Court Opinion

ID: 9727412
Source: CourtListenerOpinion
Date Created: 2023-08-26 13:35:58.721595+00
Date Added: 2024-06-11T18:25:37.376244
License: Public Domain

SULLIVAN, Judge,
concurring in part and dissenting in part.
I agree with the majority that with respect to PSI's cost of equity, the determination of IURC lacks evidentiary support. I further agree that the order is in other respects based upon impermissible speculation as to the possible impact of future acid rain legislation. I dissent, however, from the majority's categorical rejection of a sliding scale incentive with respect to the rate of return allowed.
*203Had IURC fixed PSI's "reasonable rate of return'" by resort to a cost of equity supported by testimony of record, reversal would not be justified. Here, however, as noted by the majority, the high end of the cost of equity range determined by IURC was 16.0%. That percentage has no support of record, given rejection of the rate moratorium as a viable consideration. The cost of equity determination, therefore, may not serve as the underlying basis for the rate of return allowed.
In this connection, appellees do not persuasively point to any other clear evidentia-ry underpinning for the rate allowed. To point to a generalized consideration of "all of the factors affecting a utility's financial condition", (Appellee PSI's Brief at 12) will not suffice; nor will speculative assessments of discounted cash flow or investor expectations. This is particularly so in light of a seemingly arbitrary upward adJustment of .50% for "issuance costs". Ap-pellee PSI's Brief at 14.
In its treatment of the cost of equity issue, the majority understandably noted that the rate- making authority is derived solely from statute and unless such authority is found within the statute, "it must be concluded that no authority exists." Slip Opinion at 4. This observation is subject to the implication that IURC is precluded from utilizing creative and innovative approaches in meeting the needs of utilities and protecting consumers. Such creativity and innovation may be wholly appropriate, or even necessary, to deal with a particular situation and should not be rejected unless it runs afoul of statutory provisions or established case precedent.
That the statutes do not specifically make provision for a sliding scale, such as that here permitted, is not determinative, for neither do the statutes absolutely mandate the fixing of a single, immutable percentage for the rate of return for the three-year period involved. I, therefore, do not find per se objectionable IURC's fixing of a rate of return between 7.60% and 8.10%. So long as the formula for fixing a percentage upon the sliding scale at any particular time is clear and precise, it may be sanctioned as that approach to the allowable rate of return, which though creative and innovative is necessary under the particular circumstances of the case.
In so stating, however, I do not subscribe to that portion of the IURC order which suggests that an "incentive rate" may be premised upon "the inadequacy of the record" before the Commission.
Subject to the comments herein, I concur in the remand for redetermination.