Indiana Office of Utility Consumer Counselor, City of Crown Point, Indiana and Town of Schererville, Indiana v. Indiana-American Water Company, Inc., City of Lake Station, Indiana (mem. dec.) ( 2019 )

MEMORANDUM DECISION
FILED
Pursuant to Ind. Appellate Rule 65(D),
this Memorandum Decision shall not be Jun 26 2019, 9:08 am
regarded as precedent or cited before any CLERK
Indiana Supreme Court
court except for the purpose of establishing Court of Appeals
and Tax Court
the defense of res judicata, collateral
estoppel, or the law of the case.
ATTORNEYS FOR APPELLANT ATTORNEYS FOR APPELLEE
INDIANA OFFICE OF UTILITY INDIANA-AMERICAN WATER
CONSUMER COUNSELOR COMPANY
William I. Fine David L. Pippen
Daniel M. LeVay General Counsel
Scott C. Franson Indiana-American Water Company
Indiana Office of Utility Consumer Greenwood, Indiana
Counselor
Indianapolis, Indiana Peter J. Rusthoven
Nicholas K. Kile
ATTORNEYS FOR APPELLANT Hillary J. Close
CITY OF CROWN POINT, INDIANA Barnes & Thornburg, LLP
Indianapolis, Indiana
Robert M. Glennon
Robert Glennon & Assoc., P.C.
ATTORNEYS FOR APPELLEE
Danville, Indiana
CITY OF LAKE STATION
Jeffery A. Earl Michael L. Deppe
Danville, Indiana Benjamin D. Waite
Deppe Law Center
ATTORNEYS FOR APPELLANT Hobart, Indiana
TOWN OF SCHERERVILLE, INDIANA
ATTORNEYS FOR APPELLEE
J. Christopher Janak
Kristina Kern Wheeler
INDIANA UTILITY REGULATORY
Bose, McKinney & Evans LLP COMMISSION
Indianapolis, Indiana Curtis T. Hill, Jr.
Attorney General of Indiana
Patricia C. McMath
Aaron T. Craft
Deputy Attorneys General
Indianapolis, Indiana
Court of Appeals of Indiana | Memorandum Decision 18A-EX-2179 | June 26, 2019 Page 1 of 18
Beth E. Heline
General Counsel
Jeremy Comeau
Steven Davies
Assistant General Counsel
Indiana Utility Regulatory
Commission
Indianapolis, Indiana
IN THE
COURT OF APPEALS OF INDIANA
Indiana Office of Utility June 26, 2019
Consumer Counselor, City of Court of Appeals Case No.
Crown Point, Indiana, and 18A-EX-2179
Town of Schererville, Indiana, Appeal from the Indiana Utility
Appellants-Statutory Party and Regulatory Commission
Intervenors, The Honorable James F. Huston,
v. Chairman
The Honorable Sarah E. Freeman,
Indiana-American Water Stefanie Krevda, David Ober, and
Company, Inc., City of Lake David E. Ziegner, Commissioners
Station, Indiana, and Indiana The Honorable Carol Sparks Drake,
Utility Regulatory Commission, Administrative Law Judge
Appellees-Petitioners and IURC Cause No. 45041
Administrative Agency
Crone, Judge.
Court of Appeals of Indiana | Memorandum Decision 18A-EX-2179 | June 26, 2019 Page 2 of 18
Case Summary
[1] Indiana-American Water Company, Inc. (“Indiana American”),1 agreed to
purchase the water utility of the City of Lake Station (“Lake Station”) for over
$20,000,000. Indiana American and Lake Station filed a petition seeking
approval of the proposed sale from the Indiana Utility Regulatory Commission
(“the Commission”). After an evidentiary hearing on the petition, the
Commission issued an order approving the transaction over the objection of the
Indiana Office of Utility Consumer Counselor (“the OUCC”) and Indiana
American wholesale customers the Town of Schererville (“Schererville”) and
the City of Crown Point (“Crown Point”) (collectively “Appellants”).
[2] On appeal, the controversy centers on Lake Station’s water treatment plant and
five supply wells, which Lake Station currently uses. Although Indiana
American does not plan to use them after the transaction closes, the
Commission allowed their appraised value of over $7,000,000 to be included in
Indiana American’s rate base. Appellants argue that the Commission erred in
doing so. The Commission, Indiana American, and Lake Station (collectively
“Appellees”) argue otherwise. We agree with Appellees and therefore affirm.
1
We follow the Indiana Utility Regulatory Commission’s lead in dropping the hyphen from the company’s
name.
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Facts and Procedural History2
[3] The relevant facts are undisputed. Lake Station’s water system has been
interconnected with Indiana American’s Northwest Operations System since
1965.3 In 1990, Lake Station and Indiana American entered into a water supply
agreement, which allowed Lake Station to receive 750,000 gallons per day. At
the recommendation of an engineering consultant, Lake Station constructed
various improvements to its water system, including five new supply wells and
a water treatment plant, which began operating in 2015. That same year, the
water supply agreement between Lake Station and Indiana American expired
and was not renewed, resulting in the closure of the valves linking the two
systems.
[4] Lake Station was unable to adequately maintain its water system, so in March
2016 it started taking steps to sell the system pursuant to Indiana Code Chapters
8-1.5-2 (“Transfer, Acquisition, and Improvement of Utilities by
Municipalities”) and 8-1-30.3 (“Acquisition of Distressed Water or Wastewater
Utilities”). Before a municipal legislative body or executive may sell its
“nonsurplus municipally owned utility property,” it must appoint three
disinterested Indiana residents to appraise the property. Ind. Code § 8-1.5-2-4.
2
We thank the parties for their well-written briefs, which facilitated our review.
3
According to the Commission’s order, Indiana American “is an Indiana corporation engaged in providing
water utility service to the public in numerous communities throughout Indiana, including Lake County, for
residential, commercial, industrial, public authority, sale for resale, and fire protection purposes[,]” and
“serves approximately 300,000 water customers ….” Appealed Order at 2. Lake Station “owns and operates
a water system serving approximately 3,443 metered customers.” Id.
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If the legislative body and the municipal executive decide to proceed with the
sale after the appraisal is returned, the legislative body must hold a public
hearing and then may adopt an ordinance providing for the sale of the property.
Ind. Code § 8-1.5-2-5(d).
[5] Lake Station appointed three appraisers, who returned an appraisal that valued
its nonsurplus water utility property at $20,380,600. Lake Station held a public
hearing and in June 2017 adopted an ordinance for the sale of the property. In
September 2017, Lake Station and Indiana American signed an asset purchase
agreement, pursuant to which Indiana American proposed to pay Lake Station
$20,680,000 for the property.
[6] Before a municipality may sell its nonsurplus utility property, the municipality
and the prospective purchaser must obtain the Commission’s approval pursuant
to Indiana Code Section 8-1.5-2-6.1 (“Section 6.1”). Ind. Code § 8-1.5-2-6.1(b).
The Commission shall approve the sale according to the parties’ proposed terms
and conditions if the Commission finds that the sale according to those terms
and conditions is in the public interest. Ind. Code § 8-1.5-2-6.1(d). The
purchase price shall be considered reasonable if it does not exceed the appraised
value set forth in the aforementioned appraisal. Id. If a municipally owned
utility files a petition under Indiana Code Section 8-1-30.3-5(d) and the
Commission approves the petition under Indiana Code Section 8-1-30.3-5(c),
then the proposed sale “is considered to be in the public interest.” Ind. Code §
8-1.5-2-6.1(e)(1).
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[7] In January 2018, Indiana Code Section 8-1-30.3-5 (“Section 30.3-5”) provided
in relevant part as follows:
(a) This section applies if:
(1) a utility company acquires property from another
utility company at a cost differential[4] in a transaction
involving a willing buyer and a willing seller; and
(2) at least one (1) utility company described in subdivision
(1) is subject to the jurisdiction of the commission under
this article.
(b) There is a rebuttable presumption that a cost differential is
reasonable.
(c) The utility company that acquires the utility property may
petition the commission to include the cost differentials as part of
its rate base. The commission shall approve the petition if the
commission finds the following:
(1) The utility property is used and useful in providing water
service, wastewater service, or both water and wastewater service.
(2) The distressed utility failed to furnish or maintain
adequate, efficient, safe, and reasonable service and
4
See Ind. Code § 8-1-30.3-1 (“As used in this chapter, ‘cost differential’ means the difference between: (1) the
cost to a utility company that acquires utility property from a distressed utility, including the purchase price,
incidental expenses, and other costs of acquisition; minus (2) the difference between: (A) the cost of the utility
property when originally put into service by the distressed utility; minus (B) contributions or advances in aid
of construction plus applicable accrued depreciation.”). According to the Commission, “[t]he cost
differential is in essence the ‘premium’ paid over and above the original cost less depreciation, which would
have otherwise been allowed in rate base.” Commission’s Br. at 25.
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facilities.[5]
(3) The utility company will make reasonable and prudent
improvements to ensure that customers of the distressed
utility will receive adequate, efficient, safe, and reasonable
service.
(4) The acquisition of the utility property is the result of a
mutual agreement made at arms length.
(5) The actual purchase price of the utility property is
reasonable.
(6) The utility company and the distressed utility are not
affiliated and share no ownership interests.
(7) The rates charged by the utility company before
acquiring the utility property of the distressed utility will
not increase unreasonably as a result of acquiring the
utility property.
(8) The cost differential will be added to the utility
company’s rate base to be amortized as an addition to
5
See Ind. Code § 8-1-30.3-2 (“As used in this chapter, ‘distressed utility’ refers to a utility company whose
property is the subject of an acquisition described in section 5(a) of this chapter.”). Indiana Code Section 8-1-
30.3-6 provides in pertinent part that for purposes of Section 30.3-5(c)(2),
a distressed utility is not furnishing or maintaining adequate, efficient, safe, and reasonable
service and facilities if the commission finds one (1) or more of the following:
…
(5) The distressed utility:
(A) is municipally owned utility property of a municipally owned utility that
serves fewer than five thousand (5,000) customers; and
(B) is being sold under IC 8-1.5-2-6.1.
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expense over a reasonable time with corresponding
reductions in the rate base.
(d) A utility company may petition the commission in an
independent proceeding to approve a petition under subsection
(c) before the utility company acquires the utility property if the
utility company provides:
(1) notice of the proposed acquisition and any changes in
rates or charges to customers of the distressed utility;
(2) notice to customers of the utility company if the
proposed acquisition will increase the company’s rates by
an amount that is greater than one percent (1%) of the
utility company’s base annual revenue;
(3) notice to the office of the utility consumer counselor;
and
(4) a plan for reasonable and prudent improvements to
provide adequate, efficient, safe, and reasonable service to
customers of the distressed utility.
(Emphasis added.)
[8] In January 2018, Indiana American filed a petition with the Commission
pursuant to Section 30.3-5 seeking approval to include cost differentials as part
of its rate base. Lake Station joined the petition, seeking approval to sell its
assets pursuant to Section 6.1. Indiana American wholesale customers
Schererville and Crown Point were granted permission to intervene. The
Commission held an evidentiary hearing at which the foregoing entities and the
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OUCC appeared.6 In August 2018, a majority of the five-member Commission
issued an order finding that Lake Station’s water utility is a distressed utility
under Indiana Code Section 8-1-30.3-6(5), that the sale is in the public interest
pursuant to Section 6.1, and that Indiana American had satisfied the
requirements of Section 30.3-5(c) and -(d). With respect to Section 30.3-5(c)(1),
which is the focus of this appeal, the majority’s findings state in pertinent part:
(1) The utility property is used and useful in providing water
service, wastewater service, or both water and wastewater
service. This element was contested as it relates to the used and
useful status of Lake Station’s treatment plant [(“WTP”)], wells,
and associated equipment[, which had been valued at
approximately $7,366,043]. The crux of this dispute is whether
this requirement is satisfied if the utility property is used and
useful to the seller or if it must also be used and useful to the
acquiring utility. [OUCC Utility Analyst James Parks] testified
that the Lake Station WTP will not be used and useful after Lake
Station’s Water System is acquired by Indiana American.
[Indiana American Director of Community and Government
Affairs Matthew Prine] testified that the Lake Station plant “is”
used and useful as it is currently supplying water to Lake Station
customers today. ….
….
In approaching this element, it is important to recognize that it is
likely this transaction would not be before the Commission if the
Lake Station source of supply and treatment plant were excluded
from the acquisition. [Lake Station Mayor Christopher
6
Indiana Code Section 8-1-1.1-4.1(a) provides that the OUCC “may appear on behalf of ratepayers,
consumers, and the public” in hearings before and appeals from the orders of the Commission.
Court of Appeals of Indiana | Memorandum Decision 18A-EX-2179 | June 26, 2019 Page 9 of 18
Anderson] testified that Lake Station still owes money to the
State of Indiana related to the construction of the treatment
plant. He also testified that Lake Station could not sell its system
without also selling the WTP because revenues from water sales
would be needed to pay back the loan.
Indiana American argues that the verb tense (present and not
future) used in Section 30.3-5(c)(l) requires us to find that the
utility property it is seeking to acquire “is” used and useful by
Lake Station in the provision of water service as opposed to
finding that it “will be” used and useful to Indiana American
after the acquisition. We agree and find that it is sufficient for
the purposes of this statute that the utility property is used and
useful to the selling utility.
In addition to the plain language of the statute, the use of the
present tense makes sense in the overall statutory scheme. If a
purchaser was required to show that all of the assets being
acquired would continue to remain reasonably in service after the
closing, there may be anomalous results that could discourage
the purchase of distressed utilities and its promotion of
efficiencies through regionalization. The clear policy decision of
the legislature to encourage regionalization through acquisitions
further supports finding that the utility property is used and
useful to the selling utility.[7]
For example, as further discussed below, Section 6.1 requires the
Commission to find the purchase price for a municipality’s
nonsurplus property to be reasonable if it does not exceed its
appraised value. Consequently, if Lake Station had received two
offers for the purchase of its utility at the appraised value, one
from a utility that had an existing interconnection and need only
7
A detailed description of recent legislative activity in this area appears on pages 20 and 21 of the
Commission’s order.
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open a valve to deliver quality water from an existing regional
treatment plant and the other from a utility that would need to
operate Lake Station’s existing WTP and wells, it seems
unreasonable to allow the cost differential in the rate base of the
utility needing to continue operation of the existing WTP and
wells, but not for the utility that simply needs to open the
interconnection and may be able to provide more efficient service
with its existing facilities. Changing the verb tense to future tense
would require that every single asset owned by the seller remain
in service, despite the efficiencies, economies, and improvements
to service that might be gained by the combination. It may also
cause sellers not to choose the purchaser in the best position to
regionalize and gain service efficiencies in order to sell to another
purchaser for a higher price.
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Our dissenting colleagues argue that under Ind. Code § 8-1-2-6,[8]
to be part of a public utility’s rate base, an asset must be used and
useful to that utility and therefore, Indiana American is
prohibited from including in rate base the cost of Lake Station’s
WTP and wells. However, we must respectfully disagree. As
specific exceptions to Ind. Code § 8-1-2-6, Sections 6.1 and 30.3-5
were clearly intended by the legislature to change the standards
of Ind. Code § 8-1-2-6 in certain circumstances, in order to
promote the regionalization and greater efficiencies through the
acquisition of distressed utilities and small municipal utilities. In
addition, the legal case history regarding “used and useful”
involved instances in which cost recovery was being sought for
cancelled electric generation plants. See Citizens Action Coalition,
Inc. v. N. Ind. Pub. Serv. Co., 485 N.E.2d 610, 614-615 (Ind. 1985).
8
Indiana Code Section 8-1-2-6 reads in pertinent part as follows:
(a) The commission shall value all property of every public utility actually used and useful for
the convenience of the public at its fair value, giving such consideration as it deems appropriate
in each case to all bases of valuation which may be presented or which the commission is
authorized to consider by the following provisions of this section. As one of the elements in
such valuation the commission shall give weight to the reasonable cost of bringing the property
to its then state of efficiency. In making such valuation, the commission may avail itself of any
information in possession of the department of local government finance or of any local
authorities. The commission may accept any valuation of the physical property made by the
interstate commerce commission of any public utility subject to the provisions of this act.
(b) The lands of such public utility shall not be valued at a greater amount than the assessed
value of said lands exclusive of improvements as valued for taxation. In making such valuation
no account shall be taken of presumptive value resting on natural resources independent of any
structures in relation thereto, the natural resource itself shall be viewed as the public’s property.
No account shall be taken of good will for presumptive values growing out of the operation of
any utility as a going concern, all such values to rest with the municipality by reason of the
special and exclusive grants given such utility enterprises. Except in a proceeding under IC 8-1-
30, and except as provided in IC 8-1-30.3-5 and IC 8-1.5-2-6.1, no account shall be taken of
construction costs unless such costs were actually incurred and paid as part of the cost entering
into the construction of the utility. Except in a proceeding under IC 8-1-30, and except as provided
in IC 8-1-30.3-5 and IC 8-1.5-2-6.1, all public utility valuations shall be based upon tangible
property, that is, such property as has value by reason of construction costs, either in materials
purchased or in assembling of materials into structures by the labor or (of) workers and the
services of superintendents, including engineers, legal and court costs, accounting systems and
transportation costs, and also including insurance and interest charges on capital accounts
during the construction period. As an element in determining value the commission may also
take into account reproduction costs at current prices, less depreciation, based on the items set
forth in the last sentence hereof and shall not include good will, going value, or natural
resources.
(Emphases added.)
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In contrast, Indiana American provided testimony that it would
be using Lake Station’s existing WTP and wells to some extent,
such as in cases of emergency and to backup Indiana American’s
existing system, particularly to assist with threats to its water
supplies. We also recognize that Indiana American is not
purchasing or building a treatment plant and wells; it is
proposing to regionalize and purchase an entire system, which
includes a treatment plant and wells, and all of which is included
in the appraisal price. Moreover, Ind. Code § 8-1-2-6 is a statute
of general applicability for use when reviewing utility rates and
charges; whereas Sections 6.1 and 30.3-5 are more specific
statutes addressing what may be included in the rate base of a
utility that is acquiring a distressed utility. Indiana courts have
held “where provisions of a statute conflict, the specific provision
takes priority over the general provision.” Robinson v. Wroblewski,
704 N.E.2d 467, 475 (Ind. 1998). Therefore, because Section
30.3-5(c)(l) does not require a utility to demonstrate that the
acquired assets will be used and useful, Ind. Code § 8-1-2-6 does
not prohibit Indiana American from including in rate base that
which is authorized under Sections 6.1 and 30.3-5.
We also respectfully disagree with the OUCC and our dissenting
colleagues that Section 30.3-5(c) applies to an acquisition that has
already occurred. They base their interpretation on the fact that
this provision states that the utility company that “acquires” the
utility property may petition the Commission to include the cost
differentials as part of its rate base. However, if you read
Sections 6.1 and 30.3-5 as a whole, the review that occurs under
Section 30.3-5(c) must occur prior to the close of the acquisition.
See, Ind. Code 8-1-30.3-5(d) providing that a “utility company
may petition the commission in an independent proceeding to
approve a petition under [Section 30.3-5(c)] before the utility
company acquires the utility property…” (emphasis added); Ind.
Code § 8-1.5-2-6.l(b) requires the municipality and the
prospective purchaser to obtain Commission approval “[b]efore a
municipality may proceed to sell” its property (emphasis added);
and Ind. Code § 8-1.5-2-6.1(e) requiring the Commission to
Court of Appeals of Indiana | Memorandum Decision 18A-EX-2179 | June 26, 2019 Page 13 of 18
approve the proposed sale as within the public interest if the
municipality’s municipally owned utility petitions the
Commission under Section 30.3-5(d) and the Commission
approves that petition under Section 30.3-5(c).
The statute requires that the utility property before the
acquisition “is used and useful” and does not address what its use
will be after the closing. There is no dispute that the Lake
Station WTP and wells, as they exist today, are currently used
and useful, and we so find.
Id. at 25-28 (footnotes omitted) (underlined emphasis replaced with bold type).9
Accordingly, the majority approved “the acquisition of the Lake Station Water
System by Indiana American on the terms described in the Asset Purchase
Agreement” and allowed Indiana American to “record for ratemaking purposes
as net original cost rate base of the assets being acquired an amount equal to
9
In a subsequent portion of the order, the majority stated,
The most disputed issue raised in this case was whether particular Lake Station Water System
assets, i.e., the WTP and wells, should be considered reasonably necessary to the provision of
utility service by Indiana American and therefore "used and useful" following the closing of the
sale. We have determined and found that the WTP and wells are used and useful now to Lake
Station and for acquisition purposes. This is why we approve the purchase. However,
testimony has been presented that these assets might not be used and useful following the
acquisition. If it does in fact turn out that the WTP and wells are not used and useful to Indiana
American following the acquisition, we encourage Indiana American to voluntarily explore
ratemaking options that might mitigate the impact of the purchase price in future proceedings.
For example, the purchase price associated with the WTP and wells could be treated in a way
that provides for a return of the investment, but does so at a reduced return on the investment.
Another option may be to undertake an analysis to determine the ongoing value of the WTP
and wells in providing water service to the consolidated customers and to compare that value
against that of continuing to operate and maintain those assets. We encourage Indiana
American and other utilities serving the public in Indiana to voluntarily use their resources and
explore reasonable financial concessions that can serve to enhance regionalization efforts in a
manner that also fosters positive public sentiments regarding those efforts for the benefit of all
Hoosiers.
Appealed Order at 32.
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$20,199,470, plus actual incidental expenses, and other costs of acquisition
reasonably incurred ….” Id. at 33.10 The remaining Commission members
issued a dissenting opinion. This appeal ensued.
Discussion and Decision
[9] The legislature created the Commission primarily as a factfinding body with the
technical expertise to administer the regulatory scheme that the legislature
devised. N. Ind. Pub. Serv. Co. v. U.S. Steel Corp., 907 N.E.2d 1012, 1015 (Ind.
2009). “When exercising this authority, the Commission balances the public’s
need for adequate, efficient, and reasonable service with the public utility’s need
for sufficient revenue to meet the cost of furnishing service and to earn a
reasonable profit.” NIPSCO Indus. Grp. v. N. Ind. Pub. Serv. Co., 100 N.E.3d 234,
238 (Ind. 2018). The Indiana Code authorizes judicial review of Commission
orders, which “must contain specific findings on all the factual determinations
material to its ultimate conclusions[,]” and those findings “must be supported
by substantial evidence in the record.” Ind. Gas Co. v. Ind. Fin. Auth., 999
N.E.2d 63, 66 (Ind. 2013).
[10] Appellants do not challenge the correctness of the Commission’s factual
findings, but they do disagree with the Commission’s interpretation of Section
30.3-5(c)(1). We ordinarily review an agency’s legal conclusions de novo.
10
Sections 6.1(f) and 30.3-5(e) both authorize the purchasing entity to record “(1) the full purchase price; (2)
incidental expenses; and (3) other costs of acquisition” as the net original cost rate base.
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Moriarity v. Ind. Dep’t of Nat. Res., 113 N.E.3d 614, 619 (Ind. 2019). Our
supreme court recently explained that although we are not bound by such
conclusions, an interpretation of a statute by an agency charged with the duty of
enforcing it “is entitled to great weight, unless this interpretation would be
inconsistent with the statute itself.” Id. (quoting Chrysler Grp., LLC v. Review Bd.
of Ind. Dep’t of Workforce Dev., 960 N.E.2d 118, 123 (Ind. 2012)).11 “In fact, ‘if
the agency’s interpretation is reasonable, we stop our analysis and need not
move forward with any other proposed interpretation.’” Id. (quoting Jay
Classroom Teachers Ass’n v. Jay Sch. Corp., 55 N.E.3d 813, 816 (Ind. 2016)).
Simply stated, the question before us is whether the Commission’s
interpretation of Section 30.3-5(c)(1) is reasonable. We hold that it is.
[11] Appellants’ primary complaint is that under longstanding Commission and
court precedent, the “used and useful” standard has “applied to the utility
seeking to recover a return on and a return of the utility property in question.”
Appellants’ Br. at 23. But Appellants do not specifically assert, let alone
conclusively establish, that this administrative and judicial precedent somehow
precludes the legislature from applying the standard to a distressed utility
11
The court took a contrary position less than six months earlier in NIPSCO Industrial Group v. Northern
Indiana Public Service Co., 100 N.E.3d 234, 241 (Ind. 2018) (“We review questions of law de novo … and
accord the administrative tribunal below no deference.”), but we are bound by its latest pronouncement on
the subject. Correll v. State, 639 N.E.2d 677, 683 (Ind. Ct. App. 1994).
Court of Appeals of Indiana | Memorandum Decision 18A-EX-2179 | June 26, 2019 Page 16 of 18
seeking to sell its nonsurplus property.12 It was reasonable for the Commission
to conclude that, pursuant to Section 30.3-5(c)(1), the legislature intended for
the standard to apply to the seller of a distressed utility for the multiple cogent
reasons stated in its order, which we need not rehash here.13 Appellants (and
Indiana American’s ratepayers) may disagree with the legislature’s policy
preferences regarding regionalization and the acquisition of distressed utilities,
but it is not our prerogative to second-guess those preferences or their
12
Lake Station points out that determining whether “an asset ‘is used and useful’ to the seller ensures that the
seller is only selling nonsurplus property as required by [Section 6.1(b)].” Lake Station’s Br. at 21. The
Commission makes the same observation and further observes that “exactly none of Lake Station’s
nonsurplus utility property is used and useful to Indiana American because it owns none of the property.”
Commission’s Br. at 34. In a recent opinion, another panel of this Court concluded that Sections 6.1 and
30.3-5 “apply to the same subject matter and must be construed harmoniously[,]” just as the Commission did
in its order in this case. NOW!, Inc. v. Indiana-American Water Co., 117 N.E.3d 647, 657 (Ind. Ct. App. 2018),
trans. denied (2019). Contrary to Appellants’ assertion in their reply brief, NOW!, Inc. is (and always has been)
a published opinion, which was certified on May 14 following our supreme court’s denial of transfer.
13
The legislature’s recent amendment of Section 30.3-5(c)(1) (now codified as Section 30.3-5(d)(1)) clarifies
this intent. See Ind. Pub. Law 229-2019 § 5 (“Before closing on the acquisition, the utility company that
acquires the utility property may petition the commission to include any cost differential as part of its rate
base in future rate cases. The commission shall approve the petition if the commission finds the following:
(1) The utility property is used and useful to the offered [i.e., distressed] utility in providing water service,
wastewater service, or both water and wastewater service.”) (emphases added).
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outcomes.14 Consequently, we stop our analysis without considering
Appellants’ interpretation of Section 30.3-5(c)(1) and affirm the Commission’s
order.
[12] Affirmed.
Vaidik, C.J., and Mathias, J., concur.
14
Appellants quote Indiana Code Section 8-1-2-0.5, which provides,
The general assembly declares that it is the continuing policy of the state, in cooperation with
local governments and other concerned public and private organizations, to use all practicable
means and measures, including financial and technical assistance, in a manner calculated to
create and maintain conditions under which utilities plan for and invest in infrastructure
necessary for operation and maintenance while protecting the affordability of utility services for
present and future generations of Indiana citizens.
Appellants then assert,
Requiring customers to pay for the return on and return of Indiana American’s investment in a
water treatment plant that is not used and useful to Indiana American is not consistent with the
legislative policy of being “necessary for operation” of Indiana American and is not “protecting
the affordability of utility services for present and future generations of Indiana citizens.
Appellants’ Br. at 33. We note that Section 30.3-5 was enacted before Section 8-1-2-0.5, and we presume that
the legislature was aware of the former when it drafted the latter. Any real or perceived dissonance between
the two is not a matter of judicial concern. In their reply brief, Appellants raise what could be construed as a
substantive due process challenge to the Commission’s interpretation of Section 30.3-5(c)(1), see Appellants’
Reply Br. at 10-11 (quoting Denver Union Stock Yard Co. v. United States, 304 U.S. 470, 475 (1938)), but an
argument raised for the first time in a reply brief is waived. Showley v. Kelsey, 991 N.E.2d 1017, 1021 n.2
(Ind. Ct. App. 2013), trans. denied.
Court of Appeals of Indiana | Memorandum Decision 18A-EX-2179 | June 26, 2019 Page 18 of 18