Indiana Utility Law: Indiana Supreme Court Finds “Reasonableness” Standard of Review Applies to Review of Indiana Utility Regulatory Commission (IURC) Decisions Regarding Regulatory Settlements

Indiana utilities and Indiana utility lawyers should be aware that the Indiana Supreme Court recently had the opportunity to consider the standard of review that courts follow in reviewing utility regulatory settlements of an administrative agency. N. Ind. Pub. Serv. Co. v. U.S. Steel, 907 N.E.2d 1012 (Ind. 2009). The case involved a dispute regarding a settlement agreement entered into between an Indiana public utility and a steel production facility. The agreement arose out of a previous dispute between the two parties, and had been submitted to the Indiana Utility Regulatory Commission (“IURC”) at the time for approval. However, years later when a provision of the agreement became effective, there was a disagreement between the parties regarding its interpretation. U.S. Steel filed a complaint with the IURC seeking to enforce its interpretation of the agreement, and the IURC ultimately granted summary judgment to U.S. Steel on this issue. Id. at 1015 However, the Indiana Court of Appeals reversed, and the Indiana Supreme Court granted transfer. Id.

In hearing the case, the Indiana Supreme Court discussed the standards of review which apply when considering decisions of administrative agencies. Id. at 1016. The Court stated that such reviews were multi-tiered, the first level of review being “whether there is substantial evidence in light of the whole record to support the Commission’s findings of basic fact.” Id. (citing Citizens Action Coalition of Ind., Inc. v. N. Ind. Pub. Serv. Co., 485 N.E.2d 610, 612 (Ind. 1985)). The Court noted that decisions of the IURC will stand under this standard “unless no substantial evidence supports it.” Id. (citing McClain v. Review Bd. of Ind. Dept. of Workforce Dev., 693 N.E.2d 1314, 1317-18 (Ind. 1998)). Under the standard, a court does not reweigh evidence or assess witness credibility but only considers evidence in a light most favorable to the IURC’s findings. Id.

The Court then stated that the second level of review is consideration of whether the order contains “specific findings on all the factual determinations material to its ultimate conclusions.” Id. (citing Citizens Action Coalition, 485 N.E.2d at 612). The Court noted that under this standard of review, the Court was reviewing for reasonableness. In discussing the difference between standards of review for decisions of trial courts versus agencies, the Court noted that agency functions arise out of the executive branch, whereas trial court decisions fall within the realm of the judicial branch. Id. at 1018. For this reason, higher deference is given to agency decisions than decisions of lower courts. Id. Succinctly stated the “basic facts are reviewed for substantial evidence, legal propositions are reviewed for their correctness.” Id. at 1018 (citing McClain, 693 N.E.2d at 1318). Further, ‘[u]ltimate facts or ‘mixed questions’ are evaluated for reasonableness, with the amount of deference depending on whether the issue falls within the Commission’s expertise.” Id.
In N. Ind. Pub. Serv. Co., the Court recognized that the dispute did not involve merely a general commercial contract, but a settlement agreement that had been approved by the IURC which had public interest ramifications. Id. at 1017. As such, the Court stated “[t]he Commission maintains the authority and statutory responsibility to supervise and regulate the Contract.” Id. Upon approval, the Court noted that the agreement became an order of the IURC, and any interpretations by the IURC were in fact interpretations of its order, not of a contract. Id. at 1017-18. The Court, after discussing this high level of deference owed to the IURC, found that the conclusions of the IURC did not “run afoul of reasonable application of the well- established principles of contract law.” Id. at 1020.

Jeremy L. Fetty is an associate at Parr Richey whose practice focuses on corporate law, utility law, municipal law, and labor and employment law. The statements contained herein are for information purposes only and are not to be considered legal advice and should not be construed to form an attorney-client relationship. If you have questions regarding this article, please contact an attorney.