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Appellate court allows Duke to recover damages from ratepayers

May 21, 2018

Duke Energy Indiana can recover the costs of a damages order from its ratepayers after the Indiana Court of Appeals found sufficient evidence to support the Indiana Utility Regulatory Commission’s approval of that recovery plan.

After Duke entered into a Renewable Wind Energy Power Purchase Agreement with the Benton County Wind Farm in 2006 to purchase wind energy, the IURC authorized Duke to recover all PPA costs from ratepayers. A contractual interpretation dispute then arose in 2013, prompting the wind farm to sue Duke in federal court.

The litigation proceeded to the 7th Circuit Court of Appeals, which ruled that Duke had to pay for the wind-generated power. The parties eventually agreed to a $29 million settlement, and Duke informed the IURC it intended to recover the lost production costs from its ratepayers.

Two ratepayers, Michael A. Mullett and Patricia N. March, intervened and opposed that plan, but the commission allowed Duke to recover the costs over a 12-month period. The ratepayers appealed in Michael A. Mullett and Patricia N. March v. Duke Energy Indiana, LLC, Nucor Steel-Indiana, Indiana Office of Utility Consumer Counselor, 93A02-1710-EX-2468, but the Indiana Court of Appeals upheld the IURC’s ruling in Duke’s favor.

Specifically, Judge Cale Bradford wrote in a Monday opinion that there was no caselaw to support the appellants’ argument that recovery from taxpayers is barred when that recovery is in the form of “liquidated damages,” nor was there authority to support the claims that the amount of damages here is hypothetical.

“The Commission was also presented with evidence from Duke’s Director of Fuels and Systems Optimization that the amount paid in the settlement is materially equivalent to what the ratepayers would have paid had Duke agreed with the Wind Farm’s interpretation of the PPA at the outset,” Bradford wrote. “The evidence in the record readily supports the Commission’s decision to authorize Duke’s recovery from ratepayers.”

The appellate panel also rejected the appellants’ argument that allowing Duke to recover its costs was the equivalent of retroactive ratemaking.

“After reviewing the record, there is no indication that any of the parties or the Commission thought Duke would be forfeiting its right to recover the deferred costs in a future (Fuel Cost Adjustment) proceeding nor is there any evidence that this deferral was improper,” Bradford wrote. “In fact, based on proceedings with other utilities, it appears that Duke acted in accordance with the Commission’s preferences for such matters.” 

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