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Justices hear NIPSCO industrial users’ rate hike appeal

November 2, 2018

The Indiana Supreme Court heard oral argument Thursday morning on a utility rate increase case, hearing a northern Indiana utility industrial group’s appeal over whether a reversal of the Indiana Utility Regulatory Commission’s application of its own settlement orders conflicted with a prior settlement.

Northern Indiana Public Service Company supplies electric and natural gas service to more than 460,000 customers in northern Indiana, including the NIPSCO Industrial Group, which represents a group of five of NIPSCO’s largest industrial customers.

NIPSCO Industrial Group sued the utility after a rate increase was approved by the IURC in 2017. The increase was based on a total load calculation — which includes interruptible service users may opt for — rather than a firm load basis, the cost of more reliable and uninterruptable service. But the Court of Appeals reversed that decision earlier this year, finding that the rate adjustment did not comply with the enabling statute. 

NIPSCO argues the high court’s decision in NIPSCO v. U.S. Steel Corp., 907 N.E.2d 1012 (Ind. 2009) required the appellate court to review the Commission’s application of its own settlement orders with “a high level of deference.” It further contended that the decision conflicted with U.S. Steel by failing to give the Commission’s decision the high level of deference it deserves.

“In U.S. Steel as here the Commission approved the settlement orders after evidentiary hearings. There as here the settling parties disputed how those settlements were to be applied to an adjustment mechanism. There as here the Commission held a hearing and deployed its legislatively delegated judgment and special expertise to resolve the dispute. And there as here the Commission found, quite reasonably, that the settlements were unambiguous and should be applied as written,” NIPSCO counsel Jeffrey Reed wrote in the petition to transfer.

Reed further stated that an adjudication by an agency deserves “a higher level of deference than an order by a trial court in the judicial branch.” He argued that the appellate court violated Steel when it replaced its own judgment for that of the

initial decisionmaker, as well as when it held that methodology used in calculating the TDSIC rate adjustment was effectively controlled by the methodology it approved in a 2015 NIPSCO Industrial Group decision.

Finally, NIPSCO argued that the appellate decision undermined the parties’ bargain by treating the case as though it dealt with a provision that required an adjustment for interruptible load.

Opposing counsel Todd Richardson, representing NIPSCO Industrial Group, said that NIPSCO took great pains to make sure that it would not charge customers and classes with interruptible load, contrary to the terms of the statute.

“The agreement was not contrary to the statute,” Richardson said. “It was only when NIPSCO changed its methodology in TDSIC-2 that it became a statutory violation. This is not a case of buyer’s remorse. This is a case of, ‘wait a minute, this isn't what we agreed to.’”

The industrial group further stated that it wished to have the settlement enforced “consistent with its terms and consistent with the mutual understanding of all of the parties, as indicated by the cotemporaneous construction NIPSCO itself put on the agreement.”

“If parties contemplating a settlement do not know going in that their agreements will be honored as written, and implemented in a way consistent with the Commission’s expert understanding of how utility rates should be set, parties will be less likely to end their disputes by agreement,” Reed concluded. “That is bad for utilities and ratepayers alike.”

Thursday’s oral argument in NIPSCO Industrial Group v. Northern Indiana Public Service Company, Office of the Utility Consumer Counselor, 18S-EX-00475, can be viewed here.

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