Court of Appeals of Indiana | Memorandum Decision 93A02-1604-EX-914 | March 7, 2017 Page 1 of 18

MEMORANDUM DECISION

Pursuant to Ind. Appellate Rule 65(D), 

this Memorandum Decision shall not be 

regarded as precedent or cited before any 

court except for the purpose of establishing 

the defense of res judicata, collateral 

estoppel, or the law of the case.

ATTORNEYS FOR APPELLANT

Robert E. Heidorn

P. Jason Stephenson

Vectren Corporation

Evansville, Indiana

Wayne C. Turner

Patrick A. Ziepolt

Hoover Hull Turner LLP

Indianapolis, Indiana

ATTORNEYS FOR AMICUS CURIAE

INDIANA ENERGY ASSOCIATION

Derek R. Molter

Jenny R. Buchheit

Mark R. Alson

Kay E. Pashos

Ice Miller LLP

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

Jeremy R. Comeau

Assistant General Counsel

Indiana Utility Regulatory 

Commission

Indianapolis, Indiana

ATTORNEYS FOR AMICUS CURIAE 

INDIANA INDUSTRIAL GROUP

Todd A. Richardson

Joseph P. Rompala

Lewis Kappes, P.C.

Indianapolis, Indiana

I N T H E

COURT OF APPEALS OF INDIANA
Court of Appeals of Indiana | Memorandum Decision 93A02-1604-EX-914 | March 7, 2017 Page 2 of 18

Southern Indiana Gas & Electric 

Company d/b/a Vectren Energy 

Delivery of Indiana, Inc.,

Appellant-Petitioner,

v.

Indiana Utility Regulatory 

Commission,

Appellee-Administrative Agency,

and

Indiana Office of Utility 

Counselor,

Appellee-Statutory Representative,

and

Citizens Action Coalition of 

Indiana, Inc.,

Appellee-Intervenor

March 7, 2017

Court of Appeals Case No.

93A02-1604-EX-914

Appeal from the Indiana Utility 

Regulatory Commission

The Honorable Carol A. Stephan, 

Commission Chair

The Honorable James Huston and

The Honorable David Ziegner,

Commissioners

The Honorable Loraine L. 

Seyfried,

Chief Administrative Law Judge

IURC Cause No. 44645

Crone, Judge.

Case Summary

[1] As required by statute, Southern Indiana Gas & Electric Company d/b/a 

Vectren Energy Delivery of Indiana, Inc. (“Vectren South” or “Petitioner”), 

filed a petition with the Indiana Utility Regulatory Commission 

(“Commission”) seeking approval of its Electric Demand Side Management 

(“DSM”) Plan for 2016-2017 (“Plan”). The Plan outlined Vectren South’s 
Court of Appeals of Indiana | Memorandum Decision 93A02-1604-EX-914 | March 7, 2017 Page 3 of 18

energy-efficiency (“EE”) programs and their budgets and costs, including lost 

revenues resulting from reduced demand for electricity. Indiana law requires 

the Commission to allow an electricity supplier to recover reasonable lost 

revenues associated with an energy-efficiency plan. The Commission held an 

evidentiary hearing and issued an order purporting to find the Plan to be 

reasonable in its entirety but limiting lost revenue recovery to four years or the 

life of the energy-efficiency measure, whichever is less, or until rates are 

implemented pursuant to a final order in Vectren South’s next base rate case, 

whichever occurs earlier.

[2] Vectren South now appeals, arguing that the Commission erred in finding the 

Plan to be reasonable in its entirety but capping lost revenue recovery at four 

years. Vectren South also argues that the cap is arbitrary and capricious 

because the Commission made no specific factual findings that the cap would 

allow for the recovery of reasonable lost revenues. We agree on both counts 

and therefore reverse and remand for further proceedings.

Facts and Procedural History

[3] Vectren South is a public utility based in Evansville that “provides electric 

utility service to approximately 140,000 customers in six counties in 

southwestern Indiana.” Appealed Order at 2. In June 2015, Vectren South 

filed a petition with the Commission seeking approval of the Plan pursuant to 

Indiana Code Section 8-1-8.5-10 (“Section 10”), which reads in pertinent part as 

follows:
Court of Appeals of Indiana | Memorandum Decision 93A02-1604-EX-914 | March 7, 2017 Page 4 of 18

(h) Beginning not later than calendar year 2017, and not less than 

one (1) time every three (3) years, an electricity supplier[1]shall 

petition the commission for approval of a plan that includes:

(1) energy efficiency goals;

(2) energy efficiency programs to achieve the energy 

efficiency goals;[2]

(3) program budgets and program costs [including lost 

revenues and financial incentives approved by the 

commission under subsection (o)3]; and

(4) evaluation, measurement, and verification [“EM&V”] 

procedures that must include independent evaluation, 

measurement, and verification.

An electricity supplier may submit a plan required under this 

subsection to the commission for a determination of the overall 

reasonableness of the plan either as part of a general basic rate 

proceeding or as an independent proceeding....

 

1

“Electricity supplier” means a public utility “that furnishes retail electric service to customers in Indiana.” 

Ind. Code § 8-1-8.5-10(a). The term does not include a municipally owned utility and certain other 

corporations. Id.

2

“Energy efficiency” means “a reduction in electricity use for a comparable level of electricity service.” Ind. 

Code § 8-1-8.5-10(b). “Energy efficiency goals” means “all energy efficiency produced by cost effective plans 

that are: (1) reasonably achievable; (2) consistent with an electricity supplier’s integrated resource plan; and 

(3) designed to achieve an optimal balance of energy resources in an electricity supplier’s service territory.” 

Ind. Code § 8-1-8.5-10(c). “Energy efficiency program” or “program” means “a program that is: (1) 

sponsored by an electricity supplier; and (2) designed to implement energy efficiency improvements. The 

term does not include a program designed primarily to reduce demand for limited intervals of time, such as 

during peak electricity usage or emergency conditions.” Ind. Code § 8-1-8.5-10(d).

3

Ind. Code § 8-1-8.5-10(g)(3). “Lost revenues” means “the difference, if any, between: (1) revenues lost; and 

(2) the variable operating and maintenance costs saved; by an electricity supplier as a result of implementing 

energy efficiency programs.” Ind. Code § 8-1-8.5-10(e).
Court of Appeals of Indiana | Memorandum Decision 93A02-1604-EX-914 | March 7, 2017 Page 5 of 18

....

(j) In making a determination of the overall reasonableness of a 

plan submitted under subsection (h), the commission shall 

consider the following [ten factors, including]:

....

(4) The inclusion and reasonableness of procedures to 

evaluate, measure, and verify the results of the energy 

efficiency programs included in the plan, including the 

alignment of the procedures with applicable environmental 

regulations, including federal regulations concerning 

credits for emission reductions.

....

(8) The lost revenues and financial incentives associated 

with the plan and sought to be recovered or received by the 

electricity supplier.

....

(10) Any other information the commission considers 

necessary.

(k) If, after notice and hearing, the commission determines that 

an electricity supplier’s plan is reasonable in its entirety, the

commission shall:

(1) approve the plan in its entirety;

(2) allow the electricity supplier to recover all associated 

program costs on a timely basis through a periodic rate 

adjustment mechanism; and
Court of Appeals of Indiana | Memorandum Decision 93A02-1604-EX-914 | March 7, 2017 Page 6 of 18

(3) allocate and assign costs associated with a program to 

the class or classes of customers that are eligible to 

participate in the program.

....

(m) If, after notice and hearing, the commission determines that 

an electricity supplier’s plan is not reasonable in its entirety, the 

commission shall issue an order setting forth the reasons 

supporting its determination. The electricity supplier shall submit 

a modified plan within a reasonable time. After notice and 

hearing, the commission shall issue an order approving or 

denying the modified plan. If the commission approves the 

modified plan, the commission shall allow the electricity supplier 

to recover program costs associated with the modified plan on a 

timely basis through a periodic rate adjustment mechanism.

....

(o) If the commission finds a plan submitted by an electricity 

supplier under subsection (h) to be reasonable, the commission 

shall allow the electricity supplier to recover or receive the 

following:

(1) Reasonable financial incentives that:

(A) encourage implementation of cost effective 

energy efficiency programs; or

(B) eliminate or offset regulatory or financial bias:
Court of Appeals of Indiana | Memorandum Decision 93A02-1604-EX-914 | March 7, 2017 Page 7 of 18

(i) against energy efficiency programs;[4] or

(ii) in favor of supply side resources.

(2) Reasonable lost revenues.[5]

A retail rate adjustment mechanism proposed by an electricity 

supplier under this section to implement the timely recovery of 

program costs (including reasonable lost revenues) may be based 

on a reasonable forecast, with consideration given to the 

electricity supplier’s historical lost revenue forecasting accuracy. 

If forecasted data is used, the retail rate adjustment mechanism 

must include a reconciliation mechanism to correct for any 

variance between the forecasted program costs (including 

reasonable lost revenues and financial incentives) and the actual 

program costs (including reasonable lost revenues and financial 

incentives based on the evaluation, measurement, and 

verification of the energy efficiency programs under the plan).

....

(q) The commission shall adopt:

 

4 A reduction in demand for electricity may lead to a reduction in a utility’s revenues, which in turn may lead 

to a financial bias against promoting demand-reducing programs.

5 Vectren South points out that this provision is inconsistent with 170 Indiana Administrative Code (“IAC”) 

4-8-6(a), which states that the Commission “may allow the utility to recover the utility’s lost revenue from the 

implementation of a demand-side management program sponsored or instituted by the utility.” (Emphasis 

added.) We note that an administrative agency may not make rules or regulations inconsistent with the 

statute it is administering. Ind. Dep’t of State Revenue v. Best Ever Cos., 495 N.E.2d 785, 787 (Ind. Ct. App. 

1986).
Court of Appeals of Indiana | Memorandum Decision 93A02-1604-EX-914 | March 7, 2017 Page 8 of 18

(1) rules under IC 4-22-2; or

(2) guidelines;

to assist electricity suppliers and industrial customers in 

complying with this section.

[4] Citizens Action Coalition of Indiana, Inc. (“CAC”), was allowed to intervene

in Vectren South’s proceeding. In November 2015, the Commission held an 

evidentiary hearing at which Vectren South, CAC, and the Indiana Office of 

Utility Consumer Counselor (“OUCC”) appeared and presented evidence. In 

March 2016, the Commission issued a twenty-eight-page order, which reads in 

relevant part as follows:

6. Vectren South 2016-2017 Plan. The 2016-2017 Plan includes 

the following DSM programs, the majority of which are current 

programs ...: [residential lighting, home energy assessment and 

weatherization, appliance recycling, and smart thermostats, as 

well as commercial and industrial new construction and retrofit 

programs, among others].

7. Evidence.

[The Commission summarized the often conflicting evidence and 

recommendations presented by Vectren South, the OUCC, and 

CAC, including those regarding lost revenues and cost recovery. 

The accuracy and adequacy of these findings are not at issue

here.]

8. Discussion and Commission Findings. Vectren South 

requests approval of its Energy Efficiency Plan and authority to 

recover program costs, lost revenues, and performance incentives 

associated with the 2016-2017 Plan through its DSMA [demand 
Court of Appeals of Indiana | Memorandum Decision 93A02-1604-EX-914 | March 7, 2017 Page 9 of 18

side management adjustment] in accordance with [Indiana Code 

Section 8-1-8.5-9] and [Section] 10 and the DSM Rules [adopted 

by the Commission, i.e., 170 Indiana Administrative Code 

(“IAC”) 4-8].

....

B. Reasonableness of the 2016-2017 Plan. Having determined 

that Vectren South has submitted an EE plan as required by 

Section 10(h), Section 10(j) identifies ten factors the Commission 

must consider in determining its overall reasonableness.... For 

the reasons set forth below, we find that Vectren South's 2016-

2017 Plan is reasonable and should be approved.

....

iv. EM&V. Evaluation for all programs in the Plan will be 

conducted by an independent evaluator every year for the prior 

year's programs....

....

Based on the evidence presented, we find that Vectren South’s 

proposed EM&V procedures to independently verify the results 

of its proposed programs and the estimated EM&V costs are 

reasonable. Petitioner shall file its annual evaluation in its

DSMA proceeding.

....

viii. Lost Revenues and Financial Incentives. Petitioner’s 

requested lost revenues and financial incentives are discussed in 

detail below.

....

D. Lost Revenues and Performance Incentives. ....
Court of Appeals of Indiana | Memorandum Decision 93A02-1604-EX-914 | March 7, 2017 Page 10 of 18

Because we have found Vectren South’s 2016-2017 Plan is 

reasonable, we must consider whether Petitioner’s request for 

financial incentives and lost revenues associated with its EE 

programs is reasonable. We also note that 170 IAC 4-8 

authorizes the provision of financial incentives and lost revenues 

that the Commission finds reasonable for DR programs. 

Accordingly, we consider them together.

i. Lost Revenues. Vectren South seeks to recover lost revenues 

associated with its 2016-2017 Plan in the same manner in which 

it has been authorized to recover lost revenues associated with its 

DSM programs previously. Both the OUCC and CAC generally 

oppose Petitioner’s recovery of lost revenues.

Both the OUCC and CAC argue that lost revenues should be 

authorized only if Petitioner has experienced a reduction in kWh 

[kilowatt hour] sales compared to the kWh sales used to set rates 

in its last base rate case. The OUCC presented evidence that 

Vectren South’s sales had exceeded test year sales for calendar 

years 2010 through 2014. However, on rebuttal, Vectren South 

pointed out that the increase in sales was attributable to industrial 

customers who had opted out of EE and that this trend is 

expected to reverse due to a large industrial customer's plans to 

begin self-generating in 2017. [Vectren Utility Holdings, Inc.’s 

Vice President of Customer Energy Solutions Robert C. Sears]

testified that should sales continue to remain flat to declining, 

implementation of the EE programs will cause lost revenues that 

are not covered by load growth.

As we have previously explained, because the purpose of lost 

revenue recovery is to return the utility to the position it would 

have been in absent implementation of DSM, simply eliminating 

lost revenue recovery when sales are higher than the levels used 

to develop a utility’s current base rates would be contrary to this 

purpose. Recovery of lost revenues is intended as a tool to 

remove the disincentive a utility would otherwise face as a result 
Court of Appeals of Indiana | Memorandum Decision 93A02-1604-EX-914 | March 7, 2017 Page 11 of 18

of promoting DSM in its service territory....

The OUCC and CAC appear to be primarily concerned with 

what [CAC consultant Natalie Mims] termed the pancake effect, 

which is caused when lost revenues caused by EE investments in 

different years aggregate. For example, if the average weighted 

measure life is ten years for an EE measure then the utility 

company, assuming there is no rate case in the interim, would 

still be collecting lost revenues in 2025 for measures installed in 

2016, along with lost revenues for measures installed during 

2017-2025.[6]

The proposed annual budgets for the 2016-2017 Plan show lost 

revenue as a percentage of the total budget is 11.8% in 2016 and 

12.5% in 2017. Ms. Mims noted that Petitioner is requesting $2.5 

million in lost revenues, but that this amount does not appear to 

include the legacy lost revenues, incremental or cumulative lost 

revenues for 2015 through 2017 that Petitioner has requested or is 

receiving, or the total amount of lost revenues that Vectren South 

has recovered.

 

6 According to the Commission, Mims testified that

Vectren did not provide a breakdown of lost revenue by program or year, or any evidence that it 

will under-recover authorized costs due to the impacts of its EE programs. She testified it is 

unreasonable to recover lost revenues if there is no evidence that the revenues are actually lost. 

She also testified that lost revenue recovery is meant to be a short-term solution to address 

revenue loss in between rate cases. She stated that in the absence of a rate case, Vectren South 

will continue to add lost revenues from prior years to existing years for EE measures that are 

still in service, which is known as the Pancake Effect. Accordingly, she recommended that if 

recovery of lost revenue is allowed, it should be limited to three years or the life of the measure, 

whichever is shorter, to avoid the Pancake Effect. She indicated that the rationale for a cap of 

three years of lost revenue can be found in [Senate Enrolled Act 412, enacted as Section 10],

which requires the utilities to submit EE plans at least once every three years.

Appealed Order at 11. In Vectren South’s rebuttal, Sears

disagreed with Ms. Mims that the Pancake Effect warranted limiting lost revenues because the 

lost revenues reflect a history of successful EE and DSM programs that produce significant 

savings each year. Mr. Sears testified that the average life of the weighted program savings in 

the Plan is 6.6 years with 31% of the program savings having an average life of three years or 

less for the residential sector; an average life of the weighted program savings of 10.9 years for 

the commercial sector and 8.5 years for the overall portfolio.

Id. at 12.
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Although we have previously approved lost revenues over a 

measure’s life or until a utility’s next base rate case, whichever is 

shorter, Ms. Mims’ and the other parties’ concerns with 

pancaking and the increased length of time between base rate 

cases for utilities in Indiana raise a valid concern. Clearly, 

pancaking of lost revenue is much less of an issue in an 

environment where a utility comes in regularly, i.e., every three 

to five years, for a base rate case. When the Commission’s DSM 

Rules were adopted in the early 1990’s, the previous 20 years was 

characterized by routine and sometimes almost back-to-back rate 

case filings where utilities’ rates were reset on a regular basis. 

Consequently, recovery of lost revenues at that time was viewed 

as a tool of limited duration until the utility filed its next base rate 

case in the not too distant future. However, in the years after 

adoption of the DSM Rules, utilities have been staying out for 

ten or more years before filing for a rate case. E.g., Indianapolis 

Power & Light, 19 years between Cause No. 38664 (IURC 

8/23/95) and pending Cause No. 44576; Southern Indiana Gas & 

Electric Co., 12 years between Cause No. 39871 (IURC 6/21/95) 

and Cause No. 43111 (IURC 8/15/07); Duke Energy Indiana, Inc., 

last rate case was filed 13 years ago in Cause No. 42359 (IURC 

5/18/04, rh’g denied 7/28/04). 

Because we believe the parties raise a valid concern, we find that 

Vectren South’s lost revenue recovery should be limited to: (1) 

four years or the life of the measure, whichever is less, or (2) until 

rates are implemented pursuant to a final order in Vectren 

South’s next base rate case, whichever occurs earlier. We note 

that the CAC also requested that the Commission initiate some 

type of formal process to develop a standard methodology for 

Indiana utilities to calculate lost revenues for an EE measure. 

Because Section 10 authorizes the recovery of reasonable lost

revenues to utilities with an approved EE plan and Section 10(q) 

requires the Commission to adopt rules implementing the 

requirements of Section 10, we fully expect that this issue will be

addressed in that future rulemaking.
Court of Appeals of Indiana | Memorandum Decision 93A02-1604-EX-914 | March 7, 2017 Page 13 of 18

....

IT IS THEREFORE ORDERED BY THE INDIANA 

UTILITY REGULATORY COMMISSION that:

1. Vectren South’s 2016-2017 Plan is approved as set forth in this 

Order.

2. Vectren South’s request for timely recovery of all costs, 

including program costs, lost revenues, and financial incentives 

associated with the 2016-2017 Plan, through its DSMA is 

approved consistent with the terms of this Order.

Appealed Order at 5-28 (underlining and citations to administrative orders 

omitted). Vectren South now appeals.7

Discussion and Decision

[5] The General Assembly created the Commission primarily as a factfinding body 

with the technical expertise to administer the regulatory scheme devised by the 

legislature. N. Ind. Pub. Serv. Co. v. U.S. Steel Corp., 907 N.E.2d 1012, 1015 (Ind. 

2009). “The Commission can exercise only power conferred upon it by 

 

7 Unlike the Indiana Department of Workforce Development’s Review Board, the Commission is not made a 

party appellee in every appeal of its decisions pursuant to statute. Cf. Ind. Code § 22-4-17-12(b). In a recent 

unrelated appeal involving Vectren South, we granted the appellant intervenors’ motion to dismiss the 

Commission as a party to the appeal, agreeing with their argument that 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.” Citizens Action 

Coalition of Indiana, Inc. v. S. Ind. Gas & Elec. Co., No. 93A02-1607-EX-1637, 2017 WL 587261, at *1 n.1 (Ind. 

Ct. App. Feb. 14, 2017). One of the intervenors in that case was CAC, which has not filed a brief in this 

appeal. We decline to dismiss the Commission in this case sua sponte.
Court of Appeals of Indiana | Memorandum Decision 93A02-1604-EX-914 | March 7, 2017 Page 14 of 18

statute.” Id. Indiana Code Section 8-1-3-1 authorizes judicial review of 

Commission orders by this Court. The review involves multiple tiers. Id. “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. 

Such determinations of basic fact are reviewed under a substantial evidence 

standard, meaning the order will stand unless no substantial evidence supports 

it.” Id. at 1016 (citation and footnote omitted). We neither reweigh evidence 

nor assess witness credibility, and we consider only the evidence favorable to 

the Commission’s findings. Id. The Commission’s order is not binding if it is 

unreasonable or arbitrary. Id.

[6] “At the second level, the order must contain specific findings on all the factual 

determinations material to its ultimate conclusions.” Id. We review the 

Commission’s conclusions of ultimate facts for reasonableness, the deference of 

which is based on the amount of expertise exercised by the agency. Id. If the 

order involves a subject within the Commission’s special competence, we 

should give it greater deference; if the subject is outside the Commission’s

expertise, we give it less deference. Id. Findings of fact are important because 

they help us understand the Commission’s reasoning and policy judgments and 

allow for a reasoned and informed basis of review, which decreases the 

likelihood that we will substitute our judgment on complex evidentiary issues 

and policy determinations best left to an agency with technical expertise. N. 

Ind. Pub. Serv. Co. v. LaPorte, 791 N.E.2d 271, 278 (Ind. Ct. App. 2003). 
Court of Appeals of Indiana | Memorandum Decision 93A02-1604-EX-914 | March 7, 2017 Page 15 of 18

Further, requiring findings of fact helps the Commission avoid arbitrary and 

capricious action. Id.

[7] “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 standards and legal 

principles involved in producing its decision, ruling, or order.” U.S. Steel, 907 

N.E.2d at 1016. “Courts should consider a statute in its entirety, keeping in 

mind the subject it addresses and the legislature’s apparent objective in enacting 

it.” In re Dunn, 848 N.E.2d 310, 316 (Ind. Ct. App. 2006).

The best indication of legislative intent is the statutory language, 

given its plain and ordinary meaning. Where the language of a 

statute is clear and unambiguous, courts should apply the statute 

without resort to further aids of statutory construction. It should 

be presumed that the legislature did not intend an absurd, 

inconvenient, or unjust result.

Id. (citations and quotation marks omitted). We give considerable deference to 

an interpretation of a statute by an administrative agency charged with 

administering the statute, but that interpretation is not binding on us when it is 

incorrect or if the legislative intent is obvious. Sadler v. State ex rel. Sanders, 811 

N.E.2d 936, 953-54 (Ind. Ct. App. 2004).

[8] In challenging the Commission’s order in this case, Vectren South makes

several interrelated arguments, one of which is that the Commission erred as a 

matter of law by approving its “energy-efficiency plan ‘in its entirety’ but then 

rejecting the portion of that plan addressing lost revenue recovery.” Appellant’s 
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Br. at 31. Vectren South asserts that Section 10 “calls for a single 

reasonableness inquiry that considers the ten factors in subjection (j). Recovery 

of lost revenues is included in this reasonableness inquiry.” Id. Based on the 

plain language of the statute, we agree. See Ind. Code § 8-1-8.5-10(j)(8)

(requiring Commission to consider lost revenues sought to be recovered by 

electricity supplier in determining overall reasonableness of plan).

8

 By capping 

lost revenue recovery at four years, the Commission implicitly found Vectren 

South’s lost revenue recovery proposal to be unreasonable.

9

[9] Vectren South also argues that the Commission’s four-year cap is arbitrary and 

capricious, noting that “[t]he basis for capping lost revenue recovery is never 

tied to a finding that recovery equal to DSM measure life would be 

unreasonable[,]” that the cap “effectively throws out twenty years of [the 

 

8 Because the relevant portions of Section 10 are unambiguous, we decline the invitation of Vectren South 

and amicus Indiana Energy Association to use legislative history to interpret them. See Orr v. Turco Mfg. Co., 

484 N.E.2d 1300, 1302 (Ind. Ct. App. 1985) (“When a statute is unambiguous, legislative history should not 

be used to determine its meaning.”), trans. denied (1986).

9

170 IAC 4-8-5(b), which was readopted by the Commission two years before Section 10 was enacted by the 

legislature, provides that the Commission “shall determine the cost recovery mechanism for a demand-side 

management program when the demand-side management program is submitted for commission approval.” 

We note, however, that Section 10(o) contemplates that an electricity supplier will propose its own cost 

recovery mechanism as part of its plan and that Section 10(k) contemplates that the electricity supplier will be 

allowed to “recover all associated program costs” (including reasonable lost revenues) through that 

mechanism if the Commission determines that the plan is reasonable in its entirety. We reiterate that an 

administrative agency may not make rules or regulations inconsistent with the statute it is administering. Best 

Ever Cos., 495 N.E.2d at 787.
Court of Appeals of Indiana | Memorandum Decision 93A02-1604-EX-914 | March 7, 2017 Page 17 of 18

Commission’s own precedent] regarding lost-revenue recovery[,]”10 and that 

“[t]he Commission appears to have picked a number that arbitrarily splits the 

difference between a frequently observed measure-life and a 3-year cap proposal

[by CAC].” Appellant’s Br. at 35, 36, 37; n.6 supra. Indeed, as Vectren South 

points out, the financial effect of the four-year cap is “unknown to the 

Commission” because no party proposed a four-year cap or “presented data 

about its economic effect.” Id. at 38, 39.11 A four-year cap may have the 

superficial virtues of simplicity and uniformity,

12 but the Commission made no 

specific factual findings that the cap would allow Vectren South to recover 

reasonable lost revenues as provided in Section 10(o).

13

 

10 The Commission observes that “this is the first plan submitted by Vectren [South] under the new statutory 

framework in Section 10” and that “[a]n agency may change its course and is not forever bound by prior 

policy or precedent” as long as it explains its reasons for the change. Appellee’s Br. at 24 (citing Cmty. Care 

Ctrs., Inc. v. Ind. Dep’t of Pub. Welfare, 523 N.E.2d 448, 450-51 (Ind. Ct. App. 1988)). The problem here is that 

the Commission’s change of course regarding lost revenue recovery is unsupported by adequate factual 

findings.

11 Vectren South observes that although the Commission expressed “concern” about the pancaking of lostrevenue recovery, it failed to explain “why it believes pancaking is bad” or “why the amount of pancaking 

that will occur with a 4-year cap is reasonable, but the amount that will occur with a smaller or larger cap is 

not.” Appellant’s Br. at 39. On page 17 of its appellate brief, the Commission quotes from a document that 

Mims cited regarding the alleged difficulty of tracking the pancake effect over time, but the Commission did 

not specifically rely on this document in its order or specifically find that the independent EM&V required by 

statute (and approved by the Commission) is unable to adequately account for this effect. The Commission 

addresses EM&V on pages 18 through 20 of its brief, but this is too little, too late.

12 The Commission notes that it “similarly capped lost revenue recovery at four years” in two recent orders

involving other utilities and that neither utility appealed. Appellee’s Br. at 24. The legal actions or inactions 

of other utilities are irrelevant here.

13 Contrary to the suggestion of amicus Indiana Industrial Group, Vectren South is not seeking recovery of 

“unlimited” lost revenues. Amicus Br. of Indiana Industrial Group at 15.
Court of Appeals of Indiana | Memorandum Decision 93A02-1604-EX-914 | March 7, 2017 Page 18 of 18

[10] Consequently, we reverse the Commission’s order and remand for further 

proceedings consistent with this opinion. On remand, the Commission may 

either (1) issue specific factual findings to justify its implicit determination that 

Vectren South’s lost revenue recovery proposals are unreasonable, determine 

that the Plan is not reasonable in its entirety pursuant to Section 10(m), and 

allow Vectren South to submit a modified plan within a reasonable time; or (2) 

issue specific factual findings to justify a determination that the Plan is in fact 

reasonable in its entirety pursuant to Section 10(k) and allow Vectren South to 

recover reasonable lost revenues in accordance with the Plan.

14

[11] Reversed and remanded.

15

Riley, J., and Altice, J., concur.

 

14 170 IAC 4-8-6(c) provides that “the approval of a lost revenue recovery mechanism shall not constitute 

approval of a specific dollar amount, the prudence or reasonableness of which may be debated in a future 

proceeding before the commission.” According to the Commission, Sears testified that Vectren South

takes a conservative approach to its projected lost revenues to ensure Petitioner is not overcollecting lost revenues from customers. Any over/under collection variance will be recovered 

in Petitioner’s next DSMA filing. He further testified that forecasted program costs will be 

reconciled against actual results based on EM&V of the EE programs under the Plan.

Appealed Order at 6. The Commission made no findings regarding Vectren South’s historical lost revenue 

forecasting accuracy or reconciliation mechanism as mentioned in Section 10(o).

15 We need not pass upon the wisdom of the Commission’s justification of a four-year cap based on the trend 

toward less frequent base rate cases. We note, however, that another panel of this Court recently stated that 

rate cases are “expensive, time consuming, and sometimes result in large, sudden rate hikes for customers.” 

NIPSCO Indus. Grp. v. N. Ind. Pub. Serv. Co., 31 N.E.3d 1, 4 (Ind. Ct. App. 2015).