NIPSCO Industrial Group v. Northern Public Service Company

FILED
Jun 20 2018, 11:53 am
IN THE
Indiana Supreme Court
CLERK
Indiana Supreme Court
Court of Appeals
and Tax Court
Supreme Court Case No. 18S-EX-334
NIPSCO Industrial Group
Appellant (Intervenor),
–v–
Northern Indiana Public Service Company
Appellee (Petitioner).
Argued: November 21, 2017 | Decided: June 20, 2018
Appeal from the Indiana Utility Regulatory Commission
No. 44403-TDSIC-4
On Petition to Transfer from the Indiana Court of Appeals
No. 93A02-1607-EX-1644
Opinion by Justice Slaughter
Chief Justice Rush and Justices David, Massa, and Goff concur
Slaughter, Justice.
Under traditional rate regulation, an energy utility must first make
improvements to its infrastructure before it can recover their cost through
regulator-approved rate increases to customers. The process for recouping
these costs, sometimes not until years after they were incurred, is an
expensive, onerous ratemaking case, which involves a comprehensive
review of the utility’s entire business operations.
In 2013 the legislature authorized utilities to obtain regulatory
preapproval for “designated” improvements to their infrastructure.
Under the so-called “TDSIC” Statute—which provides for more prompt
reimbursement of specified transmission, distribution and storage system
improvements—a utility can seek regulatory approval of a seven-year
plan that designates eligible improvements, followed by periodic petitions
to adjust rates automatically as approved investments are completed.
At issue here is the Indiana Utility Regulatory Commission’s
preapproval of approximately $20 million in infrastructure investments
for which the Commission authorized increases to NIPSCO’s natural-gas
rates under the TDSIC mechanism. NIPSCO is an energy utility with more
than 800,000 customers in northern Indiana. Some of NIPSCO’s largest
industrial customers—represented here by the NIPSCO Industrial
Group—oppose NIPSCO’s entitlement to favorable rate treatment under
the TDSIC Statute, contending the disputed projects do not comply with
the Statute’s requirements.
The Commission’s holding below, which divided our Court of Appeals,
approved various categories of improvements—referred to variously as
“project categories”, “multiple-unit-project categories”, and “multiple-
unit projects”—that describe broad parameters for identifying future
improvements but do not designate those improvements with specificity.
NIPSCO defends these categorical designations by arguing it does not,
and cannot, know in advance which specific segments of natural-gas pipes
throughout its system will fail each year. But it does know, based on
historical performance, that a certain percentage of its system will need to
be replaced annually. NIPSCO contends the TDSIC Statute permits the
Commission to approve a seven-year plan that describes future
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investments in terms of ascertainable planning criteria, although when its
plan was approved, NIPSCO did not know which specific segments of its
system would need to be replaced.
The Industrial Group, in contrast, interprets the TDSIC Statute more
narrowly. It argues the Statute requires the utility and the Commission to
designate specific projects upfront, rather than to rely on categories of
projects not identified with specificity until later years. For the Industrial
Group, the traditional ratemaking case is still the primary process for
seeking reimbursement, subject to occasional use of the TDSIC procedure
in the limited band of investments to which it applies.
The stakes are much larger than just the roughly $20 million at issue
between NIPSCO and the Industrial Group. The Commission, we are told,
has approved billions of dollars of utility-infrastructure investments
through the TDSIC process. Given the favorable regulatory treatment,
utilities are likely to funnel increasing amounts of infrastructure
investments through this reimbursement mechanism. How we resolve
these competing visions of the TDSIC Statute will likely have enormous
financial consequences for utilities and their customers.
We conclude the TDSIC Statute permits periodic rate increases only for
specific projects a utility designates, and the Commission approves, in the
threshold proceeding and not for multiple-unit projects using
ascertainable planning criteria. In other words, a utility must specifically
identify the projects or improvements at the outset in its seven-year plan
and not in later proceedings involving periodic updates. There is an
appreciable difference between designating specific “projects” and
“improvements” up front, which the Statute requires, and describing the
criteria for selecting them later, which the Commission approved. We
agree with the Court of Appeals’ dissenting opinion that Commission
approval of “broad categories of unspecified projects defeats the purpose
of having a ‘plan’.” NIPSCO Indus. Grp. v. N. Ind. Pub. Serv. Co., 78 N.E.3d
730, 740 (Ind. Ct. App. 2017) (Barnes, J., dissenting).
Because we find that preclusion principles do not bar our consideration
of this important legal issue of first impression, we grant transfer, reverse
the Commission’s order in part, and remand.
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Factual and Procedural History
A. Traditional utility regulation
Utility regulation is premised on a “regulatory compact” in which the
State sanctions a utility’s monopoly within a defined service area and
subjects the utility to various regulatory restrictions and responsibilities.
As a quid pro quo for being granted a monopoly in a
geographical area for the provision of a particular good or
service, the utility is subject to regulation by the state to ensure
that it is prudently investing its revenues in order to provide
the best and most efficient service possible to the consumer.
United States Gypsum, Inc. v. Ind. Gas Co., 735 N.E.2d 790, 797 (Ind. 2000)
(quotation and citations omitted).
The State regulates utilities through the Commission, which is
authorized by statute to act with “technical expertise to administer the
regulatory scheme designed by the legislature … to insure that public
utilities provide constant, reliable, and efficient service to the citizens of
Indiana.” N. Ind. Pub. Serv. Co. v. United States Steel Corp., 907 N.E.2d 1012,
1015 (Ind. 2009) (citation omitted). See Ind. Code §§ 8-1-1-1 to 8-1-1-15.
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. United States Gypsum, 735 N.E.2d at 797-98.
“Proper rates are those which produce a fair and nonconfiscatory return,
and such as will enable the company, under efficient management, to
maintain its utility property and service to the public, and provide a
reasonable return upon the fair value of its used and useful property.”
Pub. Serv. Comm'n of Ind. v. Ind. Bell Tel. Co., 235 Ind. 1, 15, 130 N.E.2d 467,
473 (1955) (citations omitted).
Traditionally, utility rates are adjusted through general ratemaking
cases. General ratemaking is a “comprehensive” process, requiring the
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Commission to “examine every aspect of the utility’s operations and the
economic environment in which the utility functions to ensure that the
data [the Commission] has received are representative of operating
conditions that will, or should, prevail in future years.” United States
Gypsum, 735 N.E.2d at 798 (citation omitted).
B. The TDSIC process
Over the years, the legislature has supplemented traditional
ratemaking with various “tracker” procedures that allow utilities to ask
the Commission to adjust their rates to reflect various costs without
having to undergo a full ratemaking case. The TDSIC Statute, I.C. ch. 8-1-
39, enacted in 2013, is one such procedure. It encourages energy utilities to
replace their aging infrastructure by modernizing electric or gas
transmission, distribution, and storage projects. This TDSIC procedure,
pronounced “tee-DEE-zick”, is a process for utilities to assess a distinct
charge—a Transmission, Distribution, and Storage System Improvement
Charge—for completed projects deemed eligible improvements under the
Statute. In contrast to traditional ratemaking, the TDSIC procedure
permits a utility to seek preapproval of designated capital improvements
to the utility’s infrastructure and then to recover the costs of those
improvements every few months as they are completed. Eligible
improvements are certain new or replacement utility projects that:
(1) a public utility undertakes for purposes of safety, reliability,
system modernization, or economic development . . . ; (2) were
not included in the public utility’s rate base in its most recent
general rate case; and (3) [were] designated in the public
utility’s seven (7) year plan and approved by the commission
under section 10 of this chapter as eligible for TDSIC
treatment”.
I.C. § 8-1-39-2.
The TDSIC Statute contemplates two distinct types of proceedings.
First, under Section 10, the utility may seek regulatory approval of a
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seven-year plan for designated improvements to transmission,
distribution, and storage systems. See Id. § 8-1-39-10. The Commission
shall then approve the plan and designate the planned improvements as
eligible for TDSIC treatment if it finds the plan is reasonable. Id. § 8-1-39-
10(b). When determining that a plan is reasonable, the Commission’s
order must include (1) “[a] finding of the best estimate of the cost of the
eligible improvements”, (2) “[a] determination whether public
convenience and necessity require or will require the eligible
improvements”, and (3) “[a] determination whether the estimated costs of
the eligible improvements … are justified by the incremental benefits
attributable to the plan”. Id.
Second, under Section 9, once the Commission has approved a seven-
year plan, the utility may petition every few months for periodic rate
adjustments to recover “eighty percent (80%) of approved capital
expenditures and TDSIC costs” for the system improvements designated
as eligible and actually completed. Id. §§ 8-1-39-9(a), (c), (e). The
remaining twenty percent can be recovered only “as part of the next
general rate case that the public utility files with the commission.” Id. § 8-
1-39-9(b). The utility must “update [its] seven (7) year plan under
subdivision (2) with each petition [it] files under this section.” Id. § 8-1-39-
9(a). Before a utility may recover additional costs above approved
estimates, it must specifically justify the additional costs, and the
Commission must specifically approve them. Id. § 8-1-39-9(f).
C. NIPSCO’s TDSIC litigation
1. Designated vs. described
The parties dispute what qualifies as an eligible project under Section 2,
which requires both designation and approval of the project in a seven-
year plan the Commission approves under Section 10. I.C. § 8-1-39-2(3)(A).
The Industrial Group claims the Commission can designate and approve
projects identified only during the initial Section 10 process, and not
during subsequent Section 9 petitions. It also claims that the TDSIC
process is an extraordinary mechanism, applicable only in limited
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circumstances, and that the general ratemaking case remains the
presumptive process for utilities to recover their investment costs.
NIPSCO, in contrast, argues the Commission can properly designate
and approve multiple-unit projects, described using ascertainable
planning criteria, as TDSIC-eligible. NIPSCO characterizes these multiple-
unit projects, generally, as planned undertakings that include component
parts that need to be improved, but without knowing in advance which
specific parts will require replacement. Here, the United States
Department of Transportation mandates that NIPSCO annually inspect
thousands of units of natural-gas pipelines throughout its system.
NIPSCO does not know in advance which specific pipeline segments
within its system it will need to update. But based on historical
performance, NIPSCO expects a certain percentage of its system will fail
each year and require replacement. Depending on the inspection results,
NIPSCO then develops a schedule to replace worn assets. This
information enables NIPSCO to identify the specific units of work
completed within the multiple-unit projects for which it received
Commission approval.
2. Current procedural posture
Shortly after the TDSIC Statute was enacted, NIPSCO filed two Section
10 petitions, seeking approval of separate, but substantially similar, seven-
year plans: one each for its electric system and its gas system. The
Commission approved NIPSCO’s Electric Plan in February 2014 and, in a
separate proceeding, approved its Gas Plan in April 2014. The plans
identified specific projects for the first year and described “project
categories” for years two through seven. NIPSCO subsequently filed
periodic Section 9 tracker petitions, seeking rate increases associated with
completed matters referenced in the approved seven-year plans.
In 2015, the Court of Appeals reversed in part the Commission’s order
approving NIPSCO’s Electric Plan. NIPSCO Indus. Grp. v. N. Ind. Pub. Serv.
Co., 31 N.E.3d 1 (Ind. Ct. App. 2015). The Electric Plan lacked sufficient
detail for the Commission to determine whether the plan was reasonable
and whether it included a best estimate of the cost of improvements under
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Section 10. Id. at 8. By identifying only the first year of improvements, the
Plan presumed that future proposed projects identified in subsequent
Section 9 “update” proceedings would be eligible for TDSIC treatment. Id.
at 8-9. Thus, the Court held, the Plan unlawfully relieved NIPSCO of its
burden to show the proposed projects were TDSIC-eligible. Id. at 9.
When the Electric Plan appeal was decided, NIPSCO had already
completed its first Gas Plan Section 9 tracker petition, TDSIC-1, and the
second, TDSIC-2, was pending. Given the legal problems with its Electric
Plan, NIPSCO voluntarily dismissed its TDSIC-2 Gas Plan petition with
the understanding that its next Section 9 tracker petition, TDSIC-3, would
seek TDSIC-2 reimbursement and modification of its Gas Plan to comply
with the appellate ruling.
In TDSIC-3, NIPSCO again sought approval of an “updated” seven-
year Gas Plan. Although NIPSCO provided additional information for the
proposed projects for all seven years of its revised seven-year Gas Plan, its
TDSIC-3 petition continued to include projects identified with specificity
as well as yet-to-be-identified projects. NIPSCO said it would identify
specific instances of completed improvements within certain project-
group categories in subsequent Section 9 plan updates. The Commission
found that TDSIC-3 presented “a unique situation” because it had already
approved NIPSCO’s initial Section 10 Gas Plan in a final order. And it
generally endorsed NIPSCO’s proposal to establish objective ascertainable
criteria for selecting specific projects within “project group” categories.
The Industrial Group did not challenge the Commission’s TDSIC-3 order
approving NIPSCO’s petition.
In February 2016, NIPSCO filed its fourth Section 9 petition—TDSIC-
4—the subject of this appeal. This filing included another update to the
Gas Plan, seeking an increase of approximately $20 million in the
previously approved “Inspect & Mitigate” category. This category
included both additional distinct projects and an increased number of
projects within previously approved categories. NIPSCO referred to these
Inspect & Mitigate project groups as “multiple-unit projects”.
The Industrial Group intervened at the Commission and opposed this
petition for $20 million in rate relief. Particularly, the Industrial Group
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objected to NIPSCO’s multiple-unit-projects approach, arguing that
project groups described using objective ascertainable-standard criteria
are not permitted under the TDSIC Statute. Despite this challenge, the
Commission approved NIPSCO’s TDSIC-4 petition. Relying on its TDSIC-
3 order, the Commission found NIPSCO’s multiple-unit-project categories
were supported by sufficient ascertainable planning criteria for later
identifying eligible improvements, and the roughly $20 million increase
was based on “further identification of the specific projects or asset
replacements within the approved project groups.”
The Industrial Group appealed the Commission’s TDSIC-4 order, and a
divided Court of Appeals affirmed. The majority held that NIPSCO’s
updated seven-year plan was lawful “because the improvements included
in the update were not new projects as they were chosen by utilizing the
ascertainable planning criteria previously approved by the Commission
and contained in NIPSCO’s 7-year plan.” 78 N.E.3d at 739. The dissent
believed the TDSIC Statute requires that a “specific plan” be established in
the initial Section 10 proceedings, and that merely describing multiple-
unit-project categories does not sufficiently designate which specific
projects are eligible for reimbursement through later Section 9
proceedings. Id. at 740.
Standard of Review
When reviewing Commission decisions, we conduct three levels of
review: one for factual findings; another for mixed questions of law and
fact; and a third for questions of law. At issue here is the last category.
This case does not implicate the Commission’s ratemaking expertise but
presents a pure question of law: Does the TDSIC Statute authorize the
Commission to approve “project categories” or “multiple-unit projects”
described using ascertainable planning criteria?
We review questions of law de novo, Ind. Bell Tel. Co. v. Ind. Util.
Regulatory Comm'n, 715 N.E.2d 351, 354 (Ind. 1999) (citation omitted), and
accord the administrative tribunal below no deference. To do otherwise
would abdicate our duty to say what the law is. See, e.g., Marbury v.
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Madison, 5 U.S. (1 Cranch) 137, 176 (1803). Such plenary review is
“constitutionally preserved” for the judiciary, United States Steel, 907
N.E.2d at 1016, and considers whether the disputed “decision, ruling or
order is contrary to law.” Citizens Action Coal. of Ind., Inc. v. N. Ind. Pub.
Serv. Co., 485 N.E.2d 610, 613 (1985) (citation omitted). Such legal
questions are for the courts to resolve and turn on “whether the
Commission stayed within its jurisdiction and conformed to the statutory
standards and legal principles involved in producing its decision, ruling,
or order.” United States Steel, 907 N.E.2d at 1016.
Separation-of-powers principles do not contemplate a “tie-goes-to-the-
agency” standard for reviewing administrative decisions on questions of
law. In discharging our constitutional duty, we pronounce the statutory
interpretation that is best and do not acquiesce in the interpretations of
others. Deciding the scope of the Commission’s authority under the
TDSIC Statute falls squarely within our institutional charge. Crafting our
State’s utility law is for the legislature; implementing it is for the executive
acting through the Commission; and interpreting it is for the courts.
Discussion and Decision
I. Multiple-unit projects described using
ascertainable criteria are not eligible for TDSIC
treatment.
We conclude the TDSIC Statute does not apply to project categories or
multiple-unit projects described using ascertainable criteria. The Statute
requires the Commission to “designate” eligible projects in a threshold
seven-year plan under Section 10. The only interpretation of “designate”
that satisfies the dual statutory requirements of particularity and cost
justification is one requiring projects to be identified with specificity from
the outset. In addition, Section 9 “update” petitions enable the utility to
obtain rate adjustments as it completes the approved projects and incurs
the additional budgeted costs. The only projects consistent with Section
10’s preapproval requirement are those the utility specified at the
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beginning of the plan, and not “new” projects or those requiring the
passage of time to specify later. The Commission erred when it authorized
multiple-unit-project categories in a Section 10 proceeding and approved
NIPSCO’s later specification of projects under Section 9.
A. The TDSIC Statute requires the Commission to
“designate” eligible projects in a threshold seven-year
plan.
A utility seeking favorable rate treatment under the TDSIC Statute for
eligible infrastructure improvements must file with the Commission a
proposed seven-year plan that designates the planned projects. I.C. §§ 8-1-
39-2(3)(A), 8-1-39-10(a). The Commission must approve the plan if it is
reasonable. Id. § 8-1-39-10(b). What is reasonable turns on three statutory
guideposts: (i) the best-estimated cost of the improvements, (ii) their
public convenience and necessity, and (iii) their cost-justified benefits. Id.
A meaningful cost-benefit analysis requires the Commission to determine
whether the estimated costs of the designated improvements are justified
by their incremental benefits. Id. § 8-1-39-10(b)(3).
If the Commission finds the plan reasonable considering the cost-
benefit analysis, it must designate and approve projects as TDSIC-eligible.
Id. §§ 8-1-39-2(3)(A), 8-1-39-10(b). In this context, TDSIC-eligible projects
are “new or replacement electric or gas transmission, distribution, or
storage utility projects” that:
(1) a “utility undertakes for purposes of safety, reliability, system
modernization, or economic development”;
(2) “were not included in the utility’s rate base in its most recent
general rate case”; and
(3) were “designated” in the utility’s seven-year plan that the
Commission approved under Section 10.
Id. § 8-1-39-2. Thus, both the utility’s proposed plan and the Commission-
approved plan under Section 10 must “designate” the eligible
improvements. A project or improvement not “designated” in the seven-
year plan is not “eligible for TDSIC treatment” under Section 2.
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“Designate” is an undefined statutory term. When interpreting a
statute, we presume the legislature uses undefined terms in their common
and ordinary meaning. In re S.H., 984 N.E.2d 630, 635 (Ind. 2013). As a
verb, “designate” means, among other things, “to appoint and set apart
for a specific purpose” or to “specify”. Designate, MERRIAM-WEBSTER’S
DICTIONARY AND THESAURUS (2007). In TDSIC-3, the Commission
approved a project category reciting ascertainable planning criteria that
NIPSCO later used to select specific improvements identified in TDSIC-4.
For example, NIPSCO’s Section 10 petition identified two project
categories—“storage” and “inspect and mitigate”—that described future
asset replacements with reference to annual inspections mandated by the
United States Department of Transportation. These categories necessarily
were generic descriptions of NIPSCO’s forthcoming projects—and not
specific designations of them—because NIPSCO had not yet performed
the inspections that would reveal which parts of NIPSCO’s system would
require replacement. That isn’t NIPSCO’s fault; it’s not gifted with
prevision. But it does mean that NIPSCO’s Section 10 plan could only
describe the projects it would undertake in the future and could not
specifically identify them at the outset when it first sought and obtained
approval for its plan. It is also why NIPSCO’s specific identification of its
projects did not occur until it later filed plan “updates” under Section 9. In
other words, only after the Commission found the Section 10 plan
reasonable was NIPSCO able to identify and prioritize specific work to be
done based on a preset list of proposed replacement categories.
We conclude that “designate” in Sections 2 and 10 requires both the
utility and the Commission to identify the TDSIC-eligible projects with
particularity in the threshold proceeding and does not allow the approval
of project categories that require a later specification based on
ascertainable planning criteria. This interpretation is consistent with the
further requirement that the Commission meaningfully apply the Statute’s
cost-benefit guideposts during the Section 10 proceeding and approve the
project(s) submitted in the seven-year plan. Because Section 2 requires the
Commission to designate and approve TDSIC-eligible projects only after
finding a plan reasonable under Section 10, the Commission’s
reasonableness determination necessarily sets the budget and defines the
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scope of a seven-year plan to what the Commission considered and
approved in the threshold proceeding. Thus, the Commission order
approving the Section 10 plan must define the plan’s scope with
particularity and establish a best-estimate budget for effectuating the plan.
The Commission’s order does not satisfy these statutory requirements.
Our view of what “designate” means in the TDSIC Statute is illustrated
by Major League Baseball’s designated-hitter rule. The rule, which was
first implemented in the American League in 1973, allows a team to add a
tenth player to the traditional nine-player lineup who will bat for the
pitcher, typically the weakest hitter on the field. Before a game, each
manager’s lineup card must “designate” which player is to serve as the
designated hitter. Major League Baseball, OFFICIAL BASEBALL RULES, Rule
4.03(c) & 5.11 (2018). The rule requires naming a specific player as the DH
from the team’s 25-man roster. Anything less than a player-specific
identification at the outset of the game will not suffice. It is inadequate, for
example, for the lineup card to describe the DH anonymously or
generically as one of the fifteen (or so) remaining players on the roster.
Waiting until the DH’s turn at bat to identify a player doesn’t comport
with the rule. Such “player-to-be-named-later” designations in the lineup
card don’t work in baseball. And neither do “project-to-be-named-later”
designations suffice under the TDSIC Statute.
B. Section 9 update petitions cannot add new projects
beyond those initially approved under Section 10 and
cannot revise the seven-year-plan’s budget.
After the Commission has approved the foundational seven-year plan
under Section 10, the utility may file petitions every few months under
Section 9 to obtain “automatic” rate adjustments for approved costs and
expenditures as it completes these improvements and puts them into
service. I.C. §§ 8-1-39-9(a), (c), (e). These periodic Section 9 petitions allow
the utility to recoup eighty percent of approved cost estimates. Id. § 8-1-39-
9(a). The remaining twenty percent—along with any cost overruns that
are specifically justified by the utility and specifically approved by the
Commission—is recoverable during the general ratemaking case required
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at the end of the plan. Id. § 8-1-39-9(b), (d), (f). The Statute thus fixes the
approved budget recoverable throughout the duration of the seven-year
plan.
With each Section 9 petition a utility files, it must also “update” its
seven-year plan. Id. § 8-1-39-9(a). “Update” also is undefined in the
Statute. The best reading of “update” requires the utility to keep records
and supply progress reports necessary for the lawful administration of the
previously designated and approved TDSIC projects. Considering Section
2’s definition of eligible improvements and Section 10’s reasonableness
inquiry, we conclude that a Section 9 “update” requires the utility to
“identif[y] projected effects of the [seven-year plan] on retail rates and
charges” and to cross-reference that progress with the approved seven-
year plan. Id. § 8-1-39-9(a). Thus, each Section 9 petition enables the
Commission to track when preapproved projects are put into service; to
authorize the “timely recovery of eighty percent (80%) of approved capital
expenditures and TDSIC costs”, id.; and to prepare for the mandated
general ratemaking case at the conclusion. Id. § 8-1-39-9(d). To be clear,
Section 9 updates do not authorize the Commission to designate or
approve new projects at the unit level. Rather, they should merely
document changes to and developments in the administration of the
previously approved Section 10 plan.
Because the Statute neither explicitly nor implicitly authorizes the
Commission to approve multiple-unit projects as eligible for TDSIC
treatment, NIPSCO cannot use the TDSIC mechanism to recover the
multiple-unit-project portions of its Section 10 plan that either were
identified with particularity for the first time in its TDSIC-4 petition or
remain unspecified.
II. Preclusion principles do not bar the Industrial
Group’s appeal.
Finally, we reject NIPSCO’s argument that principles of claim and issue
preclusion bar the Industrial Group from challenging the Commission’s
TDSIC-4 order. Merely because the Industrial Group could have
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challenged the TDSIC-3 order, but did not, does not mean the legal
methodology that order embraced is immune from legal challenge
thereafter.
We look to the Restatement (Second) of Judgments to guide our
preclusion analysis. See Sullivan v. Am. Cas. Co. of Reading, Pa., 605 N.E.2d
134, 138 (Ind. 1992) (discussing Sections 28 & 29’s adoption of the modern
rule that mutuality and identity of parties are no longer required for
defensive use of collateral estoppel); Miller Brewing Co. v. Ind. Dep't of State
Revenue, 903 N.E.2d 64, 68 (Ind. 2009) (citing Section 28 for proposition
that “preclusion may not apply where there are new facts or where a
change in the law or legal climate would dictate a different outcome”). A
noteworthy exception to general preclusion principles applies here and
counsels in favor of our addressing the important legal issues presented.
An issue is not precluded if “[t]he issue is one of law and … a new
determination is warranted … to avoid inequitable administration of the
laws”, RESTATEMENT (SECOND) OF JUDGMENTS § 28(2) (1982). Nor is an issue
precluded if it is “one of law and treating it as conclusively determined
would inappropriately foreclose opportunities for obtaining
reconsideration of the legal rule upon which it was based”. Id. § 29(7).
Our Court will not foreclose review of a legal issue of first impression
“when other litigants are free to urge that the rule should be rejected. Such
preclusion might unduly delay needed changes in the law and might
deprive a litigant of a right that the court was prepared to recognize for
other litigants in the same position.” Id. § 28 cmt. b. If we were to apply
preclusion principles here, that determination would foreclose ”an
opportunity to reconsider the applicable rule, and thus to perform [our]
function of developing the law.” Id. § 29 cmt. i. This consideration is
“especially pertinent ... when the issue is of general interest and has not
been resolved by the highest appellate court that can resolve it.” Id.
To be sure, the Industrial Group’s failure to appeal the TDSIC-3 order
does mean, as the Group acknowledges, that specific projects identified
and approved in TDSIC-3 are beyond challenge. But the Group’s failure to
challenge TDSIC-3 does not bar the Group from challenging previously
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undesignated and unapproved projects for which NIPSCO sought and
obtained rate adjustments from the Commission in TDSIC-4.
The Commission’s legal methodology of approving multiple-unit-
project categories described using ascertainable planning criteria is a pure
issue of law, of general interest, that we have not previously resolved.
And we conclude its methodology remains subject to challenge here.
Indiana courts have long held that agencies remain free to correct their
own erroneous interpretations of statutes in later proceedings. Adkins v.
City of Tell City, 625 N.E.2d 1298, 1302 (Ind. Ct. App. 1993); State ex rel.
ANR Pipeline Co. v. Ind. Dep't of State Revenue, 672 N.E.2d 91, 94 (Ind. Tax
Ct. 1996). We decline to adopt a preclusion theory that prevents litigants
from urging such a course correction.
Conclusion
We hold that periodic rate increases are available only for specific
projects a utility designates in the threshold TDSIC proceeding and not for
multiple-unit-project categories it describes using ascertainable planning
criteria. The Commission thus erred in approving various proposed
categories of unspecified improvements that NIPSCO did not identify
with particularity until it filed subsequent periodic Section 9 petitions. For
these reasons, we grant the Industrial Group’s petition to transfer. We
reverse the portions of the Commission’s TDSIC-4 Order that approved
previously unspecified improvements. And we remand to the
Commission with instructions to identify such project categories that were
not identified with specificity in TDSIC-3. The costs for all multiple-unit
projects as to which particular improvements were identified for the first
time in TDSIC-4 are disallowed for TDSIC recovery to the extent those
projects were not properly designated in the previously approved seven-
year plan.
Rush, C.J., and David, Massa, and Goff, JJ., concur.
Indiana Supreme Court | Case No. 18S-EX-334 | June 20, 2018 Page 16 of 17
ATTORNEYS FOR APPELLANT
Todd A. Richardson
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
Indiana Supreme Court | Case No. 18S-EX-334 | June 20, 2018 Page 17 of 17