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Justices send Hamilton County utility rate case back to COA

June 28, 2018

The Indiana Court of Appeals erred in determining that state utility regulators acted arbitrarily in excluding a Hamilton County sewer utility’s contractor expenses in reviewing a rate case, the Indiana Supreme Court determined Wednesday, sending the case back to the COA.

Justices also found the IURC was wrongly dismissed as a party in Hamilton Southeastern Utilities, Inc. v. Indiana Utility Regulatory Commission, et al.
18S-EX-49. The case was remanded to the Court of Appeals with instructions for the court to permit the IURC to brief its case and defend its order. The Supreme Court otherwise summarily affirmed the Court of Appeals ruling.

Hamilton Southeastern, in response to a low rate of return, petitioned the IURC for a rate increase of 8.42 percent in 2015. It cited its expenses in using a contractor, Sanitary Management & Engineering Co. (SAMCO) to operate, maintain and perform engineering functions for the utility. The Office of Utility Consumer Counselor, on the other hand, lobbied for a 14 percent rate reduction, arguing the utility could more efficiently use in-house staff to perform the contracted functions.

Ultimately, the IURC approved a rate increase of just 1.17 percent, ruling in part the SAMCO expenses should be eliminated. Both the IURC and OUCC petitioned for the Supreme Court to grant transfer, and the justices granted both petitions. Justices determined the commission was a proper party on appeal, and that public policy supports a finding that the commission should not have been dismissed.

“We reverse the Court of Appeals’ dismissal of the Commission as a party and now hold that the Commission was a proper party to the appeal,” Justice Steven David wrote for the court. “Because the Court of Appeals found that the Commission acted arbitrarily in excluding SAMCO-related expenses from HSE’s rate calculation without giving the Commission an opportunity to defend its order, we also reverse on that issue and remand to the Court of Appeals with instructions to permit the Commission an opportunity to brief the issue. As for the rest of the Court of Appeals’ opinion, we summarily affirm.”

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