Northern Indiana Public Service Company (NIPSCO) filed a petition with the Indiana Utility Regulatory Commission (IURC) seeking to implement a new rate design, pursuant to which certain rates would increase. NIPSCO and other entities, including NIPSCO Industrial Group (Industrial Group) and United States Steel Corporation (US Steel), engaged in settlement negotiations and reached an agreement. Citizens Action Coalition of Indiana, Inc. (CAC), had intervened in the proceeding and objected to the agreement. The IURC ultimately approved the settlement agreement, and CAC now appeals, arguing that there is not substantial evidence supporting the IURC's order and that the IURC should have required the inclusion of a low-income payment assistance plan and the collection and reporting of customer data by NIPSCO. Finding substantial evidence and no other error, we affirm.
NIPSCO is a public utility that provides electric service in all or parts of twenty northern Indiana counties. Its customers' electric bills generally consist of a fixed monthly charge (the "fixed charge") plus a variable energy charge (the "energy charge") based on the amount of energy used by the customer, and any additional riders. The customers pay the fixed charge even if they consume no energy in a month; the energy charge equals the approved rate multiplied by the number of kilowatt hours consumed by the consumer in a month.
In October 2015, NIPSCO filed a petition with the IURC seeking authority to increase its rates and charges for providing electric utility service. A number of entities intervened in the legal proceeding, including CAC, the Industrial Group, and US Steel. The Office of Utility Consumer Counselor (OUCC), which represents ratepayers, consumers, and the public, was also a party to the proceeding. NIPSCO sought the rate increase based on a cost of service analysis, which caused NIPSCO to conclude that a fixed rate increase would improve recovery of its fixed costs.
Initially, NIPSCO proposed an increase in the fixed charge for residential and small commercial customers from $11 to $20 and from $20 to $30 per month, respectively. At some point, a subset of entities involved in the proceeding, including the appellees and the OUCC but excluding CAC, engaged in settlement negotiations. On February 19, 2016, those entities jointly submitted to the IURC a Settlement Agreement. Among other things, the Settlement Agreement provided that the increase in the fixed charges for residential and small commercial customers would be from $11 to $14 and from $20 to $24 per month, respectively.
CAC and other entities
CAC advocated for a different rate design, such that NIPSCO would collect its needed revenue based on an increase in the energy charge rather than the fixed charge.
Second, in its initial petition, NIPSCO proposed a low-income payment assistance program wherein qualified residential customers would receive a $50 credit on their June bills each year. OUCC opposed this proposal because NIPSCO would benefit from the program by reducing expenses and lowering uncollected revenue but would not lower its charges to reflect those reduced costs. OUCC advocated for a voluntary donation program targeted at ratepayers, shareholders, and employees with a donation match from NIPSCO. CAC disliked both of those proposed plans, recommending a plan that includes a low-income rate class and an arrearage program to help low-income ratepayers pay down balances over time. CAC's program would be funded by mandatory surcharges on other customers. In response to OUCC's opposition, NIPSCO withdrew its proposed low-income assistance program; the Settlement Agreement does not contain such a program at all. In opposing the Settlement Agreement, CAC argued that its own low-income assistance program should be included in the settlement.
Third, CAC asked that the IURC require NIPSCO to collect and report the following data: number of general residential and low-income customer accounts, bills, receipts, arrearages, notices of disconnections, bill payment agreements, disconnections of service for nonpayment, reconnections of service after disconnection for non-payment, accounts written off as uncollectible, and accounts sent to collection agencies. According to CAC, this data is critical for the ability of NIPSCO, service organizations, ratepayers, and the general public to understand affordability issues. CAC testified that without timely trend data, it is not possible to appropriately respond to the payment troubles experienced within the low-income population. Moreover, the IURC has stated in the past that it will not force the adoption of a low-income payment assistance program without sufficient data to determine what is appropriate, but CAC is unable to obtain that data absent a requirement that NIPSCO collect and report it.
The IURC held an evidentiary hearing on April 13, 2016, and on July 18, 2016, it approved the Settlement Agreement without modification in a ninety-six-page order. In relevant part, the order notes as follows:
Appealed Order p. 13, 27, 28, 45-46, 58, 71-72, 74, 78-80, 88, 90-91. CAC now appeals.
Discussion and Decision
I. Standard of Review
The General Assembly created the IURC "primarily as a fact-finding body with the technical expertise to administer the regulatory scheme devised by the legislature." Ind. Gas Co. v. Ind. Fin. Auth., 999 N.E.2d 63, 65 (Ind. 2013) (internal quotation removed). Because the "complicated process of ratemaking" is "a legislative rather than judicial function," it "is more properly left to the experienced and expert opinion present in the Commission." Office of Util. Consumer Counselor v. Pub. Serv. Co. of Ind., 463 N.E.2d 499, 503 (Ind. Ct. App. 1984).
An order from the IURC is presumed valid unless the contrary is clearly apparent. Citizens Action Coalition of Ind., Inc. v. S. Ind. Gas and Elec. Co., 70 N.E.3d 429, 438 (Ind. Ct. App. 2017). More specifically, "[o]n matters within its jurisdiction, the IURC enjoys wide discretion and its findings and decision will not be lightly overridden simply because we might reach a different decision on the same evidence." Id. at 439. Essentially, "so long as there is any substantial evidence to support the rates as fixed by the Commission as reasonable, the judicial branch of the government will not interfere with such legislative functions" and has "no power or authority to substitute [its] personal judgment for what [it] might think is fair or reasonable in lieu of the [IURC's] administrative judgment." Boone Cty. Rural Elec. Membership Corp. v. Pub. Serv. Comm'n, 239 Ind. 525, 532, 159 N.E.2d 121, 124 (1959) (emphasis added).
In reviewing an IURC decision, we apply a multi-tiered standard of review. Citizens Action Coalition of Ind., Inc. v. S. Ind. Gas and Elec. Co., 45 N.E.3d 483, 491 (Ind. Ct. App. 2015). First, we must determine whether specific findings exist as to all factual determinations material to the ultimate conclusions. Id.; see also Capital Improvement Bd. of Mgrs. v. Pub. Serv. Comm'n, 176 Ind.App. 240, 260, 375 N.E.2d 616, 631 (1978) (holding that the findings "must be specific enough to enable the court to review intelligently the Commission's decision"). Second, we must consider whether substantial evidence supports the IURC's findings of fact. Citizens Action, 45 N.E.3d at 491; see also N. Ind. Pub. Serv. Co. v. U.S. Steel Corp., 907 N.E.2d 1012, 1016 (Ind. 2009) (observing that the IURC's order will stand "unless no substantial evidence supports it") (emphasis added). Finally, we must determine whether the decision is contrary to law. Citizens Action, 45 N.E.3d at 491. In conducting our review, we neither reweigh the evidence nor assess witness credibility and will focus solely on the evidence most favorable to the IURC's findings. Ind. Gas, 999 N.E.2d at 66.
Furthermore, where, as here, we are considering the IURC's approval of a settlement contract, substantial deference is required. Because approval of settlement agreements is intrinsic to the IURC's supervision and regulation of utility rates, "substantial deference [is] owed to the Commission in supervising settlements and even modifying or revoking orders entered attendant thereto." U.S. Gypsum, Inc. v. Ind. Gas Co., 735 N.E.2d 790, 803-04 (Ind. 2000). This is especially true when, as here, the OUCC—which represents ratepayers, consumers, and the public—has joined the settlement agreement. See Citizens Action Coalition of Ind., Inc. v. N. Ind. Pub. Serv. Co., 796 N.E.2d 1264, 1268 (Ind. Ct. App. 2003) (rejecting CAC challenge to settlement agreement, including CAC claim that an IURC-approved settlement should be subject to the more rigorous inspection of a settlement in class action cases).
II. Rate Design
Any change to a utility charge "shall be reasonable and just, and every unjust or unreasonable charge for such service is prohibited and declared unlawful." Ind. Code § 8-1-2-4. Here, CAC contends that the rate design included in the Settlement Agreement (and the IURC Order), which incorporates an increase in the fixed charge for residential and small commercial consumers, is unjust and unreasonable. CAC has three primary reasons for this position: first, CAC contends that NIPSCO did not produce substantial evidence to support the increase to the fixed charge; second, CAC argues that this rate design discourages energy efficiency and conservation; and third, it contends that this rate design will have a disparate, deleterious impact on low-income, Black, and elderly populations.
A. Substantial Evidence
CAC insists that NIPSCO has failed to produce evidence proving that its proposal is just and reasonable:
Appellant's Br. p. 25. According to the CAC, the IURC's Order "advances the common, but flawed, ratemaking premise that fixed costs should be collected through fixed charges. Yet, NIPSCO offered no evidence to support the concept that the nature of a cost, as either fixed or variable, should dictate the form of the charge used to recover such a cost." Id. at 25-26 (emphases original). CAC argues that NIPSCO did not prove that raising the fixed charge is preferable to the many other alternative rate designs available to it.
Whether or not there is another rate design that is preferable, however, is not our inquiry. Our inquiry is limited to whether there is substantial evidence supporting the IURC's acceptance of the Settlement Agreement. The record reveals the following evidence supporting the rate design contained in the agreement:
CAC may genuinely believe that a different rate design is preferable, and some reasonable ratepayers may agree with that belief, but the evidence in the record readily supports the IURC's decision to accept the Settlement Agreement. The IURC has the expertise to analyze and weigh the complex competing evidence on this issue, and we can only conclude that there is substantial evidence supporting its decision to accept the proposed rate design, including the increase in the fixed charge.
B. Energy Conservation
Next, CAC argues that the IURC failed to make specific findings of fact or an ultimate finding of reasonableness with respect to CAC's argument that the fixed charge increase would discourage energy conservation and efficiency. Specifically, this rate design "allows NIPSCO to shift cost recovery more to the flat fee for all customers which limits a customer's ability to reduce his bill by reducing consumption and discourages energy conservation by reducing the economic incentive for efficiency." Appellant's Br. p. 28. According to CAC, the IURC failed to adequately address this contention.
We find the analysis of this Court on this precise issue in a very recent case to be instructive. In Citizens Action Coalition of Ind., Inc. v. Indianapolis Power & Light Co., ___ N.E.3d ___, 93A02-1604-EX-804 (Ind. Ct. App. Apr. 5, 2017), CAC argued that the IURC had failed to make sufficient findings as to whether the rate design in that case discouraged energy conservation and efficiency, asking that this Court remand for specific findings on the issue. We disagreed:
Slip op. p. 17-18. Here, likewise, the IURC was not required to make specific findings on this particular argument raised by CAC. Instead, it was required to consider NIPSCO's rate design scheme as a whole, making specific findings as to all factual determinations material to the ultimate conclusions. Citizens Action, 45 N.E.3d at 491. The IURC made specific findings about the rate design, including the increase in the fixed rate charge:
Appealed Order p. 88 (internal citations omitted). These findings are specific to the factual determinations material to the ultimate conclusions, and we have already found that there is sufficient evidence supporting these findings. We disagree with CAC that it was incumbent upon IURC to address its specific argument regarding energy conservation.
Here, as in the recent case quoted above, CAC also argues that the approval of this rate design "despite its deleterious effect on conservation and energy-efficiency is contrary to federal law and state rule." Appellant's Br. p. 32. Again, we find the analysis of this Court helpful and on point:
Citizens Action, No. 93A02-1604-EX-804, at slip op. p. 19. Here, likewise, CAC has not directed our attention to any federal law or state rule mandating a different result in this case. Again, reasonable people may, and likely do, agree with CAC that this rate design scheme is less than ideal with respect to the important issues of energy conservation and efficiency. But that is immaterial to our review of the IURC's decision, which contains sufficient findings and is supported by substantial evidence.
C. Impact on Certain Populations
Similar to its energy conservation argument, CAC contends that the IURC failed to make specific findings or an ultimate finding of reasonableness regarding its allegation that the fixed rate increase will have a disproportionate impact on low-income, elderly, and Black consumers. CAC insists that NIPSCO's "presentation of data [on this issue] was very misleading, incomplete, and was effectively rebutted by CAC. Regardless, the Commission failed to make a basic finding of fact or conclusion of law on the material issue raised of how an increased fixed charge affects low volume users of electricity, who in NIPSCO's service territory are low income customers, elderly customers, and African American customers." Appellant's Br. p. 31. CAC asks us to remand so that the IURC can make specific findings on this issue.
As noted above, however, this is not a declaratory judgment action, and the IURC is required to make specific findings only on factual determinations that are material to the ultimate issue, which is the justness and reasonableness of the rate design and its effect on ratepayers as a whole. As this Court recently held,
Citizens Action, No. 93A02-1604-EX-804, at slip op. p. 20. Here, likewise, there was no requirement that the IURC make specific findings related to particular sub-groups of ratepayers. It found the rate design to be just and reasonable as a whole as related to all ratepayers, see Appealed Order p. 87, and given our standard of review, we are compelled to defer to that conclusion as there is substantial evidence supporting it.
III. Payment Assistance Program and Data Collection
Finally, CAC argues that the IURC erred because it did not require NIPSCO to include a low-income payment assistance program as part of the rate design or to collect and report data on its customers. At the beginning of the settlement negotiations, NIPSCO had included a payment assistance program as part of its rate design, but OUCC objected to that particular program. Consequently, NIPSCO withdrew its proposed payment assistance program from the final Settlement Agreement. CAC proposed its own version of a payment assistance program, but none of the other involved entities approved of its proposal. In the end, therefore, the IURC's order does not contain a payment assistance program at all.
Initially, we note that we share in the IURC's concern and perplexment as to how and why CAC was left out of the settlement negotiations. Had CAC been included, it is entirely possible, if not likely, that a compromise could have been reached such that a payment assistance program would have been included in the Settlement Agreement. It seems as though all agree that it would be preferable to have such a program included. We echo the IURC's strong encouragement that, in future cases, the utilities will act in good faith by including all parties in the negotiations.
That said, the IURC dedicated a lengthy paragraph in its order explaining why it declined to order the adoption of CAC's proposed payment assistance plan:
Appealed Order p. 90. The IURC, which is the entity statutorily charged with negotiating these complex regulatory waters, found that there are "numerous implementation and policy related concerns" with respect to the program proposed by CAC. We will not second-guess the IURC's assessment in that regard.
NIPSCO elected to withdraw its own proposed payment assistance plan when it faced resistance from OUCC, the entity charged with representing all ratepayers.
CAC also contends that NIPSCO should be required to collect and report data about its consumers so that, in the future, CAC would be able to provide the evidence on these matters that the IURC has found to be lacking. The IURC, however, concluded that "any such effort is best pursued by the utility and interested stakeholders outside the regulatory constraints of a specific Commission directive." Id. at 91. In addition to the IURC's conclusion, we would also point out that the cost of undertaking the collection and reporting of this sought-after data would certainly be passed onto the consumers whose rate increases CAC is attempting to minimize. Furthermore, the type of sensitive data that CAC believes should be collected would potentially intrude on the privacy of ratepayers. Under these circumstances, we decline to reverse the IURC's order on the basis that it did not order the collection and reporting of this information.
The judgment of the IURC is affirmed.
Barnes, J., and Crone, J., concur.