BARTEAU, Senior Judge.
In Citizens Action Coalition of Indiana, Inc. v. Duke Energy Indiana, Inc., 16 N.E.3d 449 (Ind.Ct.App.2014) (Citizens Action I), the Court remanded the case to the Indiana Utility Regulatory Commission (the Commission) for findings on two issues related to Duke Energy Indiana, Inc.'s petition to recover costs incurred while building its new power plant in Edwardsport, Indiana. On remand, the Commission issued an order with additional findings. Citizen's Action Coalition of Indiana, Inc., Save the Valley, Inc., Sierra Club, Inc., and Valley Watch, Inc. (collectively, the Intervenors), appeal the Commission's order. We affirm in part, reverse in part, and remand.
The Intervenors raise two issues, which we restate as:
The facts, as presented in Citizens Action I, are as follows:
Citizens Action I, 16 N.E.3d at 450-455 (footnotes omitted).
On appeal, Intervenors challenged the adequacy of the Commission's findings and the sufficiency of the evidence to support the findings. The Court remanded the case to the Commission with instructions to issue findings on two issues: (1) "whether the three-month delay was chargeable to Duke, and if so, what impact that delay had on Duke's customers' rates;" and (2) "a clear statement of the policy and evidentiary considerations underlying its determination regarding Duke's request that 50% of the Plant be deemed to be in-service." Id. at 460, 462. The Court did not express an opinion as to whether the Commission should reopen the record to receive new evidence.
On remand, Duke filed a motion asserting that the Commission did not need to receive additional evidence and asking the Commission to either: (1) issue additional findings; or (2) set a timetable for the parties to submit proposed findings for the Commission's review. The Intervenors objected, claiming that the Court's opinion in Citizens Action I required the Commission to consider additional evidence. Duke filed a reply.
On February 25, 2015, the Commission issued an order. The Commission determined, "it is not necessary for the Commission to reopen the record in this cause for taking additional evidence." Appellants' App. p. 8. Instead, the Commission issued findings on the issues raised by the Court in Citizens Action I. Regarding the three-month delay, the Commission stated, "based on the extensive evidence offered by [Duke] in this proceeding, we find that [Duke's] actions during the review period were not unreasonable. Specifically, we find that the schedule delays did not result from unreasonable actions taken by [Duke] in light of the complexity of the task being undertaken." Id. at 9.
As for Duke's declaration that the plant was partially in-service for federal tax purposes prior to the in-service date it had agreed to in the settlement agreement in IGCC-4S1, the Commission stated:
Appellants' App. p. 5. This appeal followed.
The General Assembly created the Commission primarily as an impartial fact-finding body with the technical expertise to administer the regulatory scheme devised by the legislature. N. Ind. Pub. Serv. Co. v. U.S. Steel Corp., 907 N.E.2d 1012, 1015 (Ind.2009). The Commission can only exercise power conferred upon it by statute. Id. The General Assembly has directed the Commission to ensure that utilities provide "safe, adequate, efficient, and economical retail energy services." Ind.Code § 8-1-2.5-1(1) (1995). In addition, the General Assembly has stated that Indiana "should encourage the use of advanced clean coal technology, such as in coal gasification." Ind.Code § 8-1-8.8-1(a)(5) (2011).
A party that is adversely affected by a ruling of the Commission may appeal as follows:
Ind.Code § 8-1-3-1 (1993).
The Court implements a multiple tiered standard of review, as follows:
Ind. Gas Co. v. Ind. Fin. Auth., 999 N.E.2d 63, 66 (Ind.2013) (citations omitted). The entity challenging the Commission's decision has the burden of proof to show that the decision is contrary to law. City of Fort Wayne v. Util. Ctr., Inc., 840 N.E.2d 836, 839 (Ind.Ct.App.2006).
Intervenors argue that the Commission's finding on remand that Duke did not act unreasonably in the course of addressing the three-month delay in the plant's commissioning schedule is insufficient and unsupported by evidence.
The General Assembly instructed the Commission to "encourage clean energy projects" by creating financial incentives for utilities who undertake such projects. Ind.Code § 8-1-8.8-11 (2011). Clean energy projects, as defined by the General Assembly, include "facilities that employ the use of clean coal technologies." Ind.Code § 8-1-8.8-2 (2011). Financial incentives may include "timely recovery of costs and expenses incurred during construction and operation" of clean energy projects. Ind.Code § 8-1-8.8-11(a)(1). Recoverable costs may include "capital, operation, maintenance, depreciation, tax costs, and financing costs." Ind.Code § 8-1-8.8-5 (2002).
With respect to coal gasification power plants such as the one at issue here, the Commission shall allow an eligible business to recover "the costs associated with qualified utility system property; and... qualified utility system expenses" if the business "provides substantial documentation that the expected costs and expenses and the schedule for incurring those costs and expenses are reasonable and necessary." Ind.Code § 8-1-8.8-12(d) (2011).
The Intervenors claim that on remand, the Commission failed to issue specific findings on every factual determination that was material to its ultimate finding of reasonableness, thereby rendering appellate review impossible. In Citizens Action I, the Court directed the Commission to answer a very specific question: "whether the three-month delay was chargeable to Duke, and if so, what
Next, the Intervenors claim that the Commission inappropriately switched the burden of proof from Duke to them, requiring them to prove that the costs were unreasonable. The evidence indicates otherwise. In the original final order in IGCC-9, the Commission determined that Duke had "adequately satisfied the information reporting requirements to the Commission" and that Duke's calculation of construction costs and other expenses "accurately reflects the net retail jurisdictional IGCC Project investment as of March 31, 2012." Appellee Duke's App. pp. 108-09. In the order at issue in this appeal, the Commission stated, "based on the extensive evidence offered by [Duke] in this proceeding, we find that the schedule delays did not result from unreasonable actions taken by [Duke]." Appellants' App. p. 9. The Commission thus indicated that Duke, the party seeking to recover costs, bore the burden of providing sufficient evidence to prove the extent and reasonableness of those costs.
The Commission noted that the Intervenors "offered very little evidence to support their allegations of imprudence" and determined that Duke's interpretation of reports offered by the Intervenors was "reasonably plausible." Id. These statements are best understood as weighing the party's evidence rather than altering the burden of proof. There is no indication that the Commission shifted Indiana Code section 8-1-8.8-12(d)'s burden of proof to the Intervenors. See City of Fort Wayne, 840 N.E.2d at 842 (Commission did not shift burden of proof to respondents; record demonstrated that the petitioner bore the burden of submitting proper documentation to support its requests); Cf. NIPSCO Indus. Group v. N. Ind. Pub. Serv. Co., 31 N.E.3d 1, 9 (Ind.Ct.App.2015) (Commission improperly shifted burden of proof to intervening parties by determining that petitioner's future projects were presumptively eligible for rate increases through tracker proceedings that had not yet begun).
The Intervenors also argue that the evidence does not support the Commission's finding that Duke's actions in relation to the three-month delay were not unreasonable. Per our standard of review, we consider the evidence in the light most favorable to the Commission's decision.
As of April 2012, the only construction work remaining to be completed was "10% of pipe insulation, the last 5% of electrical heat tracing, and punchlist items." Tr. p. 207. Ninety-one of the 2014 operating systems for the plant had been released to Duke's control by the systems' vendors. The construction portion of the project was "99% complete." Id.
Nevertheless, issues arose as various systems were installed and tested, resulting in a three-month delay during the six-month review period at issue here. For example, a Duke contractor accidentally activated an "ASU train 2 Compander" without appropriately oiling the device's bearings, which damaged the device and required Duke to ship it back to the manufacturer to be rebuilt. Id. at 45-46, 176. Duke's Vice President in charge of the plant construction project, Michael
Another compander also had to be sent back to the manufacturer for rebuilding due to rust problems. The manufacturer was able to rebuild one compander and send it back to Duke within several weeks. The other compander was out for fifteen weeks, but that did not impact the construction schedule because Duke needed only one functioning compander to perform startup testing.
On another occasion, commissioning of the "power block" was slowed because GE, who built and installed several crucial systems in the new plant, performed extra tests on two turbines before releasing them to Duke for startup testing. Id. at 65-66. The extra tests would not have been necessary on a more conventional construction project, but the turbines had "a new blade design, new — not built anywhere else." Id. at 66. Thus, GE, not Duke, caused a delay by performing additional testing on this new technology.
The parties also discussed a six-week delay caused by a "water hammer" event that damaged piping and valves and required a "realignment of the steam turbine." Id. at 68. The event occurred on June 26, 2012, outside the time period for which Duke sought to recover costs in this proceeding (IGCC-9). In any case, the event was caused by "malfunctioning equipment and control system logic errors," Id. at 303, rather than negligence or other unreasonable behavior by Duke. The Intervenors also cite two other delays, caused by lengthy detergent cleaning of gas removal systems and an unexpected need to replace critical control valves in the gasification tower, both of which occurred outside the time period at issue here.
Furthermore, when technical problems or damaged parts caused delays in testing and commissioning systems, the evidence, including internal emails, reflects that Duke acted with necessary speed in identifying and fixing the problems.
Based on our review, there is sufficient evidence to support the Commission's finding that the construction delays during the time period at issue in IGCC-9 were not caused by unreasonable behavior by Duke or its contractors. See Citizens Action Coalition of Ind., Inc. v. Duke Energy Ind., Inc., 15 N.E.3d 1030, 1038 (Ind. Ct.App.2014) (determining that sufficient evidence supported the Commission's decision to allow Duke to recover construction costs in IGCC-10), trans. denied.
The Intervenors cite to evidence, consisting mostly of reports from GE, to argue that Duke cut corners during construction and testing, which the Intervenors claim was unreasonable and resulted in equipment failures. The Commission, as the finder of fact, was free to weigh the reports and determine how credible they were. As the Commission noted in the order at issue here, no one from GE appeared at the Commission's evidentiary hearing to explain and authenticate GE's position as stated in the reports and other communications. In addition, Duke submitted evidence refuting GE's allegations. The Intervenors are essentially asking the Court to reweigh the evidence, in violation of our standard of review.
Finally, the Intervenors assert that the Commission failed to adequately calculate the cost to ratepayers caused by the three-month delay. The Court's opinion in Citizen Action I directed the Commission
The Intervenors challenge the Commission's finding that Duke did not violate the settlement agreement in IGCC-4S1 by declaring the Edwardsport plant to be partially in-service for federal tax purposes prior to the in-service date it had agreed to in the settlement agreement. The Intervenors further assert that Duke's declaration violated the plain language of the settlement agreement.
A settlement agreement is a type of contract. Language in a contract should be given its plain and ordinary meaning unless a particular term is used in a manner intended to convey a specific technical concept. Washington Nat'l Corp. v. Sears, 474 N.E.2d 116, 121 (Ind. Ct.App.1985), trans. denied. In construing a written instrument, we give technical words and terms of art their technical meaning. George S. May Intern. Co. v. King, 629 N.E.2d 257, 262 (Ind.Ct.App. 1994), trans. denied. We presume that the parties know the technical meaning of the language they use in a formal instrument and have adopted that meaning. Id.
The settlement agreement in IGCC-4S1 was intended to resolve "all disputes, claims, and issues ... relating to the construction costs and allowance for funds used during construction (`AFUDC') costs associated with the Edwardsport IGCC Project." Tr. p. 412. With respect to an in-service date, the agreement provides, in relevant part:
Tr. p. 413.
Two observations may be drawn from the terms of the agreement. First, the agreement was intended to address construction costs in the context of utility regulation and utility rates. Second, the parties defined "in-service" in highly technical terms, with reference to Federal Energy Regulatory Commission guidelines and specific technological benchmarks. It thus appears that the parties limited the definition of "In-Service Operational Date" to utility regulatory matters and did not state a broad, plain-language meaning of the term that might bar Duke from declaring the plant to be in-service for other purposes, such as federal tax accounting.
In addition, Duke's Director of Rates, Diana L. Douglas, testified that in her experience as an accountant, there is a difference between declaring a plant in-service for federal tax purposes and declaring a plant in-service for ratemaking purposes. Tr. pp. 363-64, 378-79. There is sufficient evidence in the record to support the Commission's determination that Duke did not violate the settlement agreement by declaring the plant to be partially in-service for federal tax purposes before the "In-Service Operational Date" set forth in the settlement agreement.
The Intervenors next argue that the Commission erred because Duke and the Commission both concede that Duke's declaration of the plant as being
On remand, the Commission impliedly determined that the impact upon rates was reasonable because it found that it "had allowed the impact of [Duke's] in-service date for tax purposes to be recognized for ratemaking purposes in prior proceedings, and [it was] not presented with any evidence suggesting a reversal of those decisions." Appellants' App. p. 5. The Commission cited to orders from prior proceedings, ECR 19 and ECR 20, in support of its finding.
The Intervenors claim that the Commission erred by considering the orders from ECR 19 and ECR 20, asserting that those orders were not introduced into the record in IGCC-9 and the Commission did not take proper notice of them. The Intervenors are correct. Duke cited to the order from ECR 19 in its Reply Brief to the IURC in this case, but neither Duke nor the Intervenors asked to have that order or the order from ECR 20 admitted as evidence in this case. In addition, the Commission has a procedure for taking administrative notice of its orders from prior cases. See 170 IAC 1-1.1-21 (2012). Nothing in the record indicates that the Commission followed that procedure with the orders from ECR 19 and ECR 20. The Commission erred in considering those orders in this proceeding, and its finding related to those orders is not supported by properly admitted evidence.
Next, the Commission found that Duke's Director of Rates, Diana Douglas, notified the Commission in this case of the date that Duke had declared the plant to be partially in-service for tax purposes. That finding appears to be supported by the record, but does not address the issues of whether declaring the plant partially in-service affected Duke's costs in this proceeding and, if so, whether those costs and the impact upon ratepayers are reasonable.
The Commission also found that the Intervenors "did not question the accuracy of Ms. Douglas' rate calculations." Appellants' App. p. 5. It appears from the record that the Intervenors did not challenge her math. However, Duke did not clarify until December 20, 2012, that its petition for cost recovery in this case was affected by declaring the plant partially in-service for tax purposes. On that date, Douglas filed her written rebuttal testimony with the Commission, explaining that Duke's proposed utility rates were affected by its tax liabilities. The Commission held its evidentiary hearing on January 15, 2013, less than a month after Duke filed Douglas's rebuttal testimony. At the hearing, Douglas further clarified that the partial in-service declaration effectively raised the rates on Duke's utility customers. In Citizens Action I, we noted that these late clarifications deprived the Intervenors of the opportunity to object to the rate implications of the partial in-service declaration and conduct discovery on Duke's calculations. 16 N.E.3d at 461.
Nevertheless, although the Intervenors had limited opportunities to examine Douglas's calculations for the impact of the in-service declaration, during the evidentiary hearing the Intervenors cross-examined Douglas extensively about the rate consequences arising from Duke's partial in-service declaration. The Intervenors subsequently stated in their objection to Duke's proposed final order that the Commission should reject Duke's proposed rates because the tax consequences resulted in an inappropriate increase to customers'
We conclude from this evidence that although the settlement in IGCC-4S1 did not bar Duke from declaring the power plant to be partially in-service for federal tax purposes, the Commission was obligated to determine the impact of that in-service declaration upon the rates Duke sought in this action, and whether the rates were reasonable per Indiana Code section 8-1-8.8-12(d). The findings in the Commission's original order and the order on remand do not adequately address these points. We must reverse and remand. See L.S. Ayres & Co. v. Indianapolis Power & Light Co., 169 Ind.App. 652, 351 N.E.2d 814, 830 (Ind.Ct.App.1976) (reversing and remanding for further proceedings where the commission's order did not address a key issue raised by a party or articulate the reasons for its decision).
The Intervenors argue that the Commission erred by failing to reopen the record on remand to hear additional evidence. The Court in Citizens Action I did not order the Commission to receive additional evidence. The Court also did not bar the Commission from receiving additional evidence if deemed necessary.
Based on our review of the record, there was ample evidence regarding the three-month delay and its impact upon Duke's petition for cost recovery, and there was no need for additional evidence on remand to address that issue. By contrast, there are insufficient findings as to the value of the rate increases caused by Duke's declaration that the plant was partially in-service for tax purposes, and whether the increases were reasonable. Furthermore, the Intervenors did not have an opportunity to seek discovery on the rate increases, due to Duke's late clarification of the issue. In addition, the Commission on remand considered additional evidence in the form of orders from ECR 19 and ECR 20, although those orders were not part of the record in IGCC-9 and the Commission did not follow the procedure for taking administrative notice of prior orders. The Commission's consideration of these orders sharply contradicts its determination that it did not need to reopen the record on remand to receive additional evidence.
Under these circumstances, on remand the Commission should reopen the record, receive additional evidence (including any orders and other documents from prior or subsequent cases deemed necessary by the parties and the Commission), and issue findings of fact on these issues: (1) quantifying the impact upon Duke's proposed rate increases in this case resulting from Duke's declaration that the plant was partially in-service for tax purposes; and (2) determining whether the proposed increases were reasonable per Indiana Code section 8-1-8.8-12(d). See Civil Commitment of W.S. v. Eskenazi Health, 23 N.E.3d 29, 36 (Ind.Ct.App.2014) (reversing and remanding for additional evidentiary hearing where findings of fact were silent on key issue raised by appellant), trans. denied.
For the reasons stated above, we affirm in part the Commission's order, reverse in part, and remand for further proceedings.
Affirmed in part, reversed in part, and remanded.
MAY, J., and CRONE, J., concur.