Court Opinion

ID: 4375743
Source: CourtListenerOpinion
Date Created: 2019-03-11 16:04:54.363511+00
Date Added: 2024-06-11T15:05:35.005416
License: Public Domain

MEMORANDUM DECISION
Pursuant to Ind. Appellate Rule 65(D),
                                                                               FILED
this Memorandum Decision shall not be
regarded as precedent or cited before any                                 Mar 11 2019, 5:29 am

court except for the purpose of establishing                                   CLERK
                                                                           Indiana Supreme Court
the defense of res judicata, collateral                                       Court of Appeals
                                                                                and Tax Court
estoppel, or the law of the case.

ATTORNEYS FOR APPELLANT                                  ATTORNEYS FOR APPELLEE
Jennifer A. Washburn                                     Robert E. Heidorn
Margo Tucker                                             P. Jason Stephenson
Citizens Action Coalition of Indiana,                    Vectren Corporation
Inc.                                                     Evansville, Indiana
Indianapolis, Indiana                                    Wayne C. Turner
                                                         Patrick A. Ziepolt
                                                         Hoover Hull Turner LLP
                                                         Indianapolis, Indiana

                                           IN THE
    COURT OF APPEALS OF INDIANA

Citizens Action Coalition of                             March 11, 2019
Indiana, Inc.,                                           Court of Appeals Case No.
Appellant-Intervenor,                                    18A-EX-95
                                                         Appeal from the Indiana Utility
        v.                                               Regulatory Commission
                                                         The Honorable David E. Ziegner,
Southern Indiana Gas & Electric                          Commissioner
Company d/b/a Vectren Energy                             The Honorable Loraine L.
Delivery of Indiana, Inc.,                               Seyfried, Chief Administrative
Appellee-Petitioner.                                     Law Judge
                                                         IURC Cause No.
                                                         44645

Court of Appeals of Indiana | Memorandum Decision 18A-EX-95 | March 11, 2019                       Page 1 of 28
      Brown, Judge.

[1]   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 energy-

      efficiency Electric Demand Side Management (“DSM”) Plan for 2016-2017

      (“Plan”). Citizens Action Coalition of Indiana, Inc. (“CAC”) intervened in the

      proceeding. The Commission held an evidentiary hearing and issued its

      decision that approved the Plan but limited Vectren South’s lost revenue

      recovery. Vectren South appealed, arguing that the Commission erred when it

      found the Plan to be reasonable in its entirety but then capped lost revenue

      recovery at four years. Vectren South further argued that the cap was arbitrary

      and capricious because the Commission made no specific factual findings that

      the cap would allow for the recovery of reasonable lost revenues. We agreed on

      both counts, reversed the Commission’s order in part, and remanded the case to

      the Commission for additional findings. S. Ind. Gas & Elec. Co. v. Ind. Util. Reg.

      Comm’n, No. 93A02-1604-EX-914, slip op. at 1 (March 7, 2017). On remand,
                                                          1
      and following an evidentiary hearing, the Commission issued its decision

      (“Order on Remand”) approving Vectren South’s Plan that included a revised

      lost revenue recovery proposal that Vectren South had presented. CAC now

      1
        We note that “[a] party of record in the trial court or Administrative Agency shall be a party on appeal.”
      Ind. Appellate Rule 17(A). Indiana Industrial Group was an intervenor below but did not file a brief with
      this Court.

      Court of Appeals of Indiana | Memorandum Decision 18A-EX-95 | March 11, 2019                       Page 2 of 28
      appeals from the Commission’s Order on Remand, raising the following issues

      which we consolidate and restate as follows:

               I. Whether the Commission’s Order on Remand is contrary to
               law;

               II. Whether the Commission’s Order on Remand impermissibly
               deviates from precedent; and

               III. Whether the Commission’s Order on Remand is supported
               by substantial evidence.

      We affirm.

                                         Facts and Procedural History

[2]   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. In 2015, the General Assembly passed a statute, Indiana Code § 8-1-
                                                                                         2
      8.5-10 (2015) (“Section 10”), requiring electricity suppliers to periodically

      present to the Commission energy-efficiency (“EE”) plans, goals, and
                   3
      programs for approval by the Commission beginning no later than 2017. See

      Ind. Code § 8-1-8.5-10(h). The statute specifically provides as follows:

      2
       “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.
      3
       “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

      Court of Appeals of Indiana | Memorandum Decision 18A-EX-95 | March 11, 2019                         Page 3 of 28
         (h) Beginning not later than calendar year 2017, and not less than
         one (1) time every three (3) years, an electricity supplier 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;

                  (3) program budgets and program costs; and

                  (4) evaluation, measurement, and verification
                               4
                  [(“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
                                   [5]
         reasonableness of the plan either as part of a general basic rate
         proceeding or as an independent proceeding.

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).
4
 “Evaluation, measurement, and verification (EM&V) is the collection of methods and processes used to
assess the performance of energy efficiency activities so planned results can be achieved with greater certainty
and future activities can be more effective.” DEPT. OF ENERGY, EVALUATION, MEASUREMENT, AND
VERIFICATION OF ENERGY DATA, https://www.energy.gov/eere/slsc/evaluation-measurement-and-
verification-energy-data (last visited Jan. 15, 2019).
5
 In determining the overall reasonableness of the plan, the Commission is required to consider ten factors.
See Ind. Code § 8-1-8.5-10(j).

Court of Appeals of Indiana | Memorandum Decision 18A-EX-95 | March 11, 2019                         Page 4 of 28
      Id.

[3]   As an incentive for participation, the General Assembly included provisions

      within the statute allowing electricity suppliers, such as Vectren South, to

      recover certain costs associated with their EE plans, including lost
                   6
      revenues. See Ind. Code § 8-1-8.5-10(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: . . . (2) Reasonable lost revenues.”). In other words, and as

      explained by Vectren South: “When the Commission approves an energy-

      efficiency plan, [Ind. Code § 8-1-8.5-10(o)] requires it to approve an adjustment

      to the utility’s electric rate, the amount charged to consumers, to compensate

      the utility for lost revenues it would have received without these programs

      designed to [lower energy consumption and, ultimately,] reduce its sales.”

      Appellee’s Brief at 9.

[4]   On June 29, 2015, Vectren South filed a petition with the Commission seeking

      approval of its Plan, which outlined Vectren South’s EE programs and their

      budgets and costs and included lost revenues resulting from reduced demand

      for electricity. On July 6, 2015, CAC filed a petition to intervene, which was

      6
        Lost revenues can be described as: “an estimation of the amount of lost sales attributable to the energy
      efficiency programs. . . .” Exhibits at 19. According to Vectren South, “the purpose of lost revenue recovery
      is to return the utility to the position it would have been in absent the implementation of the EE measures.”
      Id. at 20.

      Court of Appeals of Indiana | Memorandum Decision 18A-EX-95 | March 11, 2019                     Page 5 of 28
                                                                                                                7
      granted on August 3, 2015. The Commission held an evidentiary hearing and,

      on March 23, 2016, it issued an order (“First Order”) finding the Plan to be

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

      life of the [EE] measure, whichever is less, or. . . until rates are implemented
                                                                                                 [8]
      pursuant to a final order in Vectren South’s next base rate case, whichever

      occurs earlier.” Appellant’s [Vectren South] Appendix 2 at 31.

[5]   Vectren South appealed the First Order, 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 argued that the cap was arbitrary

      and capricious because the Commission made no specific factual findings that

      the cap would allow for the recovery of reasonable lost revenues. On March 7,

      2017, this Court issued a memorandum decision, agreeing with Vectren South

      on both counts. S. Ind. Gas & Elec. Co., No. 93A02-1604-EX-914. We reversed

      a portion of the First Order and remanded to the Commission with instructions

      that it could 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

      7
       During this proceeding, the Commission heard evidence from Vectren South, from statutory party Indiana
      Office of Utility Consumer Counselor (“OUCC”), and from CAC.
      8
       “[A] rate case resets base [utility] rates and effectively zeros out . . . any lost revenue recovery[.]” Transcript
      at 28.

      Court of Appeals of Indiana | Memorandum Decision 18A-EX-95 | March 11, 2019                           Page 6 of 28
              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.

      Id. at 7.

[6]   On remand, Vectren South presented a revised lost revenue recovery proposal

      (“Revised Lost Revenue Proposal”) that was described in the Commission’s

      Order on Remand through testimony provided by Rina H. Harris (“Ms.

      Harris”), Director of Energy Efficiency for Vectren Utility Holdings, Inc., at an

      evidentiary hearing held by the Commission on September 5, 2017:

              Ms. Harris described Vectren South’s [Revised Lost Revenue
              Proposal as basing] lost revenues on: (1) the weighted average
                                        [9]
              measure life (“WAML”) of the Plan; and (2) a 10% reduction
              in annual savings. Using this method, Vectren South would
              recover the reasonable amount of lost revenues associated with
              the WAML of its EE programs or the measure life, whichever is
              less. The WAML of the portfolio would be re-evaluated and
              adjusted with each EE filing. [Ms. Harris] said that in using this
              approach, Vectren South first determines the weighted average
              life of each program by weighting the energy savings for each

      9
       “Measure” is defined in pertinent part as “[s]pecific energy efficiency activities or equipment.” DEPT. OF
      ENERGY, ENERGY EFFICIENCY & RENEWABLE ENERGY 1, https://www.energy.gov/sites/prod/files/2014/
      05/f16/ what_is_emv.pdf (last visited Jan. 15, 2019).
      “Measure life” is widely defined as “the average/median life over many data points, or customer
      experiences, of a particular EE program. It takes into consideration variations in the useful life of an EE
      measure among different types of customers by developing an average. [For example, a]n LED could last 5
      years in one home, 11 years in another and 30 years in another – with an average of 15 years.” Exhibits at
      27.
      Weighted average measure life (“WAML”) “is the average life [of a measure or a program], weighted by
      savings in years.” Id. at 24.

      Court of Appeals of Indiana | Memorandum Decision 18A-EX-95 | March 11, 2019                    Page 7 of 28
               measure included in the program. Next, Vectren South
               calculates the weighted average measure life of a portfolio by
               weighting the energy savings of each program included in the
               portfolio. To determine individual measure lives, Vectren South
                                                                  [10]
               uses the latest Indiana Technical Resource Manual (“TRM”)
               for evaluation. Ms. Harris stated that capping recovery of lost
               revenues based upon WAML is reasonable because it limits lost
               revenue recovery based on the average equipment life and
               measure persistence of the entire program plan. In addition, only
               90% of annual savings would be recovered, reflecting the
               statistical certainty EM&V providers can obtain for energy
               savings.

      Appellant’s Appendix Volume 2 at 10-11. Vectren South maintained that,

      under the Revised Lost Revenue Proposal, it was not seeking to recover its

      estimate of $34.3 million in lost revenue or sales, but rather “only about $26

      million, or approximately $2.9 million per year.” Appellee’s Brief at 28.

[7]   CAC argued for Vectren South’s lost revenue collection to be the lesser of four

      years or the Plan’s measure life. A witness for CAC, Karl R. Rábago (“Mr.

      Rábago”), the principal of Rábago Energy, LLC, testified that any lost revenue
                                                        11
      adjustment mechanism (“LRAM”) must be limited to a maximum duration of

      10
        Per testimony provided at the evidentiary hearing, the Technical Resource Manual “[is] a planning
      document that has a lot of equations and algorithms to help utilities plan for what energy savings are . . . .”
      Transcript at 62.
      11
        “Lost Revenue Adjustment Mechanism (LRAM) is a rate adjustment mechanism that allows the utility to
      recover revenues that are ‘lost’ due to energy savings from approved energy efficiency programs.” Sara
      Hayes et al., Balancing Interests: A Review of Lost Revenue Adjustment Mechanisms for Utility Energy Efficiency
      Programs, 1 (September 2011) American Counsel for an Energy-Efficient Economy, https://aceee.org/sites/
      default/files/publications/researchreports/u114.pdf (last visited Jan. 15, 2019).

      Court of Appeals of Indiana | Memorandum Decision 18A-EX-95 | March 11, 2019                         Page 8 of 28
      four years to be reasonable. He compared the dollar amounts between Vectren

      South’s original lifetime lost revenue recovery proposal, the Revised Lost

      Revenue Proposal, and CAC’s proposal to cap lost revenue recovery at four

      years or the life of the measure, whichever is shorter. He determined that,

      under Vectren South’s original lost revenue recovery proposal, ratepayers

      would pay $34.3 million in lost revenues for a program that costs $16.8 million

      to implement. He maintained that although the total amount of lost revenues

      under the Revised Lost Revenue Proposal would be less, $25.9 million, this

      amount in lost revenues for “$16.8 million in actual program delivery is

      unreasonable.” Exhibits at 101. Mr. Rábago further testified that, under

      CAC’s four-year-cap proposal, total lost revenues would amount to $14.4

      million.

[8]   CAC also argued that testimony from a Vectren South witness, Dr. M. Sami

      Khawaja (“Dr. Khawaja”), Chief Economist at The Cadmus Group (an energy

      efficiency evaluation firm), created a conflict of interest and should be

      disregarded because The Cadmus Group had been retained by Vectren South to

      perform evaluation services for the past eight years. According to CAC,

      Section 10 requires that the EM&V procedures be independent, and that Dr.

      Khawaja’s advocacy position “in this proceeding . . . casts doubt on the

      integrity of the firm’s work as an independent evaluator.” Id. at 114.

[9]   The Commission determined that “the only issue we need to address in this

      proceeding [on remand] is the reasonableness of Vectren South’s [Revised Lost

      Revenue Proposal].” Appellant’s Appendix Volume 2 at 16. Thus, on

      Court of Appeals of Indiana | Memorandum Decision 18A-EX-95 | March 11, 2019   Page 9 of 28
December 20, 2017, the Commission issued its twelve-page Order on Remand,

concluding that “Vectren South’s modified lost revenue recovery proposal,

which has a strong relationship with the EM&V process, is reasonable.” Id. at

18. The Order reads in pertinent part:

        Vectren South proposed a modified approach to its initial
        proposal for lost revenue recovery, which caps lost revenue
        recovery associated with its Plan by using the WAML of the Plan
        programs and reduces the resulting recovery by an additional
        10%. . . . Thus, the proposed LRAM is projected to recover
        slightly less than $26 million of lost revenues over the nine-year
        WAML of the Plan or, on average, approximately $2.9 million
        per year.

                                             *****

        CAC argues that a four-year cap on lost revenue recovery is
        reasonable because a term greater than four years creates
        unreasonable difficulties in tracking the accuracy of lost revenues
        [and] the pancaking or cumulative effect of lost revenues over
        time on rates[;] and lost revenue policies were created at a time
        when the period between rate cases was shorter.

        Based on the evidence presented as further discussed below, we
        find Vectren South’s modified proposal for lost revenue recovery
        is reasonable and approve the Plan in its entirety. It is commonly
        understood that the calculation of lost revenues is not an exact
        science and there will always be a range of what may be
        considered reasonable lost revenue recovery. Vectren South has
        sufficiently demonstrated that its WAML proposal is grounded in
        the EM&V processes that are required by Section 10 and
        universally relied upon in the utility industry to estimate energy
        savings and associated lost revenues. The other parties did not
        provide us with evidence demonstrating that Vectren South’s
Court of Appeals of Indiana | Memorandum Decision 18A-EX-95 | March 11, 2019   Page 10 of 28
        proposal is unreasonable. Nor did they provide us with sufficient
        facts from which we could determine that a four-year (or less) cap
        on lost revenue recovery would allow Vectren South to recover
        reasonable lost revenues.

                                             *****

        In addition to the use of the nine-year WAML, Vectren South
        proposes to recover only 90% of the annual energy savings. CAC
        and other parties, in their post-hearing filing, argue that because
        EM&V is only conducted once for each Plan year, the initial
        determination of energy savings and lost revenue becomes
        progressively less reliable and more uncertain in successive years
        and therefore should not be relied upon. Further, they argue that
        the proposed 10% reduction in energy savings only addresses the
        degree of confidence in the threshold EM&V determination, not
        the eroding reliability of assumed savings.

        EM&V is the most established approach to reasonably estimating
        energy savings and lost revenues associated with EE programs.
        Vectren South’s approach appears reasonably designed to ensure
        it recovers only the lost revenues that EM&V can establish, with
        a high degree of confidence, [and that] will result from savings
        driven by EE measures. Recognizing that estimates are more
        certain in the immediate as opposed to the distant future, Vectren
        South’s evaluation process for estimating net energy savings . . .
        results in a statistically conservative estimate. While we
        recognize that EM&V degrades over time based on accumulating
        changes, this degradation is built into the EM&V process. We
        further find that the approximate 24% reduction in recovered lost
        revenues compared to Petitioner’s initial [revenue recovery]
        proposal is intended to strike a reasonable balance in terms of
        offsetting the inherent financial harm to a utility caused by EE
        sales reductions, while also ensuring the recoveries are fully
        supported by conservative EM&V estimates that safeguard the

Court of Appeals of Indiana | Memorandum Decision 18A-EX-95 | March 11, 2019   Page 11 of 28
               cost and benefit analysis relied upon to determine that the EE
               Plan provides short- and long-term benefits to customers.

                                                    *****

               Rather than providing a reasoned explanation or analysis to
               support ending lost revenue recovery after four years[,] regardless
               of measure life[,] or evidence related to the financial effects of
               such a proposal on Petitioner, CAC instead offers a conclusory
               opinion that the magnitude of lost revenues exceeds the program
               costs, which makes the proposal unreasonable. CAC provided
               no factual basis to support its contention that lost revenues
               should not exceed program costs. . . . [C]ost-effective EE
               programs should have lower program[] costs with larger energy
               savings, which does result in higher lost revenues relative to
               program costs.

                                                    *****

               Section 10(o) similarly recognizes the importance of subjecting
               lost revenues to EM&V. Vectren South’s [Revised Lost Revenue
               P]roposal recognizes that the EM&V process is not a perfect
               science. It also employs limitations on EM&V quantification of
               savings (and thus lost revenues) that ensure customers are billed
               for lost revenues based on a conservative determination of
               achieved savings with the highest level of confidence in the
               energy savings attributed to EE measures. Accordingly, we find
               Vectren South’s Plan is reasonable and approved.

       Id. at 17-19.

[10]   Regarding whether testimony from Dr. Khawaja should have been disregarded,

       the Commission determined that:

       Court of Appeals of Indiana | Memorandum Decision 18A-EX-95 | March 11, 2019   Page 12 of 28
               Dr. Khawaja’s testimony was largely limited to addressing the
               reasonableness of EM&V results over time and how the issues of
               uncertainty and persistence are accounted for in the EM&V
               process and methodology. While it may have been more prudent
               for Petitioner to retain an EM&V witness not associated with
               Cadmus, we lack sufficient evidence to find that EM&V
               independence has been undermined – particularly given the
               request for proposal process for selecting the EM&V entity and
               the ongoing participation by members of the [Vectren Oversight
                     12
               Board ] in the review of the EM&V analysis and reports.

       Id. at 18.

[11]   CAC now appeals the Commission’s Order on Remand. This is the second

       appeal related to Vectren South’s Plan for calendar years 2016-2017.

                                                   Discussion

                                             Standard of Review

[12]   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’s assignment is to insure that public utilities provide

       constant, reliable, and efficient service to the citizens of Indiana. Id. “The

       Commission can exercise only power conferred upon it by statute.” Id.

       “Because the complicated process of ratemaking is a legislative rather than

       12
         The Vectren Oversight Board is Vectren South’s EE program governance body. Both CAC and OUCC are
       voting members of the Board.

       Court of Appeals of Indiana | Memorandum Decision 18A-EX-95 | March 11, 2019          Page 13 of 28
       judicial function, it is more properly left to the experienced and expert opinion

       present in the Commission.” Citizens Action Coal. of Ind., Inc. v. N. Ind. Pub. Serv.

       Co., 76 N.E.3d 144, 151 (Ind. Ct. App. 2017) (internal quotations omitted).

[13]   Indiana Code § 8-1-3-1 (1993) authorizes judicial review of Commission orders

       by this Court. The review involves multiple tiers. U.S. Steel, 907 N.E.2d at

       1016. “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. (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

       lacks substantial evidence supporting the findings of the Commission or is

       unreasonable or arbitrary. Id.

[14]   “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. “More specifically, on matters within its

       jurisdiction, [the Commission] enjoys wide discretion and its findings and

       decision will not be lightly overridden simply because we might reach a

       Court of Appeals of Indiana | Memorandum Decision 18A-EX-95 | March 11, 2019   Page 14 of 28
       different decision on the same evidence.” Citizens Action Coal. of Ind., Inc., 76

       N.E.3d at 151 (brackets and internal quotation omitted). “Essentially, so long

       as there is any substantial evidence to support the rates as fixed by the

       Commission as reasonable, the judicial branch of the government will not

       interfere with such legislative functions and has no power or authority to

       substitute its personal judgment for what it might think is fair or reasonable in

       lieu of [the Commission’s] administrative judgment.” Id. (brackets, emphasis,

       and internal quotations omitted).

[15]   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). Further, requiring findings of fact helps

       the Commission avoid arbitrary and capricious action. Id.

[16]   “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.

       Court of Appeals of Indiana | Memorandum Decision 18A-EX-95 | March 11, 2019   Page 15 of 28
               I. Whether the Commission’s Order on Remand is Contrary to Law

[17]   CAC’s first argument is twofold. It contends that the Commission’s Order on

       Remand is contrary to law because the approval of Vectren South’s Revised

       Lost Revenue Proposal is unreasonable, and that it is inconsistent with Section

       10. We address each argument in turn.

               A. Whether the Approval of the Revised Lost Revenue Proposal is
                                       Unreasonable

[18]   CAC maintains that the Commission should have reviewed Vectren South’s

       overall financial condition when it determined whether the Revised Lost

       Revenue Proposal was reasonable and just. The crux of CAC’s argument is

       that:

               [b]ecause the Commission[, in approving the Revised Lost
               Revenue Proposal,] has ignored the requirement that each
               utility’s rates must be set on the utility’s overall financial
               condition including total revenue and expense, the approval of
               Vectren [South]’s lost revenue rate recovery in the [Order on
               Remand] is not just and reasonable, and should be declared
               unlawful by this Court.

       Appellant’s Brief at 28. According to CAC:

               [t]he approved lost revenue rate in the [Commission’s Order on
               Remand] just guarantees rate recovery based on projected savings
               without any consideration for other ratemaking principles. It
               also disregards the distinction between a utility who comes in for
               regular rate cases, regularly zeroing out lost revenue totals when
               resetting rates, versus a utility who does not reset rates but for
               once every 10, 15, 20 years, resulting in exorbitant lost revenue

       Court of Appeals of Indiana | Memorandum Decision 18A-EX-95 | March 11, 2019   Page 16 of 28
                rate recovery and millions of dollars in difference in terms of
                what the ratepayers is [sic] required to pay.

       Id. at 27. CAC also argues that to allow Vectren South to recover the requested
                                                                                              13
       amount dissuades Vectren South from filing general rate cases.

[19]   CAC further argues that the Revised Lost Revenue Proposal is unreasonable

       because it allows Vectren South to recover $25.9 million in lost revenue for EE

       programs projected to cost $16.8 million to administer. It states that “lost

       revenue rates at 1.54 times greater than the cost to actually run the programs is

       far in excess of what is necessary to satisfy a monopoly utility’s shareholders’

       legitimate expectations.” Id. at 25-26. CAC claims that “[t]his lost revenue is

       outside the zone of reasonableness in light of the legal framework, ratemaking

       policy, regulatory history, objective of the required cost-effectiveness in the

       statute, and the appropriate degree of reliability in forecasting estimated savings

       out beyond a few immediate years.” Id. at 26. CAC contends that “it is

       particularly wasteful and results in artificially high prices to award a utility 1.54

       times more in revenue than costs to run the energy efficiency programs with no

       13
          CAC posits that the approval of lost revenues is subject to a “just and reasonable” rates standard under
       Indiana Code § 8-1-2-4 (1984), the general rate statute, which provides in relevant part that “[t]he charge
       made by any public utility for any service rendered or to be rendered either directly or in connection
       therewith shall be reasonable and just, and every unjust or unreasonable charge for such service is prohibited
       and declared unlawful.” However, in its Surreply Brief, CAC clarifies that in referencing the statute, it was
       not raising a new argument. CAC acknowledges that it should have been more careful with its phrasing, but
       that “the point . . . is this: by failing to consider its precedent of capping the time a lost revenue rate
       adjustment mechanism may be used due to Indiana’s environment of infrequent rate cases, the Commission
       brings the just and reasonable rates requirement from I.C. § 8-1-2-4 and the examination of the utility’s
       overall financial condition to the forefront . . . .” Appellant’s Surreply Brief at 6.

       Court of Appeals of Indiana | Memorandum Decision 18A-EX-95 | March 11, 2019                     Page 17 of 28
       shown correlation that this extra revenue will equate to more energy efficiency

       services or savings.” Id. at 27.

[20]   We are not persuaded by CAC’s arguments. The only disputed factor on

       remand was Vectren South’s Revised Lost Revenue Proposal. Section 10(j)(8)

       provides that, when the Commission makes a determination of the overall

       reasonableness of a plan, it must consider the lost revenues and financial

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

       the utility. Section 10(o) provides that if the Commission finds a plan

       submitted by a utility to be reasonable then the Commission must allow the

       utility to recover or receive reasonable lost revenues. Here, the Commission

       considered the lost revenues sought to be recovered and determined that CAC

       “provided no factual basis to support its contention that lost revenues should

       not exceed program costs.” Appellant’s Appendix Volume 2 at 18.

       Furthermore, Section 10 does not require the Commission to consider a utility’s

       overall financial condition in determining whether lost revenues sought to be

       recovered are reasonable or whether recovery of the requested lost revenue
                                                                                   14
       dissuades Vectren South from filing general rate cases.                          As such, the

       14
          Cf. NIPSCO Indus. Grp. v. N. Ind. Pub. Serv. Co., 100 N.E.3d 234, 238 (Ind. 2018) (“General ratemaking is a
       ‘comprehensive’ process, requiring the 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.’” (emphasis
       added and citation omitted)), modified on reh’g.

       Court of Appeals of Indiana | Memorandum Decision 18A-EX-95 | March 11, 2019                      Page 18 of 28
       Commission did not act contrary to law in determining that Vectren South’s

       Plan was reasonable.

       B. Whether the Approval of the Revised Lost Revenue Proposal is inconsistent
                                     with Section 10

[21]   CAC also argues that the Commission’s approval of the Revised Lost Revenue

       Proposal is inconsistent with Section 10. It contends that the Commission’s

       Order on Remand “misinterprets and misconstrues” that section by

       “establishing rates under Section 10 without any reference or consideration of

       ratemaking practices and the requirements of Indiana’s Public Service

       Commission Act (‘PSCA’).” Appellant’s Brief at 36. CAC specifically argues

       that “the most basic error is the Commission’s failure to reconcile its approval

       of [the Revised Lost Revenue Proposal] without any reference or application of

       ratemaking policies” and the Commission’s failure to “consider ratepayers in

       making a determination as to the reasonableness of this rate.” Id.

[22]   We observe that the requirement under Section 10 that electricity suppliers file a

       three-year EE plan was adopted by our General Assembly in 2015 as a separate

       requirement that is in addition to long-standing requirements regarding general

       ratemaking. CAC points to no relevant authority indicating that the

       Commission was required to consider or apply procedures adopted in

       connection with general ratemaking cases when considering a petition filed in

       accordance with Section 10. CAC has failed to establish that the Commission’s

       approval of Vectren South’s Revised Lost Revenue Proposal is inconsistent

       with Section 10. We, therefore, find that the Commission’s approval of the

       Court of Appeals of Indiana | Memorandum Decision 18A-EX-95 | March 11, 2019   Page 19 of 28
       Revised Lost Revenue Proposal was not inconsistent with Section 10 and was

       not contrary to law.

       II. Whether the Commission’s Order on Remand Impermissibly Deviates from
                                       Precedent

[23]   We next address whether the Commission impermissibly deviated from

       precedent. CAC maintains that the Commission’s Order on Remand “ignores

       available precedent related to the relationship between lost revenues and

       general rate cases that articulated principles by which to ascertain the

       reasonableness of lost revenue recovery proposals.” Appellant’s Brief at 29.

       According to CAC, “the relationship between rate cases and lost revenues, as

       articulated in the Commission’s [First] Order and other available precedent,

       was a material issue raised and put in dispute by the parties before the

       Commission in this remand proceeding, but it went unaddressed.” Id.

[24]   In support of its argument, CAC cites to four Commission decisions. See In re

       Ind. Power & Light Co., Cause No. 43911, 2010 WL 4499412, at *9 (November

       4, 2010) (denied lost revenue recovery “in absence of a base rate case to ensure

       that class specific investment and investment recovery is properly aligned”); In

       re N. Ind. Pub. Serv. Co., Cause No. 43912, 2011 WL 3346770, at *22 (July 27,

       2011) (denied request to recover lost margins but remained “willing to consider

       a request for lost margins, provided NIPSCO can demonstrate the revenue

       margin rates are reasonably reflective of today’s operations”); In re N. Ind. Pub.

       Serv. Co., Cause No. 44634, 2015 WL 9605053, at *30, 31 (December 30, 2015)

       (Commission acknowledged that it had “previously approved lost revenues over

       Court of Appeals of Indiana | Memorandum Decision 18A-EX-95 | March 11, 2019   Page 20 of 28
       a measure’s life or until a utility’s next base rate case, whichever is shorter,” but

       due to “concerns with pancaking and the increased length of time between base

       rate cases for utilities in Indiana,” ultimately found NIPSCO’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

       NIPSCO’s next base rate case, whichever occurs earlier.”); In re Duke Energy

       Ind., Inc., Cause No. 43955, 2016 WL 1118794 (March 16, 2016) (denied

       approval of Duke’s EE plan, finding, in part, that recovery of lost revenues

       should be limited to four-year term). However, nothing in our review of these

       decisions leads us to the conclusion that reversal is required in this case.

[25]   By its own acknowledgement, the Commission has previously approved the

       recovery of lost revenues over a measure’s life or until the utility’s next base rate

       case, whichever is shorter. The Commission has also previously approved a

       four-year cap on a utility’s lost revenue recovery. An agency may change its

       course and is not forever bound by prior policy or precedent as long as it

       explains its reasons for doing so. See Ind. Bell Tel. Co. v. Ind. Util. Reg. Comm’n,

       810 N.E.2d 1179, 1186 (Ind. Ct. App. 2004), trans. denied. In its Order on

       Remand, the Commission found Vectren South’s Plan to be reasonable in its

       entirety, found Vectren South’s Revised Lost Revenue Proposal to be

       reasonable, and explained its reasons for doing so. The Commission did not

       impermissibly deviate from precedent.

       Court of Appeals of Indiana | Memorandum Decision 18A-EX-95 | March 11, 2019   Page 21 of 28
                  III. Whether Substantial Evidence Supports the Commission’s
                                       Order on Remand

[26]   CAC’s last argument is that the Commission’s Order on Remand “lacks a

       reasonably sound basis of evidentiary support.” Appellant’s Brief at 33.

       Specifically, CAC maintains that 1) the Commission failed to consider the

       “relationship of the lost revenue rate with the resetting of rates in general rate

       cases”; 2) the Order on Remand failed to “mention or weigh any of the critical

       cross-examination that was conducted by the other consumer parties”; and 3)

       the Order on Remand failed to mention certain evidence of record from the

       underlying proceeding, namely, a white paper from the American Council for

       an Energy-Efficient Economy. Id. at 33-34, 35.

[27]   Our inquiry here is limited to whether there is substantial evidence supporting

       the Commission’s Order on Remand. U.S. Steel, 907 N.E.2d at 1016. We

       neither reweigh evidence nor assess witness credibility, and we consider only

       the evidence favorable to the Commission’s findings. Id. Here, the record

       reveals the following substantial evidence supporting the Commission’s Order

       on Remand and its ultimate approval of Vectren South’s Revised Lost Revenue

       Proposal.

[28]   Testifying for Vectren South, Ms. Harris explained in detail how Vectren South

       calculates lost revenues. She testified that it is reasonable to collect lost

       revenues for the Plan for the life of the measure because “utility revenues

       continue to be reduced over time by energy efficiency measures or programs

       each year for the life of the measure”; thus,“[i]t is reasonable to match the

       Court of Appeals of Indiana | Memorandum Decision 18A-EX-95 | March 11, 2019   Page 22 of 28
ability to recover lost revenues for the programs over the same life which is used

to determine a program’s cost effectiveness.” Exhibits at 22. She added that

Vectren South’s EE programs “undergo rigorous, independent, third-party

[EM&V] process to determine the actual program savings which are used to

determine cost effectiveness of programs and also serve as the basis for the lost

revenue calculation.” Id. She explained how the EM&V results would be

applied in the calculation of the lost revenues, why a four-year cap on the

recovery of lost revenues was not appropriate and would cause financial harm

to Vectren South, and how and why Vectren South’s Revised Lost Revenue

Proposal, based on “(1) the weighted average measure life (‘WAML’) of the

[Plan] period[,] and (2) a 10% reduction in annual savings,” provides “even

greater assurance customers are paying only for lost revenues that result from

EE measures.” Id. at 24. She further explained that under the Revised Lost

Revenue Proposal, “Vectren South would recover the reasonable amount of lost

revenues associated with the weighted average measure life of its EE programs

or the measure life, whichever is less,” and that the WAML of the portfolio

would be re-evaluated and adjusted with each EE filing.” Id. On rebuttal, she

testified to “two key factors” associated with Vectren South’s Revised Lost

Revenue Proposal “that make it superior to the approaches recommended by

the OUCC and CAC and they are: (1) lost revenue recovery remains connected

to measure life; and (2) lost revenue recovery remains connected to EM&V,

which has been relied upon for decades in the determination of lost revenues.”

Id. at 45.

Court of Appeals of Indiana | Memorandum Decision 18A-EX-95 | March 11, 2019   Page 23 of 28
[29]   Dr. Khawaja, who has conducted impact evaluation studies for energy

       efficiency programs for nearly thirty-five years and is an expert in evaluation

       methods, also testified for Vectren South and described the EM&V process

       utilized for it. He explained that confidence and precision energy program

       evaluation is “typically based on estimating energy impacts using a

       representative sample of program participants to determine how measures are

       installed and used.” Id. at 54. He stated that the results of these efforts are then

       used to estimate savings for the program and that, for Vectren South, “program

       evaluations are in line with the industry standard of obtaining estimates with a

       confidence level of 90% with a relative precision of ±10%.” Id. He testified

       that it is appropriate to recover lost revenues for the life of a measure and to cap

       lost revenue based upon the WAML of a plan; and, he expressed his concerns

       regarding placing a four-year cap on lost revenue recovery. In summary, he

       stated:

                 In my view, Vectren South’s use of evaluation results, combined
                 with the [effective useful lives (“EUL”)] of program measures, is
                 a conservative basis for the calculation of lost revenues.

                 First, the EUL values used are conservative (Vectren South
                 estimate of weighted average life is 9 (rounded from 8.5) years
                 while the same estimate based on industry values is 9.5 years).

                 Second, Vectren South’s evaluation process for estimating net
                 energy savings utilizes at minimum a 90% confidence interval
                 (industry accepted standard). Vectren South supports a 10%
                 degradation of annual savings within its lost revenue calculation.

       Court of Appeals of Indiana | Memorandum Decision 18A-EX-95 | March 11, 2019   Page 24 of 28
               This reflects using the lower end of the confidence interval which
               is also statistically conservative. . . .

               Finally, it is extremely likely that lost revenues are far in excess
               of those claimed due to the significant amount of market effects
               caused by utility DSM programs.

       Id. at 58.

[30]   Scott E. Albertson (“Mr. Albertson”), Vice President of Regulatory Affairs and

       Gas Supply for Vectren Utilities Holdings, Inc., also testified on behalf of

       Vectren South and addressed concerns regarding the frequency of rate cases and

       the concept of pancaking lost revenues. When asked if the frequency of a

       utility’s rate cases contribute to the magnitude of lost revenues, he replied as

       follows:

               Yes and no. While the costs recovered via an LRAM (i.e.[,] a
               lost revenue adjustment mechanism) would be lessened if rate
               cases were filed more frequently, the revenues lost as a result of
               EE are included in base rates each time the utility files a rate
               case. In either case, the appropriate level of fixed costs will be
               included in customers’ bills. Customer usage at the time of a rate
               case reflects the usage reductions resulting from EE, thus
               increasing unit rates as needed to recoup fixed costs. So[,]
               whether via an LRAM or new base rates, the utility should
               recover the revenues needed to recover the approved level of
               fixed costs. An LRAM cap is merely a temporary limit on
               recovery which may force utilities into rate cases sooner and
               more frequently than would have otherwise been the case had the
               period of lost revenue recovery matched the lives of EE measures
               implemented by customers. And, as noted by the Court of
               Appeals, rate cases are “expensive, time consuming, and
               sometimes result in large, sudden rate hikes for customers.”
       Court of Appeals of Indiana | Memorandum Decision 18A-EX-95 | March 11, 2019   Page 25 of 28
               Thus, capping lost revenue recovery to force utilities to file a rate
               case is not good public policy.

       Id. at 68. He further testified that if a four-year cap on lost revenue recovery

       were implemented, a utility would be incented to offer only programs that have

       lives of four years or less, and that “[i]t simply would not make sense to embed

       such a perverse incentive into the EE Program framework.” Id. at 69. On

       rebuttal, Mr. Albertson testified that Vectren South’s Revised Lost Revenue

       Proposal sets a reasonable limit on the recovery of lost revenues. He refuted

       claims by Mr. Rábago that, under the Revised Lost Revenue Proposal, Vectren

       South would over-recover lost revenues. He further testified that Mr. Rábago

       “has provided no specific evidence to support that a [four-year] cap would

       allow Vectren South reasonable lost revenue recovery.” Id. at 76.

[31]   The Commission reviewed the evidence and determined that Vectren South’s

       Revised Lost Revenue Proposal was reasonable, and that Vectren South’s Plan

       was reasonable in its entirety. The Commission found that “the calculation of

       lost revenues is not an exact science”; that “there will always be a range of what

       may be considered reasonable lost revenue recovery”; and that “Vectren South .

       . . sufficiently demonstrated that its [Revised Lost Revenue Proposal] is

       grounded in the EM&V processes that are required by Section 10 and

       universally relied upon in the utility industry to estimate energy savings and

       associated lost revenues.” Appellant’s Appendix Volume 2 at 17. The

       Commission was unpersuaded by CAC’s arguments regarding a four-year cap

       on lost revenue recovery and further found that CAC did not provide it with

       Court of Appeals of Indiana | Memorandum Decision 18A-EX-95 | March 11, 2019   Page 26 of 28
       evidence “demonstrating that Vectren South’s proposal is unreasonable” or

       with “sufficient facts from which [it] could determine that a four-year (or less)

       cap on lost revenue would allow Vectren South to recover reasonable lost

       revenues.” Id. The Commission also found that “[r]ather than providing a

       reasoned explanation or analysis to support ending lost revenue recovery after

       four years regardless of measure life or evidence related to the financial effects

       of such a proposal on [Vectren South], CAC instead offer[ed] a conclusory

       opinion that the magnitude of lost revenues exceeds the program costs, which

       makes the proposal unreasonable” and “provided no factual basis to support its

       contention that lost revenues should not exceed program costs.” Id. at 18. It

       further found that “[i]t is inherent to EM&V that validated energy savings will

       create lost revenues”, and that “[c]onsequently, cost-effective EE programs

       should have lower programs [sic] costs with larger energy savings, which does

       result in higher lost revenues relative to program costs.” Id.

[32]   Based upon our review of the record, we conclude that there is substantial

       evidence to support the Commission’s determination that Vectren South’s

       Revised Lost Revenue Proposal is reasonable and that the Plan is reasonable

       and should be approved in its entirety. CAC’s arguments to the contrary

       amount to an invitation to reweigh the evidence, we do not reweigh evidence or

       reassess witness credibility on appeal. See U.S. Steel, 907 N.E.2d at 1016.

[33]   For the foregoing reasons, the Commission’s Order on Remand is affirmed.

[34]   Affirmed.

       Court of Appeals of Indiana | Memorandum Decision 18A-EX-95 | March 11, 2019   Page 27 of 28
Najam, J., and Altice, J., concur.

Court of Appeals of Indiana | Memorandum Decision 18A-EX-95 | March 11, 2019   Page 28 of 28