Citizens Action Coalition of Indiana, Inc., Indiana Association for Community and Economic Development, Indiana Coalition for Human Services v. Indianapolis Power & Light Company

FILED
Apr 05 2017, 6:36 am
CLERK
Indiana Supreme Court
Court of Appeals
and Tax Court
ATTORNEY FOR APPELLANTS ATTORNEYS FOR APPELLEE –
Jennifer A. Washburn INDIANAPOLIS POWER & LIGHT
Indianapolis, Indiana COMPANY
Peter J. Rusthoven
Teresa Morton Nyhart
Jeffrey M. Peabody
Barnes & Thornburg LLP
Indianapolis, Indiana
ATTORNEYS FOR APPELLEE –
INDIANAPOLIS POWER & LIGHT
INDUSTRIAL GROUP
Bette J. Dodd
Joseph P. Rompala
Lewis & Kappes, P.C.
Indianapolis, Indiana
ATTORNEYS FOR APPELLEE –
INDIANA UTILITY REGULATORY
COMMISSION
Curtis T. Hill, Jr.
Attorney General of Indiana
David Lee Steiner
Deputy Attorney General
Indianapolis, Indiana
Beth Krogel Roads
General Counsel
Indiana Utility Regulatory
Commission
Indianapolis, Indiana
Court of Appeals of Indiana | Opinion 93A02-1604-EX-804 | April 5, 2017 Page 1 of 23
IN THE
COURT OF APPEALS OF INDIANA
Citizens Action Coalition of April 5, 2017
Indiana, Inc., Indiana Court of Appeals Case No.
Association for Community and 93A02-1604-EX-804
Economic Development, Indiana Appeal from the Indiana Utility
Coalition for Human Services, Regulatory Commission
Indiana Community Action Cause Nos. 44576
Association, Indiana State 44602
Conference of the National The Hon. Carol Stephan,
Association for the Chair
Advancement of Colored People,
The Hon. James Huston
Inc., and National Association of The Hon. Carolene Mays-Medley
Social Workers Indiana Chapter, The Hon. Angela Weber
Appellants (Intervenors Below), The Hon. David E. Ziegner
Commissioners
v. The Hon. Aaron Schmoll,
Administrative Law Judge
Indianapolis Power & Light
Company, et al.,
Appellee (Petitioner and Parties Below).
Bailey, Judge.
Court of Appeals of Indiana | Opinion 93A02-1604-EX-804 | April 5, 2017 Page 2 of 23
Case Summary
[1] Indianapolis Power & Light Company (“IPL”) petitioned the Indiana Utility
Regulatory Commission (“the Commission”) for approval of an increase to its
base rates for provision of electricity, which had been in effect since 1995. The
Commission granted requests for intervention by Citizens Action Coalition,
Indiana Community Action Association, Indiana Coalition for Human
Services, Indiana Association for Community Economic Development,
National Association of Social Workers Indiana Chapter, and Indiana State
Conference of the National Association for the Advancement of Colored
People (collectively, “Joint Intervenors”), and by IPL Industrial Group (“IPL
Group”), The Kroger Company, and the City of Indianapolis.1 The proposed
rate increase was approved by the Commission. After the denial of various
petitions for reconsideration, Joint Intervenors appealed. We affirm. 2
1
The Indiana Office of the Utility Consumer Counselor (“the OUCC”) is a statutory party to rate
proceedings, as a consumer representative.
2
By a separate order, we grant Joint Intervenors’ motion to dismiss the Commission as a party to this appeal.
Because the Commission acted as a fact-finding administrative tribunal and no statute or administrative
provision expressly makes the Commission a party on appeal, it is not a proper party on appeal from its own
decision. See e.g., Citizens Action Coalition of Indiana, Inc. v. So. Indiana Gas & Electricity Co., 2017 WL 587261,
slip op. at 1, n.1 (Ind. Ct. App. Feb. 14, 2017). See also City of Terre Haute v. Terre Haute Water Works Corp.,
180 N.E.2d 110, 111 (Ind. Ct. App. 1962) (“When there are two opposing parties before [the Public Service
Commission of Indiana], as here, its action in making findings and issuing an order deemed detrimental by
one of the parties is similar to that of a court which makes a decision determining a controversy between
adverse parties. A court is never a party to an appeal from its decision.”)
Court of Appeals of Indiana | Opinion 93A02-1604-EX-804 | April 5, 2017 Page 3 of 23
Issue
[2] Joint Intervenors articulate four issues claiming that the order lacks adequate
support, particularly challenging (1) the lack of findings specifically addressing
the impact of a particular rate component, a declining block rate (“DBR”),
upon energy conservation, (2) the lack of findings specifically addressing the
effect of DBR on elderly and African-American customers, (3) the rejection of a
proposal for 25% low-income customer subsidies, and (4) the rejection of
mandatory reporting by IPL of interruption-in-service data. We consolidate
and restate the issues to conform to our standard of review, that is, a
Commission order will stand unless no substantial evidence supports it or it is
contrary to law,3 and address the following issue: Whether the Commission’s
rate approval order is not conclusive and binding due to a lack of specific
findings on factual determinations material to its ultimate conclusions.
Facts and Procedural History
[3] On December 29, 2014, IPL, an investor-owned public utility providing
electrical service to approximately 470,000 ratepayers in and around
Indianapolis, filed a base-rate-increase petition with the Commission. IPL
proposed that the fixed customer charge, a flat fee for access to the electrical
grid, would rise from $6.70 per month to $11.25 per month for customers using
3
Northern Ind. Public Serv. Co. v. U.S. Steel Corp., 907 N.E.2d 1012, 1015 (Ind. 2009).
Court of Appeals of Indiana | Opinion 93A02-1604-EX-804 | April 5, 2017 Page 4 of 23
0 to 325 kilowatt hours and from $11.00 to $17.00 for customers using over 325
kilowatt hours. The energy charge, a volumetric charge equal to the approved
rate multiplied by the number of kilowatt hours consumed, would rise from
$0.093346 to $0.093935 for the first 500 kilowatt hours and from $0.070346 to
$0.073000 thereafter.4 Because customers consuming greater than 500 kilowatt
hours incrementally pay less than the lower-usage customers for the energy
charge portion of the bill, the rate scheme incorporates a DBR.
[4] The Commission consolidated the base rate case with a facilities investigation
case and conducted nine days of evidentiary hearings. At the hearing, Joint
Intervenors opposed the increase to the monthly fixed customer charge and
presented testimony opposing the DBR on grounds that charging less at higher
usage rates penalizes low volume customers and does not promote energy
conservation. Also, Joint Intervenors urged adoption of a 25% subsidy for
certain customers, to be funded by an incremental usage increase on other
customers, and requested an order that IPL provide Joint Intervenors with data
on service interruption events pertaining to low-income customers.
[5] IPL presented testimony acknowledging that, in the absence of demand meters
and/or time-of-use meters, the most cost-justified rate design would be a
straight fixed-rate/variable rate. In this design, fixed rates are entirely
4
The inclusion of fuel and Demand Side Management (“DSM”) charges would cause a rise to $0.097416
from $0.096827 and to $0.076481 from $0.073827, for the first 500 kilowatt hours and over 500 kilowatt
hours, respectively. There was also a third block reduced rate for residential users of electric hot water
heaters and space heaters who consumed over 1,000 kilowatt hours per month.
Court of Appeals of Indiana | Opinion 93A02-1604-EX-804 | April 5, 2017 Page 5 of 23
recovered from the fixed charges and variable costs are entirely recovered from
variable charges. However, IPL proposed gradualism as opposed to a total
conversion to straight fixed-rate/variable rate methodology within one rate
proceeding. Additionally, there was testimony that economically efficient
pricing is achieved when a price is set equal to the marginal cost of production,
and that flat energy charges (eliminating DBR) do not mirror costs in that it
does not cost twice as much to produce twice as much electricity.
[6] Economist Glenn Watkins (“Watkins”), who testified for the OUCC after
conducting an evaluation of IPL’s proposal, opined that “the current level of
customer charges is appropriate.” (Tr. at 8208.) According to Watkins, the
proposed increases to the fixed monthly customer charge “violate the regulatory
principle of gradualism, violate the economic theory of efficient competitive
pricing, and are contrary to effective conservation efforts.” (Tr. at 8200.) With
regard to DBR, Watkins recommended: “[DBR rates] be eliminated gradually
to a flat rate structure. However, this restructuring of residential and small
commercial rates should be done in a gradual and systematic manner to avoid
rate shock to large volume heating customers.” (Tr. at 8212.) He
recommended a phase out in three rate cases, with equal increments.
[7] On March 16, 2016, the Commission issued its final order approving IPL’s
proposed rate increase and rejecting the proposals for a low-income customer
subsidy and service interruption reporting requirements. We do not re-produce
the eighty-three-page opinion here, but recite portions relevant to Joint
Intervenor’s positions:
Court of Appeals of Indiana | Opinion 93A02-1604-EX-804 | April 5, 2017 Page 6 of 23
Comprehensive Low Income Bill Payment Assistance Program
Evidence. Joint Intervenors witness Howat recommended
implementation of a low income rate that would be paid for by
all classes of customers through a volumetric charge and that the
low income rate be available to all residential customers at or
below 150% of the poverty level. His recommendation was a
25% discounted rate. He also recommended a plan to implement
a low-income arrearage write-down program by retiring pre-
program arrearages through 12 timely payments of discounted
bills. He conducted and submitted analysis for the Commission’s
consideration of the account activity among Low Income Home
Energy Assistance program (“LIHEAP”) customers – number of
overdue accounts, disconnect notices, and disconnection for
nonpayment. Joint Intervenor witness Fraser presented
demographic data concerning income levels and poverty rates in
Indiana and Marion County.
Industrial Group witness Phillips contended that recovery of
social program costs is divorced from any cost causation
principles and distorts electric price signals. He testified that the
proposed program is best addressed by the Indiana state
legislature.
In rebuttal, IPL witness Gaske testified that the Joint Intervenors’
proposal raises significant policy issues for the Commission to
address and that perhaps the manner and amount of low income
assistance would be more appropriately addressed in a generic
proceeding involving all regulated electric utilities or by the
legislature.
Discussion and Findings. We recognize the importance of the
issues raised by Joint Intervenors, but find that there are
numerous implementation and policy related concerns. The
timing of the introduction of the proposal in this proceeding has
Court of Appeals of Indiana | Opinion 93A02-1604-EX-804 | April 5, 2017 Page 7 of 23
not provided an opportunity for sufficient consideration of the
complexities involved. As pointed out by Mr. Phillips, the
application of costs that could be considered beyond the cost of
electric service distorts electric service price signals. A well-
designed proposal would include a thorough understanding of
how it would create or alleviate any costs of providing electric
service. Further, access to key demographic and billing
information the affected utility or utilities collect and hold is
integral to evaluating any specific program design. Absent this
information, we decline to adopt Mr. Howat’s recommendations
in this proceeding.
Joint Intervenors also have proposed that IPL be ordered to
collect and report trend data on arrearages, disconnections, and
related data points. While a properly designed program of the
type suggested by Joint Intervenors would benefit from this
information, and we encourage IPL to consider working with the
Joint Intervenors and other interested stakeholders in further
identifying beneficial information, we decline to order such
collection and reporting solely on the basis of the evidence before
us. We believe that any such effort is best pursued by the utility
and interested stakeholders outside the regulatory constraints of a
specific Commission directive.
Rate Design.
Evidence. Dr. Gaske explained that the rate design objective was
guided by two goals: (1) the residential increase would remain
less than 10%; and (2) no rate schedule would receive a rate
decrease. The rate design proposed for residential and
commercial rate classes by Dr. Gaske included moving
additional fixed costs into the customer charge component of the
bill. The result is a customer charge that increases by a greater
percentage than the overall rate increase. He explained that the
proposed level does not include all the fixed costs. In conducting
the revenue proof, Dr. Gaske gave effect to the movement of
Court of Appeals of Indiana | Opinion 93A02-1604-EX-804 | April 5, 2017 Page 8 of 23
customers who are eligible to migrate to a different rate schedule
that would be more financially advantageous to them. He
testified that after this case is concluded, IPL will notify those
customers who would achieve lower bills by moving to a
different rate schedule. The effect of this migration will result in
the new rate schedule producing $1.187 million less in revenue,
which was added to the overall rate increase requested.
OUCC witness Watkins objected to the increase to the residential
customer charge. He testified that it violates gradualism, violates
efficient competitive pricing, and discourages conservation. Mr.
Watkins also opposed Dr. Gaske’s proposed migration
adjustment.5 The migration adjustment was based upon an
analysis of customers and a determination that a number of the
customers would be financially benefitted if they migrated to an
alternative rate schedule. Mr. Watkins claimed that one cannot
assume that a customer will choose to move to a more
economical rate. He noted that savings for most would be less
than 10%.
...
Joint Intervenor witness Howat also objected to the increase to
the customer charge and continuation of declining block rates.
He testified that rate structures such as these have a
disproportionate impact on low income, elderly, and African
American customers, and that on average, low income customers
use less electricity than the average or than their higher income
counterparts.
Industrial Group witness Phillips objected to the proposed
increase in the demand charge for the HL class. . . . Kroger
5
Migration refers to movement between an SS (energy only) rate and SL (demand plus energy) rate.
Court of Appeals of Indiana | Opinion 93A02-1604-EX-804 | April 5, 2017 Page 9 of 23
witness Higgins testified that he supports IPL’s proposed rate
design, including the increases to the demand charge for the HL
and SL classes. City witness Sommer disagreed with IPL’s rate
migration objective that no class receive a rate decrease. . . .
In rebuttal, Dr. Gaske responded to Mr. Watkins’ testimony
concerning economic efficiency and testified that economic
theory supports the concept that economic efficiency is promoted
by recovering fixed costs through a fixed charge and only
variable costs in a variable charge. He noted that IPL is not
proposing a straight fixed variable (“SFV”) rate design in this
case. He testified that while a SFV rate design would provide
better price signals, IPL’s proposed rates would continue to
recover 75% of residential fixed costs through the energy charge
and 81% of small commercial fixed costs. He agreed that
declining block rates are not as cost-justified as a SFV rate design,
but are more cost-justified than a flat energy charge in that the
declining block rate structure represents a reasonable
compromise approach in which successively larger rate blocks
move closer to the marginal cost of energy. He further responded
to Mr. Watkins’ contention that the increase in the customer
charge violates a principle of gradualism by noting that
gradualism looks at the total bill, which is the sum of both the
customer and energy charges. The proposed increase in
customer charge would significantly reduce the percentage
increase in energy charge that would otherwise be required and
thereby offset the increase in the customer charge which is the
focus of Mr. Watkins’ argument.
With respect to the Joint Intervenors’ position, Dr. Gaske cited
details concerning the percentage of residential customers who
are enrolled in the LIHEAP program and those who are not,
showing that, in general, the energy usage characteristics among
the residential class for LIHEAP customers are very similar to
the no-assistance customers. As a result, proposals for lower
customer charges and/or flat energy charges are likely to increase
Court of Appeals of Indiana | Opinion 93A02-1604-EX-804 | April 5, 2017 Page 10 of 23
the monthly bills of the significant portion of low income energy
assistance customers who have above-average energy use, and
reduce the bills of the significant portion of customers who are
not low income but have below-average energy use.
...
Discussion and Findings.
Increase in Residential Customer Charge and Continuation of Declining
Block Rates. There were only two arguments presented in
opposition to IPL’s customer charge proposal: Mr. Watkins’
contention that all costs are variable in the long run and therefore
SFV rates represent inefficient pricing, and Mr. Howat’s
testimony that Petitioner’s rate design produces a
disproportionate impact on low income customers.
As to the first argument, we note that IPL has not proposed SFV
rates. While the proposed increases in the customer charge from
$6.70 to $11.25 (for less than 325 kWh/month) and $11.00 to
$17.00 (for greater than 325 kWh/month) move toward a more
fixed and variable rate design consistent with traditional cost
causation principals, it is demonstrably short of SFV rates. There
is no evidence that the customer charge as designed even reaches
the level of full distribution system fixed cost recovery. Cost
recovery design alignment with cost causation principles sends
efficient price signals to customers, allowing customers to make
informed decisions regarding their consumption of the service
being provided. The Commission investigated the rate design
issue with regard to natural gas service in Cause No. 43180, and
the general premise appears to be reasonably applicable to
electric utilities in the context of distribution-related costs.
Notwithstanding, gradualism in any movement is a reasonable
consideration, and we find that the increase in customer charge is
consistent with the Commission’s preference for gradual changes
Court of Appeals of Indiana | Opinion 93A02-1604-EX-804 | April 5, 2017 Page 11 of 23
in rate structures. We note that IPL’s proposed customer charge
represents the first increase in the customer charge since base
rates were last changed in 1995.
With respect to the second argument, Dr. Gaske’s analysis
demonstrated that approximately 8-10% of the customers within
each residential class receive energy assistance, yet the median
usage and the 90th percentile usage for energy assistance
customers compared to no-assistance customers is similar. While
switching to an inclining block rate structure may benefit low
income/low energy users, it would harm a substantial number of
low income/high energy users. Many low-income customers use
more than the residential average amount.
Ultimately, we find that Petitioner’s proposed rate design to
increase the customer charge and maintain declining block rates
should be approved. We further find that this structure does not
violate principles of gradualism, because gradualism is best
considered in the context of the entire customer bill and not
discrete charges within the bill.
(App. at 91-96.)
[8] The Commission subsequently issued a Nunc Pro Tunc Order unrelated to this
appeal. On April 5, 2015, Joint Intervenors, IPL Group, and The Kroger
Company filed petitions seeking reconsideration of various aspects of the Order.
On June 1, 2016, the Commission denied those petitions. Joint Intervenors and
the OUCC filed notices of appeal. Subsequently, the OUCC filed a motion to
Court of Appeals of Indiana | Opinion 93A02-1604-EX-804 | April 5, 2017 Page 12 of 23
dismiss its notice of appeal.6 The appeal initiated by Joint Intervenors
proceeded.
Standard of Review
[9] The Commission was created by the Indiana General Assembly to act
“primarily as a fact-finding body with the technical expertise to administer the
regulatory scheme designed by the legislature.” Northern Ind. Public Serv. v. U.S.
Steel, 907 N.E.2d 1012, 1015 (Ind. 2009). The Commission was assigned the
responsibility “to insure that public utilities provide constant, reliable, and
efficient service to the citizens of Indiana.” Id. The Commission can exercise
only that power which has been conferred upon it by statute. Id.
[10] This statutory scheme reflects a basic legislative policy that questions of rate-
making methodology are best consigned to the Commission’s expertise. L.S.
Ayres & Co. et al. v. IPALCO et al., 169 Ind. App. 652, 675-76, 351 N.E.2d 814,
830 (1976). In each rate proceeding, the Commission’s primary objective is to
establish a level of rates and charges that will permit the utility to meet its
operating expenses plus a return on investment which will compensate its
investors. City of Evansville v. Southern Ind. Gas & Elec. Co., 167 Ind. App. 472,
479, 339 N.E.2d 562, 568 (1976).
6
The OUCC petitioned to be retained as a statutory party on appeal. This Court granted that motion on
August 4, 2016.
Court of Appeals of Indiana | Opinion 93A02-1604-EX-804 | April 5, 2017 Page 13 of 23
[11] Indiana Code Section 8-1-3-1 provides for judicial review of the Commission’s
decisions in language almost identical to provisions for judicial review of other
administrative agency actions:
Any person, firm, association, corporation, limited liability
company, city, town or public utility adversely affected by any
final decision, ruling, or order of the commission may, within
thirty (30) days from the date of entry of such decision, ruling, or
order, appeal to the court of appeals of Indiana for errors of law
under the same terms and conditions as govern appeals in
ordinary civil actions, except as otherwise provided in this
chapter and with the right in the losing party or parties in the
court of appeals to apply to the supreme court for a petition to
transfer the cause to said supreme court as in other cases. An
assignment of errors that the decision, ruling, or order of the
commission is contrary to law shall be sufficient to present both
the sufficiency of the facts found to sustain the decision, ruling,
or order, and the sufficiency of the evidence to sustain the finding
of facts upon which it was rendered.
[12] Our review is two-tiered:
On the first level, it requires a review of whether there is
substantial evidence in light of the whole record to support the
Commission’s findings of basic fact. Citizens Action Coalition of
Ind., Inc. v. N. Ind. Pub. Serv. Co., 485 N.E.2d 610, 612 (Ind.
1985). Such determinations of basic fact are reviewed under a
substantial evidence standard, meaning the order will stand
unless no substantial evidence supports it. McClain [v. Review Bd.
Of Ind. Dept. of Workforce Dev., 693 N.E.2d 1314, 1317-18 (Ind.
1998)]. In substantial evidence review, “the appellate court
neither reweighs the evidence nor assesses the credibility of
witnesses and considers only the evidence most favorable to the
Board’s findings.” Id. The Commission’s order is conclusive and
binding unless (1) the evidence on which the Commission based
Court of Appeals of Indiana | Opinion 93A02-1604-EX-804 | April 5, 2017 Page 14 of 23
its findings was devoid of probative value; (2) the quantum of
legitimate evidence was so proportionately meager as to lead to
the conviction that the finding does not rest upon a rational basis;
(3) the result of the hearing before the Commission was
substantially influenced by improper considerations; (4) there
was not substantial evidence supporting the findings of the
Commission; (5) the order of the Commission is fraudulent,
unreasonable, or arbitrary. Id. at 1317 n.2. This list of
exceptions is not exclusive. Id.
At the second level, the order must contain specific findings on
all the factual determinations material to its ultimate conclusions.
Citizens Action Coalition, 485 N.E.2d at 612. McClain described
the judicial task on this score as reviewing conclusions of
ultimate facts for reasonableness, the deference of which is based
on the amount of expertise exercised by the agency. McClain,
693 N.E.2d at 1317-18. Insofar as the order involves a subject
within the Commission’s special competence, courts should give
it greater deference. Id. at 1318. If the subject is outside the
Commission’s expertise, courts give it less deference. Id. In
either case courts may examine the logic of inferences drawn and
any rule of law that may drive the result. Id. Additionally, an
agency action is always subject to review as contrary to law, but
this constitutionally preserved review is limited to whether the
Commission stayed within its jurisdiction and conformed to the
statutory standard and legal principles involved in producing its
decision, ruling, or order. Citizens Action Coalition, 485 N.E.2d at
612-13.
Northern Indiana Public Serv., 907 N.E.2d at 1016.
Declining Block Rates – Disparate Impact
[13] At the hearing, Joint Intervenors opposed a rate scheme inclusive of DBR, that
is, the volumetric charge decrease from $0.093935 to $0.070346 after the first
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500 kilowatt hours of usage. Joint Intervenors argued that this is a disincentive
for conservation and disproportionately harms elderly, African-American, and
low income customers.
[14] In response to an inquiry about the “general public policy” applicable to DBR,
Watkins testified:
In 1978, Congress passed the Public Utility Regulatory Policies
Act (“PURPA”). Among other things, PURPA established
various conservation initiatives and mandates for electric utilities.
Included in this Act is a clear policy to eliminate declining-block
energy rates unless supported by costs. Specifically, PURPA
states:
‘Declining Block Rates. The energy component of a rate, or the
amount attributable to the energy component in a rate, charged
by any electric utility for providing electric service during any
period to any class of electric consumers may not decrease as
kilowatt-hour consumption by such class increases during such
period except to the extent that such utility demonstrates that the
costs to such utility or providing electric service to such class,
which costs are attributable to such energy component, decrease
as such consumption increases during such period.’
Since this time, most states and commissions have abandoned
the once prevalent declining-block rate structures in favor of flat,
or inverted, block rates. The general policy supporting the
elimination of such declining-block rates is that this type of rate
structure is clearly at odds with energy conservation due to the
fact that the incremental price of electricity decreases as
consumption increases, thereby creating somewhat of an
incentive to use more and more electricity. Indeed, declining-
block electricity rates became popular in the 1960s and early
1970s and were used as a promotional tool to encourage the
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increased usage of relatively cheap electricity during a time in
which there were significant natural gas shortages through the
Country.
(Tr. at 8210.)
[15] On appeal, Joint Intervenors claim that the Commission’s order “is deficient
because the Commission failed to make basic findings of fact or a conclusion of
law as to whether DBR has a deleterious effect on energy conservation and
energy efficiency programs sponsored by the utility.” Appellant’s Br. at 25.
According to Joint Intervenors, the Commission “ignored the substantial
evidence presented by both CAC and the OUCC, demonstrating that ‘this type
of structure is clearly at odds with energy conservation due to the fact that the
incremental price of electricity decreases as consumption increases, thereby
creating somewhat of an incentive to use more and more electricity.”’
Appellant’s Br. at 27 (quoting App. at 190-91). They ask that we remand the
order “for the Commission to determine whether the DBR rate structure is
deleterious to energy conservation and utility-sponsored energy efficiency
programs.” Appellant’s Br. at 30.
[16] We do not find this particular relief warranted. Joint Intervenors did not bring
a declaratory judgment action; rather, they intervened in a rate case. Rate-
making is a legislative as opposed to a judicial function, and our Indiana
Legislature has seen fit to establish a commission for the express purpose of
hearing evidence and balancing and weighing the many complicated factors
which must be taken into consideration in setting utility rates. State ex rel.
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Indianapolis Water Co. v. Boone Circuit Court, 261 Ind. 583, 586-87, 307 N.E.2d
870, 872 (1974). The enabling act does not authorize the Commission to issue
declaratory rulings. See U.S. Steel Corp. v. No. Ind. Public Serv. Co., Inc., 482
N.E.2d 501, 506 (Ind. Ct. App. 1985), trans. denied.
[17] In their insistence upon particular language, Joint Intervenors attempt to shift
the focus from the reasonableness of the order approving the rate change as a
whole to one component. As the Commission acknowledged, an ideal rate
scheme would closely align recovery of fixed costs with fixed rates and variable
costs with variable rates based upon usage. However, there was ample
testimony to support the Commission’s conclusions that, in light of the fact that
IPL’s base rates had not been increased since 1995, an abrupt rate structure
overhaul ignoring the principles of gradualism would be undesirable.
Ultimately, the Commission incorporated the principle of “gradualism,” (App.
at 96), and approved a rate structure that was not a straight fixed rate/variable
rate structure.
[18] Joint Intervenors make a cursory claim that “approval of DBR despite its
deleterious effect on energy conservation is contrary to federal law, state rule,
and existing precedent.” Appellant’s Br. at 27. They note that the National
Energy Policy Act of 1992 encourages state regulators of utilities to consider
setting rates to promote energy efficient investments. They also note that, in a
separate utility case, the Commission found the utility’s proposal to gradually
eliminate DBR rates to be reasonable. See In re Verified Petition of So. Ind. Gas &
Electric Co., Cause No. 43839, 2011 Ind. PUC LEXIS 115, 215 (I.U.R.C. Apr.
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27, 2011). The parties do not dispute the proposition that public policy, federal
and State, favors and encourages conservation.
[19] Nonetheless, encouragement is not a mandate. Joint Intervenors direct us to no
statutory requirement that each individual component of a rate scheme reflect
the most environmentally conservative approach or that abandonment of older
methodology be immediate and total. At bottom, Joint Intervenors suggest a
reweighing of evidence, with conservation – based upon their interpretation of
customer usage signals – being paramount. They do not demonstrate the
unreasonableness of the rate increase as a whole.
[20] In a similar vein, Joint Intervenors argue that the Commission “did not make
any specific findings of fact or make an ultimate finding of reasonableness as to
the material issue raised regarding whether the continuance of the DBR
structure disproportionately harms elderly consumers and African American
consumers.” Appellant’s Br. at 31. Joint Intervenors observe that the
Commission has a duty to see that the rates are fair and reasonable, both to the
consumers and to the utility; claim that “no party rebutted the [Joint
Intervenor] evidence on this issue”; and ask for remand “to determine whether
the DBR rate structure disproportionately harms elderly and African American
ratepayers.” Appellant’s Br. at 31-32.
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[21] Joint Intervenors presented testimony to the effect that lower income customers
use less electricity on average.7 IPL presented testimony that their customers
participating in energy assistance programs show similar characteristics of
usage compared to customers not receiving assistance, looking at median usage
and 90th percentile usage. Even assuming that DBR has a disproportionate
negative impact upon certain groups of customers, the Commission is required
by statute to approve rates that are fair and reasonable inclusive of the entire
customer base. There is no statutory requirement that the impact upon
particular sub-groups be separately addressed. Joint Intervenors have not
demonstrated that the Commission failed to conform to statutory standards.
[22] “On matters within its jurisdiction, the Commission enjoys wide discretion.
The Commission’s findings and decision will not be lightly overridden just
because we might reach a contrary opinion on the same evidence.” NIPSCO
Indus. Grp. v. No. Ind. Public Serv. Co., 31 N.E.3d 1, 5-6 (Ind. Ct. App. 2015)
(internal citation omitted.) As explained by Watkins, “it is generally accepted
that to the extent possible, joint costs should be allocated to customer classes
based on the concept of cost causation,” but “although there are certain
principles used by all cost of service analysts, there are often significant
disagreements on the specific factors that drive individual costs.” (Tr. at 8147-
48.)
7
The data base was not limited to IPL or Indiana customers.
Court of Appeals of Indiana | Opinion 93A02-1604-EX-804 | April 5, 2017 Page 20 of 23
[23] Challengers have the burden of showing there is insufficient evidence in the
record to support the findings of the Commission; they cannot merely cite to
other evidence of record which would support a determination more favorable
to their position. Bethlehem Steel Corp. v. N. Ind. Pub. Serv. Co., 397 N.E.2d 623,
628 (Ind. Ct. App. 1979). Here, the findings contain enough detail such that we
can determine whether the order is reasonable, within the wide discretion of the
Commission.
Subsidy Program and Reporting Requirements
[24] Joint Intervenors complain that the Commission did not make sufficient
findings to support its rejection of Joint Intervenors’ requests for a 25% subsidy
to low-income customers and for mandatory reporting of service interruption
events so as to assist the Intervenors in supporting future arguments with such
data. As a threshold matter, we observe that Joint Intervenors argue that the
Commission must make findings with respect to disparate socioeconomic
impact of rate increases, but have not shown that the Commission had a
statutory duty to make any findings at all in this regard. Joint Intervenors were
permitted to intervene in a rate-making case, but this did not change the nature
of the proceeding from rate-making to a broad socio-economic inquiry akin to
that which might be undertaken by the General Assembly.
[25] The Commission is to approve rates that are just and reasonable. Within the
statutory language, there is no requirement that the unique position of
particular groups of consumers be separately considered. Joint Intervenors are
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not entitled to specific findings on propositions they have injected unless it is a
matter material to the rate decision. Citizens Action Coalition, 485 N.E.2d at 612.
In other words, the Commission does not have to justify to Joint Intervenors
why it rejected a subsidy outside general rate-making principles and a reporting
obligation. Joint Intervenors had to justify to the Commission why a direct
subsidy and reporting requirement should be adopted within a rate case. They
failed to do so.
[26] That said, the Commission has shown some inclination to hear socio-economic
evidence in a rate case. It did not simply ignore the Joint Intervenors’
argument. Rather, after hearing limited evidence, the Commission
acknowledged the need for broader-based evidence and observed that the
legislature is better suited to determinations of if and when one citizen is
burdened to benefit another. Undeniably, lower income persons at times
struggle to obtain basic necessities. But the struggle for necessities of life is
broader; what of those who have above-poverty incomes but increased
expenses, a larger family size, or significant medical needs? The drawing of
lines in the face of myriad considerations and competing concerns is
traditionally a function performed by our General Assembly. See Citizens Action
Coalition v. Public Serv. Co., 450 N.E.2d 98, 103 (Ind. Ct. App. 1983) (affirming
the Commission decision declining to require Indiana electric utilities to offer a
“life-line” rate structure providing a below-cost rate for essential residential
customer needs and observing, “any decision to implement an assistance
Court of Appeals of Indiana | Opinion 93A02-1604-EX-804 | April 5, 2017 Page 22 of 23
program not based on sound regulatory principles must be made by the
legislature.”)8
[27] Again, Joint Intervenors have not shown that the Commission failed to
conform to statutory standards or failed to make requisite findings.
Conclusion
[28] Joint Intervenors have not shown that the Commission decision approving a
rate design that includes DBR is unsupported by requisite findings. Joint
Intervenors have not shown that the rate approval order is non-binding due to a
lack of more extensive factual findings on matters introduced by Joint
Intervenors which were not directly material to components of the approved
rate design.
[29] Affirmed.
Najam, J., and May, J., concur.
8
In the order affirmed on appeal, the Commission found that a rate “targeted” to specific income or
demographic groups of residential customers was prohibited by law and a general lifeline rate structure was
not an effective and equitable means of providing assistance to low-income residential customers. Citizens
Action Coalition, 450 N.E.2d at 100.
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