Justices deny rehearing in Duke Energy coal-ash cleanup case; Goff dissents

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Duke Energy will not get a second chance to convince the Indiana Supreme Court that it erred in ruling the utility cannot recoup its past costs for coal-ash cleanup efforts.

In a Thursday order, justices denied Duke’s petition for rehearing in Indiana Office of Utility Consumer Counselor, et al. v. Duke Energy Indiana, LLC, et al., 21S-EX-432. The court denied rehearing on a 4-1 vote, with Justice Christopher Goff dissenting.

The Supreme Court was likewise divided on an issue of first impression when it handed down its opinion in March. The Court of Appeals of Indiana had previously ruled in Duke’s favor, but the majority justices ruled in March that the utility can’t recover past coal-ash cleanup costs adjudicated under a prior rate order by treating the costs as a capitalized asset.

Goff dissented from the March majority ruling and from the denial of rehearing, writing Thursday that the opinion “omitted discussion of relevant precedent from this Court,” and that “because it failed to properly consider the ratemaking implications of regulatory accounting methods,” he would grant a rehearing.

In its petition for rehearing, Duke asserted the high court incorrectly concluded the accounting method used to recover costs was irrelevant, and by doing so, it “invades specific authority the legislature delegated to the (Indiana Utility Regulatory) Commission.”

The Indiana Energy Association joined the petition as amicus in support of Duke’s petition, emphasizing that judicial deference to the IURC’s accounting methods — and the ratemaking implications of those methods — rests on the Supreme Court’s precedent, not just the Court of Appeals cases the opinion dismissed as nonbinding and inapposite.

“… (H)ere ‘the IURC’s order violates no proposition of law’ because ‘decisions involving the ‘accounting practices followed by public utilities are policy determinations committed to the sound discretion of the Commission,’’” Goff wrote, quoting NIPSCO v. Office of Util. Consumer Couns., 826 N.E.2d 112, 119 (Ind. Ct. App. 2005). “And ‘the Commission’s authority to determine a utility’s accounting practices ascends from the legislature itself.’”

Goff opined that the court mistakenly omitted discussion of Boone County Rural Electric Membership Corp. v. Public Service. Commission, 239 Ind. 525, 159 N.E.2d 121 (1959), and incorrectly concluded that the IURC’s statutory authority to determine accounting methods for regulated utilities is irrelevant to the rate-making process.

“The Court’s opinion dismissed these points, summarily concluding, with no reference to Boone County, that it’s ‘not bound by court-of-appeals precedent.’ And even if it agreed with that precedent, the Court added, those cases ‘simply said that reasonable accounting practices are left to the commission’s discretion,’” Goff wrote. “In reaching this conclusion, the Court framed the issue not as ‘whether Duke used a proper accounting method to track its remediation costs in its balance sheet,’ but, rather, ‘whether the commission can approve reimbursement for a deferred asset, even one properly accounted for, without violating the statutory bar against retroactive ratemaking.’”

Looking at Boone County, Goff said, “In a clear show of judicial deference, this Court emphasized that the ‘right and power of the Commission to authorize an accounting system under which reserves are set up for future tax increases, losses or contingencies is an administrative matter and, so long as such procedure is within reason and prudence, the trial court has no right to interfere.’”

He continued, “In the end, the legislature has spoken on the issue presented here. Our utilities-regulation code mandates the IURC to ‘consider any system of accounting established by any federal law, commission or department and any system authorized by a national association of such utilities.’ … By reaching a contrary conclusion, the Court’s opinion, in my view, ‘invades specific authority the legislature delegated to the Commission.’”

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