Indiana Utility Law: Duke Energy Indiana, Inc. v. Office of Utility Consumer Counselor, 983 N.E.2d 160 (Ind. Ct. App. 2012)

The Indiana Court of Appeals affirmed an order from the Indiana Utility Regulatory Commission which denied an electric utility company’s petition to seek deferred-accounting treatment for storm-operating expenses.

In Duke Energy Indiana, Inc. v. Office of Utility Consumer Counselor, 983 N.E.2d 160 (Ind. Ct. App. 2012), a southern Indiana wind storm in September 2008 and an ice storm in January 2009 caused approximately $32 million in damage to Duke Energy Indiana, Inc.’s (“Duke”) electrical system. Duke filed a petition with the Indiana Utility Regulatory Commission (IURC) which sought deferred-accounting treatment for $11.6 million. The Office of Utility Consumer Counselor (OUCC), a state agency charged with representing the interests of ratepayers, consumers, opposed Duke’s petition. It contended that Duke’s proposal constituted single-issue ratemaking and retroactive ratemaking, both of which are generally prohibited.

In July 2010, the IURC issued an order that approved Duke’s request. While the OUCC appealed that agency’s decision, at the end of July 2010, information came to light that the Administrative Law Judge (ALJ) which presided over the Duke proceedings had been simultaneously negotiating for employment with Duke during that time and when the order was issued. In October 2010, the IURC announced that it was conducting a legal and technical audit of the cases that the former ALJ presided over involving Duke.

While the audit found that no undue influence was exerted by the ALJ while he presided over the Duke cases, and no anomalies in this case were discovered, the IURC concluded that the case should nevertheless be reopened for further review and consideration. Duke provided additional testimony and evidence, as did the OUCC. The IURC issued an extensive second order that reversed course from the first order and thus denied Duke’s petition for the deferred-accounting treatment for storm-operating expenses. Duke appealed, contending the IURC acted arbitrarily and capriciously when it looked twice at materially the same evidentiary record but came to different decisions without giving any reason for the change.

The Court of Appeals disagreed with Duke’s assessment. It noted the high level of deference given to the agency because the order was a question falling well within its expertise. The Court emphasized that all the factual findings were based on substantial evidence placed into the record after the IURC reopened the proceeding. Finally, “the better practice would have been for the IURC to clearly articulate why it reached different conclusions,” but the Court concluded that IURC was not required to explain why it reached a different conclusion in its second order as compared to the first.

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.

The statements contained herein are matters of opinion and general information only and are not to be considered legal advice and should not be construed to form an attorney-client relationship. If you have any questions regarding this article, please contact an attorney.

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