On June 27, 2019, the Indiana Supreme Court concluded that Indiana utility companies may be estopped from challenging the use of customer class revenue allocation factors under Indiana’s Transmission, Distribution, and Storage System Improvement Charge statute (the “TDSIC Statute”) if such companies demonstrate uncontested support of the factors’ use in prior proceedings and the challenge would cause injury to an opposing party. The TDSIC Statute was enacted in 2013 and encourages energy utilities to replace their aging infrastructures by allowing them (1) to seek IURC pre-approval for certain gas or electric infrastructure projects and (2) to recoup the costs by submitting rate-increase petitions.
Typically, base utility rates are set through a general ratemaking case before the IURC. This type of review allows the IURC to ensure that utility rates are fair to both the utility company and to its customers. However, rates can also be adjusted to reflect certain infrastructure projects and costs through the Commission in what is known as “tracker” or “rider” proceedings. Specifically, the TDSIC Statute provides two such proceedings under Section 9 and Section 10, both of which are distinct yet still related. Under Section 10, utilities may seek approval of a multi-year plan from the IURC “for eligible transmission, distribution, and storage improvements.” Based on this multi-year plan, Section 9 subsequently permits utilities to petition the IURC for periodic rate adjustments to recover 80% of approved capital expenditures and TDSIC costs. Section 9 petitions further require that customers use “the customer class revenue allocation factors based on firm load approved in the pubic utility’s most recent retail base rate case order.”
At issue in NIPSCO Industrial Group v. Northern Indiana Public Service Co. was whether the IURC improperly approved of the use of customer class revenue allocation factors based on total load rather than firm load as required by the TDSIC Statute. Initially, NIPSCO Industrial Group (the “Industrial Group”) and the Northern Indiana Public Service Company (“NIPSCO”) agreed to two expansive, multi-year settlements, which specified how rate increases should be calculated and allocated among the utility company’s various rate classes under the TDSIC Statute. Ultimately, the IURC approved the agreements. However, despite being a party and approving the first Section 9 petition, the Industrial Group opposed NIPSCO’s second Section 9 petition. Specifically, the Industrial Group argued that the customer class revenue allocation factors included in NIPSCO’s second Section 9 petition were based not on firm load, but on total load. The IURC rejected the Industrial Group’s argument, leading the Industrial Group to seek judicial review.