On March 10, 2022, the Indiana Supreme Court concluded that a utility cannot be reimbursed for a deferred asset, even if it is properly accounted for, without violating Ind. Code § 8-1-2-68 bar against retroactive ratemaking. The case involved the utility regulation commission’s approval of Duke Energy Indiana’s (“Duke”) 2019 request to increase its rates for retail consumers in order to recover about $212 million for coal-ash site closures, coal-ash site remediation, and other financing costs associated with the 2015 Environmental Protection Agency’s new rules for treating coal ash and remediating ash ponds. Duke accounted for these compliance efforts using asset retirement obligation accounting, which represents a legal obligation associated with the retirement of a tangible long-lived asset that must be settled under a newly enacted statute.
The issue before the Court was whether the utility regulation commission had the authority to approve the reimbursement sought by Duke without violating the statutory ban on retroactive ratemaking. Finding that the commission had established Duke’s rate and adjudicated depreciation rates for the cost of decommissioning its plant assets, including coal-ash costs, in its 2004 rate order, the Court concluded that the utility regulation commission exceeded its statutory authority by granting Duke’s request to re-adjudicate its coal-ash costs that were already governed by the commission’s 2004 rate order.
Jeremy Fetty is a partner in the law firm of Parr Richey Frandsen Patterson Kruse with offices in Lebanon and Indianapolis. He often advises businesses and utilities (for profit, non-profit and cooperative) on organizational, human resources, and transactional matters and drafts and reviews commercial contracts.