The Indiana Court of Appeals affirmed an order by the Indiana Utility Regulatory Commission, finding the commission had the authority to hear a dispute between a town and a water company.

At issue in Town of Chandler, Indiana v. Indiana-American Water Co., and Town of Newburgh, Indiana, No. 93A02-0801-EX-00005, is Indiana Code Section 8-1-2-86.5, which defines when the commission may determine a territorial dispute within a 4-mile area regarding water utilities.

The town of Chandler owns and operates a water utility for the delivery of water within and around the corporate limits of the town. The town adopted an ordinance that stated it would be the only provider of water within the 4-mile area surrounding the town. Indiana-American Water Co. filed a complaint with the regulatory commission, requesting that it determine the unincorporated areas in the 4-mile area surrounding the town were open competition for water customers.

There was also a dispute involving the town of Newburgh, because it passed a similar ordinance and some of its 4-mile area overlapped with the surrounding Chandler area.

The commission issued an order denying Chandler's second motion to dismiss the complaint and granted Indiana-American's requested relief and ruled that Indiana-American could provide water service to a prospective customer within the 4-mile area, regardless of Chandler's ordinance.

The Court of Appeals examined the construction of I.C. Section 8-1-2-86.5 to determine whether the commission had the authority to determine a territorial dispute. Chandler argued that the commission can't determine a territorial dispute because the statute only applies to the municipalities that meet the conditions of subsections (c)(1) and (c)(2), and since Newburgh doesn't meet those conditions, the commission can't settle the dispute.

The Court of Appeals disagreed with Chandler's arguments, finding the plain reading of the statute leads the court to conclude the exception to the exception, which allows the commission to determine disputes between two municipalities located within the same 4-mile area, applies whenever the territorial dispute concerns an area located within more than one 4-mile area of any municipality, wrote Judge Paul Mathias.

The appellate court also found the commission's treatment of Chandler didn't violate Article I, Section 23 of the Indiana Constitution because a municipal corporation isn't a citizen of Indiana and the section is inapplicable to its case.