Court Opinion

ID: 4305687
Source: CourtListenerOpinion
Date Created: 2018-08-21 15:06:13.74202+00
Date Added: 2024-06-11T14:37:11.213125
License: Public Domain

MEMORANDUM DECISION
Pursuant to Ind. Appellate Rule 65(D),
this Memorandum Decision shall not be
regarded as precedent or cited before any                                        FILED
court except for the purpose of establishing                                Aug 21 2018, 8:55 am

the defense of res judicata, collateral                                          CLERK
                                                                             Indiana Supreme Court
estoppel, or the law of the case.                                               Court of Appeals
                                                                                  and Tax Court

ATTORNEYS FOR APPELLANT                                  ATTORNEYS FOR APPELLEE
Jennifer A. Washburn                                     Derek R. Molter
Margo Tucker                                             Kay E. Pashos
Citizens Action Coalition of Indiana,                    Ice Miller LLP
Inc.                                                     Indianapolis, Indiana
Indianapolis, Indiana
                                                         Kelley A. Karn
                                                         Melanie D. Price
                                                         Duke Energy Business Services,
                                                         LLC
                                                         Indianapolis, Indiana

                                           IN THE
    COURT OF APPEALS OF INDIANA

Citizens Action Coalition of                             August 21, 2018
Indiana, Inc.,                                           Court of Appeals Case No.
Appellant-Intervenor,                                    18A-EX-141
                                                         Appeal from the Indiana Utility
        v.                                               Regulatory Commission
                                                         The Honorable Sarah E. Freeman,
Duke Energy Indiana, LLC,                                Commissioner
Appellee-Petitioner.
                                                         The Honorable David E. Veleta,
                                                         Senior Administrative Law Judge

Court of Appeals of Indiana | Memorandum Decision 18A-EX-141 | August 21, 2018                       Page 1 of 16
                                                               IURC Cause No.
                                                               43955 DSM-4

      Bradford, Judge.

                                          Case Summary
[1]   Appellant-Intervenor Citizens Action Coalition of Indiana, Inc. (“CAC”)

      appeals from the Indiana Utility Regulatory Commission’s (“the Commission”)

      order approving an energy efficiency (“EE”) plan filed by Appellee-Petitioner

      Duke Energy Indiana, LLC’s (“Duke”) in accordance with Indiana Code

      section 8-1-8.5-10 for the years 2017 through 2019. Specifically, CAC contends

      that the Commission abused its discretion in finding Duke’s proposed EE goals

      and lost revenue recovery rate to be reasonable. Concluding otherwise, we

      affirm.

                            Facts and Procedural History
[2]   Duke is an electricity supplier servicing both individuals and businesses in

      Indiana. In 2015, the General Assembly passed a statute requiring electricity

      suppliers to file EE plans and goals for approval by the Commission beginning

      Court of Appeals of Indiana | Memorandum Decision 18A-EX-141 | August 21, 2018   Page 2 of 16
      no later than 2017. As an incentive for participation, the General Assembly

      included provisions allowing electricity suppliers to recover certain costs

      associated with their EE plans, including lost revenues. This case stems from

      the Commission’s approval of Duke’s EE plan for the three-year term running

      from 2017 to 2019 (“Duke’s proposed EE Plan”).

[3]   On May 28, 2015, Duke sought approval of an EE plan for the three-year term

      running from 2016–2018. In this plan, Duke proposed a lost revenue rate that

      allowed for recovery of lost revenues over the measure’s life or until the utility’s

      next basic rate case, whichever was shorter. The Commission rejected Duke’s

      plan, finding, in part, that the recovery of lost revenues should be limited to a

      four-year term. Shortly thereafter, we found that a nearly identical provision in

      a case involving a different energy provider was unreasonable. See S. Ind. Gas &

      Elec. Co. v. Ind. Util. Regulatory Comm’n, 2017 WL 899947, at *7 (March 7,

      2017).

[4]   On November 22, 2016, Duke filed a petition seeking approval of Duke’s

      proposed EE Plan. Duke proposed EE goals that are expected to result in an

      energy savings of approximately 1.1% of eligible retail sales for each year of the

      plan. It again proposed a lost revenue rate that allowed for recovery of lost

      revenues over the measure’s life or until the utility’s next basic rate case,

      whichever was shorter. Pursuant to Duke’s proposed EE Plan, Duke’s recovery

      of forecasted lost revenues would be reconciled with actual losses following an

      independent evaluation. The total cost of Duke’s proposed EE Plan equaled

      $110,233,151.

      Court of Appeals of Indiana | Memorandum Decision 18A-EX-141 | August 21, 2018   Page 3 of 16
[5]   On November 28, November 30, 2016, and February 6, 2017, respectively,

      Nucor-Steel-Indiana, a division of Nucor Corporation, CAC, and the Duke

      Industrial Group (collectively, “the Intervenors”) filed petitions to intervene in

      the proceeding. The Commission subsequently granted those petitions. Duke

      and the Intervenors filed extensive evidence prior to an August 17, 2017

      evidentiary hearing. On December 28, 2017, the Commission approved Duke’s

      EE Plan.

                                 Discussion and Decision
                                     I. Standard of Review
[6]   “The General Assembly created [the Commission] primarily as a fact-finding

      body with the technical expertise to administer the regulatory scheme devised

      by the legislature.” Ind. Gas Co., Inc. v. Ind. Fin. Auth., 999 N.E.2d 63, 65 (Ind.

      2013). “The Commission’s assignment is to insure that public utilities provide

      constant, reliable, and efficient service to the citizens of Indiana.” N. Ind. Pub.

      Serv. Co. v. U.S. Steel Corp., 907 N.E.2d 1012, 1015 (Ind. 2009). “Because the

      complicated process of ratemaking is a legislative rather than 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).

[7]   An order from the Commission is presumed valid unless the contrary is clearly

      apparent. Id. “More specifically, on matters within its jurisdiction, [the

      Commission] enjoys wide discretion and its findings and decision will not be
      Court of Appeals of Indiana | Memorandum Decision 18A-EX-141 | August 21, 2018   Page 4 of 16
      lightly overridden simply because we might reach a different decision on the

      same evidence.” Id. (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).

[8]   Commission orders are subject to a multi-tier review. Ind. Gas, 999 N.E.2d at

      66.

              First, the order must contain specific findings on all the factual
              determinations material to its ultimate conclusions. We review
              the conclusions of ultimate facts, or mixed questions of fact and
              law, for their reasonableness, with greater deference to matters
              within [the Commission’s] expertise and jurisdiction. Second,
              the findings of fact must be supported by substantial evidence in
              the record. We neither reweigh the evidence nor assess the
              credibility of witnesses and consider only the evidence most
              favorable to [the Commission’s] findings. Finally, we review
              whether IURC action is 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.

      Id. (internal citations and quotation omitted).

      Court of Appeals of Indiana | Memorandum Decision 18A-EX-141 | August 21, 2018   Page 5 of 16
               II. General Overview of the Relevant Statutory
                                 Authority
[9]   Indiana Code section 8-1-8.5-10(h) provides that beginning not later than 2017,

      and not less than one time every three years, “an electricity supplier shall

      petition the [C]ommission 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 [(“EM&V”)] procedures that must include

      independent [EM&V].” In determining whether a plan submitted under

      subsection (h) is reasonable, the [C]ommission shall consider the following:

              (1) Projected changes in customer consumption of electricity
              resulting from the implementation of the plan.

              (2) A cost and benefit analysis of the plan, including the
              likelihood of achieving the goals of the energy efficiency
              programs included in the plan.

              (3) Whether the plan is consistent with the following:

                       (A) The state energy analysis developed by the
                       commission under section 3 of this chapter.

                       (B) The electricity supplier’s most recent long range
                       integrated resource plan submitted to the
                       commission.

              (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.

      Court of Appeals of Indiana | Memorandum Decision 18A-EX-141 | August 21, 2018   Page 6 of 16
               (5) Any undue or unreasonable preference to any customer class
               resulting, or potentially resulting, from the implementation of an
               energy efficiency program or from the overall design of a plan.

               (6) Comments provided by customers, customer representatives,
               the office of utility consumer counselor, and other stakeholders
               concerning the adequacy and reasonableness of the plan,
               including alternative or additional means to achieve energy
               efficiency in the electricity supplier’s service territory.

               (7) The effect, or potential effect, in both the long term and the
               short term, of the plan on the electric rates and bills of customers
               that participate in energy efficiency programs compared to the
               electric rates and bills of customers that do not participate in
               energy efficiency programs.

               (8) The lost revenues and financial incentives associated with the
               plan and sought to be recovered or received by the electricity
               supplier.

               (9) The electricity supplier’s current integrated resource plan and
               the underlying resource assessment.

               (10) Any other information the [C]ommission considers
               necessary.

       Ind. Code § 8-1-8.5-10(j).

                  III. Approval of Duke’s Proposed EE Goals
[10]   “‘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

       Court of Appeals of Indiana | Memorandum Decision 18A-EX-141 | August 21, 2018   Page 7 of 16
       balance of energy resources in an electricity supplier’s service territory.” Ind.

       Code § 8-1-8.5-10(c). Review of the record reveals that Duke and each of the

       Intervenors submitted extensive evidence relating to the reasonableness of

       Duke’s proposed EE goals both prior to and during the evidentiary hearing.

       The Commission noted that it considered all of the evidence, including CAC’s

       asserted discrediting evidence.

[11]   In its order, the Commission noted that Duke “proposes EE goals to be

       achieved through its 2017-2019 Plan that are expected to result in energy

       savings of approximately 1.1% of eligible retail sales for each year of the three-

       year Plan.” Appellant’s App. Vol. II, p. 45. The Commission determined that

       Duke’s “EE goals meet the requirement that it is reasonably achievable,

       designed to achieve an optimal balance of energy resources and consistent with

       [Duke’s] 2015 IRP.” Appellant’s App. Vol. II, p. 47.

[12]   In challenging the Commission’s determination that Duke’s proposed EE goals

       were reasonable, CAC does not challenge any of the Commission’s factual

       findings. It merely argues that this court should re-evaluate and reweigh the

       evidence, giving its evidence greater weight. Again, in reviewing the

       Commission’s determination that a plan is reasonable, we will neither reweigh

       the evidence nor reassess witness credibility. Ind. Gas, 999 N.E.2d at 66. As

       such, because the record contains evidence supporting the Commission’s

       determination, we will not override the Commission’s determination that

       Duke’s EE goals were reasonable. See Citizens Action Coal., 76 N.E.3d at 151

       Court of Appeals of Indiana | Memorandum Decision 18A-EX-141 | August 21, 2018   Page 8 of 16
       (providing that the Commission’s decision will not be overridden simply

       because we might have reached a different decision on the same evidence).

          IV. Approval of Duke’s Proposed Lost Revenue Rate
[13]   It is undisputed that rates charged by a utility company must be just and

       reasonable. In challenging the Commission’s approval of Duke’s EE Plan,

       CAC argues that the rate of lost revenue funds recoverable by Duke was both

       unjust and unreasonable. For its part, Duke argues the opposite.

[14]   Indiana Code section 8-1-8.5-10(h) requires an energy provider to obtain

       approval of an EE plan independent of its required rate plans. Once the

       Commission has found a proposed EE plan to be reasonable, it “shall allow the

       electricity supplier to recover or receive …[r]easonable lost revenues.” Ind.

       Code § 8-1-8.5-10(o). “‘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).

               A retail rate adjustment mechanism proposed by an electricity
               supplier … 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

       Court of Appeals of Indiana | Memorandum Decision 18A-EX-141 | August 21, 2018   Page 9 of 16
               incentives based on the [EM&V] of the [EE] programs under the
               plan).

       Ind. Code § 8-1-8.5-10(o).

              A. Whether the Approved Rate is Unreasonably High
[15]   CAC notes that Indiana Code section 8-1-8.5-10 only allows for the recovery of

       reasonable lost revenues and asserts that the Commission exceeded its

       discretion by allowing the recovery of up to $63,448,839 in lost revenues for EE

       programs projected to cost $110,233,151 to administer. Specifically, CAC

       claims that “[t]his lost revenue guaranteed rate 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.” Appellant’s Br. p. 27.

[16]   Duke correctly asserts, however, that in making this claim, CAC “does not

       identify any legal basis for imposing any particular limit regarding a ration

       between recoverable lost revenues and other program costs,” nor does it “make

       any showing that the ration in this particular case renders rates ‘artificially

       high.’” Appellee’s Br. p. 29. The Commission heard extensive evidence

       regarding lost revenues and how such revenues would be calculated. In

       approving Duke’s EE Plan, the Commission required independent EM&V to

       reconcile proposed costs, including lost revenues, to those actually incurred in

       Court of Appeals of Indiana | Memorandum Decision 18A-EX-141 | August 21, 2018   Page 10 of 16
       order to ensure that the lost revenue rate applied in connection to the EE Plan

       was not too high.

[17]   The Commission considered the extensive evidence presented both by Duke

       and the Intervenors and determined that Duke’s rate for the recovery of lost

       revenues was reasonable. CAC does not challenge any of the Commission’s

       specific findings. Rather, its challenge on appeal effectively amounts to a

       request for this court to reweigh the evidence submitted before the Commission,

       which we will not do. Ind. Gas, 999 N.E.2d at 66. Based on our review of the

       record, we conclude that the Commission’s order is consistent with the

       requirements of Indiana Code section 8-1-8.5-10(o).

         B. Whether the Commission Impermissibly Deviated from
                           Past Precedent
[18]   CAC argues that the Commission impermissibly deviated from the approach it

       adopted in its decision relating to Duke’s petition relating to its plan for the

       years 2016 through 2018. With respect to lost revenues, the Commission’s

       order in that case reads as follows:

               Although we have previously approved lost revenues over a
               measure’s life or until a utility’s next base rate case, whichever is
               shorter, … 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.…
               Because we believe the parties raise a valid concern, we find that
               Petitioner’s lost revenue recovery should be limited to: (1) four
               years or the life of the measure, whichever is less, or (2) until
       Court of Appeals of Indiana | Memorandum Decision 18A-EX-141 | August 21, 2018   Page 11 of 16
               rates are implemented pursuant to a final order in Petitioner’s
               next base rate case, whichever occurs earlier.

       In re Duke Energy Ind., Inc., Cause No. 43955 DSM 3, 2016 WL 943945, at *53

       (Mar. 9, 2016).

[19]   The Commission included a nearly identical provision in its order issued in In re

       Southern Indiana Gas & Electric Co., Cause No. 44645, 2016 WL 1179962, at

       *28–29 (March 23, 2016). On appeal from that order, we reversed the portion

       of the Commission’s order relating to the four-year cap. S. Ind. Gas & Elec. Co.,

       2017 WL 899947, at *7 (“the Vectren South case”). We remanded the matter to

       the Commission with instructions that the Commission 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
               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.

       Court of Appeals of Indiana | Memorandum Decision 18A-EX-141 | August 21, 2018   Page 12 of 16
       Id. On remand, the Commission rejected CAC’s preferred four-year recovery

       period and found that Vectren South’s plan was reasonable. 1 In re S. Ind. Gas &

       Elec. Co., Cause No. 44645, 2017 WL 6618867, at *12 (December 20, 2017).

[20]   CAC acknowledges our decision in the Vectren South case, but nonetheless

       argues that because our decision did not explicitly rule out a four-year recovery

       period, the Commission should have adopted that approach. CAC claims that

       such an approach would be justifiable so long as the Commission made

       appropriate factual findings in support thereof. Here, however, the

       Commission made no such findings, and CAC does not point to sufficient

       evidence in the record on which the Commission could have relied. Instead,

       CAC merely points to alleged deficiencies in the approach adopted by the

       Commission.

[21]   It is undisputed that the Commission has previously approved the recovery of

       lost revenues over a measure’s life or until a utility’s next base rate case,

       whichever is shorter. The Commission adopted this approach in this case and

       the Commission’s determination is supported by the evidence. Given that CAC

       failed to point to adequate evidence to support its favored four-year approach

       and in light of our memorandum decision issued in the Vectren South case, we

       conclude that the Commission did not unjustifiably deviate from CAC’s

       1
         Vectren South’s plan is, in relevant part, similar to Duke’s proposed EE Plan as it allows for recovery over
       the measure’s life or until the utility’s next base rate case, whichever is shorter, and requires reconciliation
       through EM&V.

       Court of Appeals of Indiana | Memorandum Decision 18A-EX-141 | August 21, 2018                     Page 13 of 16
       favored precedent.2 CAC’s challenge to the evidence supporting this approach

       amounts to a request that we reweigh the evidence, which, again, we will not

       do.3 Ind. Gas, 999 N.E.2d at 66.

               C. Whether the Evidence is Sufficient to Support the
                             Commission’s Order
[22]   In arguing that the Commission’s order was not supported by adequate

       substantial evidence, CAC does not point to any particular finding which it

       claims was not supported by the evidence. CAC merely claims that “there is no

       credible evidence that [Duke] experienced its claimed level of lost revenues or

       that the rate was established based on other financial aspects of the utility.”

       Appellant’s Br. pp. 34–35. It is expected that Duke’s petition would not include

       actual losses as it was a petition seeking pre-approval of a three-year EE plan.

       The evidence indicated that the losses detailed in the petition were forecasted

       losses which would later be reconciled through EM&V with Duke’s actual

       losses. The Commission’s order accurately reflects this point and requires

       reconciliation. CAC also argues that the Commission failed to give appropriate

       weight to the evidence submitted by the Intervenors. As we have stated

       2
         In addition, contrary to CAC’s claim, the record reveals that the Commission did not ignore the evidence
       relating to the so-called “pancaking effect” argued by CAC.
       3
         We are further unpersuaded by CAC’s argument that the Commission erroneously relied on EM&V as part
       of the methodology for determining lost revenues given that Indiana Code section 8-1-8.5-10(o) explicitly
       provides that this method should be used during the reconciliation process.

       Court of Appeals of Indiana | Memorandum Decision 18A-EX-141 | August 21, 2018                 Page 14 of 16
       numerous times above, we will not reweigh the evidence or reassess witness

       credibility on appeal. See Ind. Gas, 999 N.E.2d at 66.

       D. Whether the Rate is Consistent with Indiana Code Section
                               8-1-8.5-10
[23]   CAC last argues that the lost revenue rate was not consistent with Indiana Code

       section 8-1-8.5-10. In making this claim, CAC notes that the Commission did

       not reference or apply the procedures used in general rate-making cases.

       However, as we have noted, the requirement that electricity providers 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

       rate-making. CAC points to no relevant authority indicating that the

       Commission was required to consider or apply procedures adopted in

       connection to general rate-making cases when considering a petition filed in

       accordance with Indiana Code section 8-1-8.5-10. Instead, we think the

       Commission acted within its discretion by applying the factors and

       considerations listed in Indiana Code section 8-1-8.5-10 when considering

       Duke’s proposed EE Plan. CAC fails to establish that the Commission’s order

       is not consistent with Indiana Code section 8-1-8.5-10.

                                               Conclusion
[24]   In sum, we conclude that the Commission did not abuse its discretion in finding

       both Duke’s proposed EE goals and lost revenue rate to be reasonable. As

       such, we affirm the Commission’s approval of Duke’s proposed EE Plan.

       Court of Appeals of Indiana | Memorandum Decision 18A-EX-141 | August 21, 2018   Page 15 of 16
[25]   The judgment of the Commission is affirmed.

       Bailey, J., and Mathias, J., concur.

       Court of Appeals of Indiana | Memorandum Decision 18A-EX-141 | August 21, 2018   Page 16 of 16