costs through a "tracker" or "rider"
procedure before the Commission. The TDSIC Statute, at issue
in this appeal, provides one such proceeding related to
electric or gas transmission, distribution,
and storage system improvement
charges a public utility imposes for certain
improvement projects. See generally Ind. Code ch.
8-1-39 (2016 Repl.). This statute provides two distinct, yet
related, types of proceedings. First, under Section 10, a
utility can seek approval from the Commission of a multi-year
plan "for eligible transmission, distribution, and
storage improvements." I.C. § 8-1-39-10(a). See
also NIPSCO 2018, 100 N.E.3d at 239. Second, under
Section 9 and based on the multi-year plan, the utility can
periodically petition the Commission for "adjustment of
[its] basic rates and charges to provide for timely recovery
of eighty percent (80%) of approved capital expenditures and
TDSIC costs." I.C. § 8-1-39-9(a). See also
NIPSCO 2018, 100 N.E.3d at 239. The utility calculates
these rate adjustments through a multi-step process, and one
of the steps in this process involves allocating eligible
TDSIC costs among the utility's various rate classes.
requirement of Section 9 of the TDSIC Statute speaks
specifically to the allocation step of the rate adjustment
calculation, and this requirement lies at the center of this
appeal. A Section 9 petition, among other things, must
"use the customer class revenue allocation factor based
on firm load approved in the public utility's most recent
retail base rate case order." I.C. §
8-1-39-9(a)(1). The parties agree as to which order from the
Commission qualifies as Northern Indiana Public Service
Company's ("NIPSCO") most recent retail base rate
case order. Further, the parties do not dispute the meaning
of the term "firm load" in the context of this
proceeding. However, the NIPSCO Industrial Group (the
"Industrial Group") argues that the customer class
revenue allocation factors included in NIPSCO's second
Section 9 petition were not based on firm load, as required
by Section 9, but rather on total load.
NIPSCO's most recent base rate case and its Section 10
proceeding for approval of its multi-year TDSIC plan
the Section 9 proceeding that spawned this appeal drew from
the parties' settlements and the Commission's orders
resolving NIPSCO's most recent base rate case and
approving NIPSCO's multi-year TDSIC plan, we begin our
discussion of the particular facts and history of this appeal
with a discussion of the underlying proceedings.
The base rate case
October 2015, NIPSCO petitioned the Commission to begin a
base rate case to increase its base electric service rates,
and it submitted testimony and exhibits to the
Commission. Nine entities intervened and participated
in the case, including the Industrial Group. The Indiana
Office of Utility Consumer Counselor (the "OUCC"),
a statutory representative of "ratepayers, consumers,
and the public," I.C. § 8-1-1.1-4.1(a), also
participated in the case.
February 2016, NIPSCO, the OUCC, and most of the intervenors-
including the Industrial Group-submitted a settlement
agreement (the "Base Rate Case Settlement") to the
Commission, along with supporting testimony. As relevant
here, the settling parties stated, "For purposes of
establishing any rate schedules allowing for the recovery of
80% of NIPSCO's approved capital TDSIC expenditures and
costs pursuant to I.C. 8-1-39-9(a), the parties agree that
Joint Exhibit D reflects the customer class revenue
allocation factors that should be applied to firm load."