BAILEY, Judge.
Citizens Action Coalition of Indiana, Inc., Save the Valley, Inc., Sierra Club, Inc., and Valley Watch, Inc. (collectively, "Interveners") appeal an order of the Indiana Utility Regulatory Commission ("the Commission") approving a request from Duke Energy, Indiana, Inc. ("Duke") to include power plant construction costs incurred April 1, 2012 to September 30, 2012 in a rate adjustment rider ("ICGG-10"), in implementation of a settlement agreement between Duke, the Indiana Office of Utility Consumer Counselor ("the OUCC"), and other entities. We affirm.
Interveners present two issues for review: whether the ratemaking order is contrary to law because:
On November 20, 2007, the Commission issued Certificates of Public Convenience and Necessity ("CPCN"), approving the cost estimate of $1.985 billion to build an integrated coal gasification combined cycle
This Court affirmed the Commission's CPCN Order approving the cost estimate of $1.985 billion. Id. at 1070.
On June 3, 2008, the Commission issued an order providing that its review of the IGCC Project would be conducted first by the introduction and consideration of evidence presented in semi-annual IGCC Rider proceedings
On September 17, 2010, several intervening parties (not including the present Interveners)
The Modified Settlement Agreement set a $2.595 billion hard cap for construction costs to be included in rates over a thirty-year period. The total was inclusive of $2.319 billion of direct costs and approximately $276 million of AFUDC prior to June 30, 2012. After June 30, 2012,
With Duke having continued to make semi-annual IGCC Rider filings pending the settlement, the Commission determined that IURC Cause No. 43114IGCC-5 ("IGCC-5") and IURC Cause No. 43114IGCC-6 ("IGCC-6") would be considered as part of the Commission's review under the sub-docket proceedings in IGCC-4S1. Duke subsequently filed semi-annual IGCC Rider filings in IURC Cause Nos. 43114IGCC-7 ("IGCC-7") and 43114IGCC-8 ("IGCC-8"). On the same day it issued its Final Order in the IGCC-4S1 sub-docket, the Commission issued orders in IGCC-5, IGCC-6, IGCC-7, and IGCC-8, implementing the Modified Settlement Agreement approved in the Final Order in IGCC-4S1.
The Edwardsport plant began commercial operations in 2013. Ultimately, the approved cost was $2.88 billion.
The Interveners filed Notices of Appeal to challenge orders in IGCC-4, IGCC-4S1, IGCC-5, IGCC-6, IGCC-7, and IGCC-8. Duke's petition to consolidate the appeals was granted. The orders on appeal consisted of one Commission order approving the Modified Settlement Agreement, and four orders implementing it. A panel of this Court affirmed the orders. Citizens Action Coal. of Ind., Inc. et al. v. Duke Energy Ind., Inc., et al., No. 93A02-1301-EX-76, 2014 WL 1092210 (Mar. 19, 2014) ("Duke II").
On November 20, 2012, Duke filed a petition requesting that the Commission approve its construction progress report for the IGCC Project for April 1, 2012 through September 30, 2012 (the IGCC-10 period). Duke also requested approval of construction costs to be reflected in a rate rider.
The Commission conducted a hearing on June 4, 2013, at which Interveners contended that the costs of a construction delay of 80 days should be chargeable to Duke and not ratepayers. The OUCC also appeared and participated. On September 11, 2013, the Commission issued an order approving Duke's construction progress report and approving the requested dollar amount for inclusion in a rate rider. This appeal ensued.
The Commission was created by the Indiana General Assembly to act "primarily as a fact-finding body with the technical expertise to administer the regulatory scheme devised by the legislature." Northern Ind. Public Serv. Co. v. U.S. Steel, 907 N.E.2d 1012, 1015 (Ind.2009). The Commission was assigned the responsibility "to insure that public utilities provide constant, reliable, and efficient service to the citizens of Indiana." Id. The five members, at least one of whom shall be an attorney, and not more than three of whom belong to the same political party, "shall be appointed by the governor from among persons nominated by the nominating committee in accordance with the provisions of IC 8-1-1.5." I.C. § 8-1-1-2(b).
Indiana Code section 8-1-3-1 provides for judicial review of the Commission's decisions in language almost identical
Our review is two-tiered:
Northern Ind. Public Serv., 907 N.E.2d at 1016.
Interveners' witness David Schlissel ("Schlissel"), President of Schlissel Technical Consulting, Inc., testified that, in his opinion, a delay of 80 days attributable to technical problems associated with human error and equipment failures, was unreasonable. He believed that an occurrence referred to as a "water hammer event" of June 26, 2012 was the primary cause of the delay,
On appeal, Interveners assert that the Commission improperly burdened the Interveners to show that delays were imprudent, as opposed to requiring Duke to show, through "substantial documentation," that delay-related financing costs were "reasonable and necessary" as required by Indiana Code section 8-1-8.8-12. According to Interveners, "imprudence," the standard embodied in Indiana Code section 8-1-8.5-6.5,
Indiana Code section 8-1-8.8-12 addresses financial incentives; recovery of costs; application for approval of rate adjustment mechanism; documentation; and actual or forecasted data. Subsection (a) states that the Commission shall provide incentives to eligible businesses for certain energy production or generating facilities in the form of timely recovery of specified costs. Subsection (b) provides that an eligible business seeking authority to timely recover the described costs must apply to the Commission for approval of a rate
Interveners assert that the requirement of "substantial documentation" persists at each rider proceeding and that the Commission failed to impose upon Duke this requirement — instead, examining the claimed costs for "imprudence." Duke contends that the statutory requirement of substantial documentation is applicable in the context of requirements for an initial project approval and does not govern the semi-annual proceedings.
The interpretation of a statute is a question of law which we review de novo. Nash v. State, 881 N.E.2d 1060, 1063 (Ind. Ct.App.2008), trans. denied. The best evidence of legislative intent is the language of the statute, giving all words their plain and ordinary meaning unless otherwise indicated by the statute. Chambliss v. State, 746 N.E.2d 73, 77 (Ind.2001). We presume the legislature intended language to be applied logically. Nash, 881 N.E.2d at 1063.
As for Section 12, its various subsections reference the application process and its requirements. In one instance, in subsection (d), there is a reference to "expected" costs. A "schedule for completion of construction" is required by subsection (c). Our examination of the plain language leads us to agree with Duke that 8-1-8.8-12 concerns the initial application for financial incentives. We are not persuaded that, once a utility has demonstrated its eligibility for clean energy financial incentives,
In supplement, Interveners claim in their reply brief that the Commission "looked at the wrong documentation" (the ongoing progress report required for review of the capital costs) as opposed to substantial evidence in the record (required for financing costs) to assess whether the challenged costs were "reasonable" or "unreasonable" and "necessary" or "unnecessary." Reply Brief at 10. Interveners then assert the Commission should have found, "based on the `correct' documentation from [Duke]," that the delay was within the "exclusive control of Duke and its contractors" and was thus neither reasonable nor necessary. Reply Brief at 10.
Distilled to its essence, Interveners' contention is that the Commission should have followed the recommendation of Interveners' expert to charge at least part of the costs of delay to Duke and not ratepayers. According to Interveners, the delay is untenable because the instrumentalities were within the control of Duke and the timeline simply reached too far beyond the prior estimates of completion
Next, Interveners assert that the Commission allowed an AFUDC "rate of return that did not take into account the benefit Duke receives from money collected from customers for deferred taxes," Appellants' Brief at 1, in contravention of Evansville v. Southern Indiana Gas & Electric Co., 167 Ind.App. 472, 339 N.E.2d 562 (1975).
At the hearing, Interveners presented the testimony of Ralph Smith ("Smith"), a regulatory consultant. In Smith's opinion, the CWIP proposed rate of return of 6.78% and the AFUDC proposed rates of return of 7.26% and 7.38% (depending upon the months represented) should be consistent. He challenged the calculation of AFUDC, claiming that deferred taxes was a necessary component of the calculation so as to avoid allowing a return on investment from ratepayer funds, as opposed to only the capital investors' contributions. In other words, Interveners asserted that the Commission ignored an interest-free loan extended to Duke because it could charge customers for tax liabilities but defer payment to taxing authorities, using the ratepayer funds in the interim. Smith opined that a proper reduction in AFUDC would be $264,000.
Duke witness Diana Douglas testified that Duke's calculation of AFUDC did not include accumulated deferred income taxes or unamortized investment tax credits and other cost elements used for regulatory cost of capital calculations in Indiana, because these are not specified for inclusion in guidelines promulgated by the Federal Energy Regulatory Commission ("FERC"). She observed that Duke had "computed its rate of return in accordance with prior Commission orders in all prior IGCC proceedings." (App 122.) She quoted a prior Commission order, in IGCC-9, acknowledging Duke's argument that deferred taxes are not generated during the construction phase.
The Commission rejected the Interveners' request "that Indiana's traditional AFUDC methodology should not be used for this project." (App. 34.) In so doing, the Commission observed that AFUDC had been calculated in conformance with FERC guidelines, adopted by the Commission "for use by Indiana electric utilities." (App. 35.)
On appeal, Interveners do not suggest that FERC guidelines mandate inclusion of deferred taxes as a component of AFUDC. Rather, they argue that exclusion is not required by FERC guidelines and note that at least one other state, Florida, provides for its inclusion.
In City of Evansville, the petitioning utility ("Petitioner") had adopted a practice of depreciating its plant at an accelerated rate for purposes of federal income taxes
A panel of this Court, addressing the City's claim on appeal that the "consumer contributed" funds should be excluded from the Petitioner's jurisdictional electric rate base, observed "[u]nder traditional regulatory concepts, utility company shareholders and bondholders, not the consumers, furnish the capital necessary for the operation of the business." Id. at 585. Accordingly, "customer contributions in aid of construction cannot be included in the fair value of the property upon which the utility's return is determined." Id. (citing Public Serv. Comm'n v. City of Indianapolis, 235 Ind. 70, 93, 131 N.E.2d 308, 317 (1956)).
Ultimately, this Court held that the funds "extracted from the ratepayers and held in reserve to meet future tax liabilities" constituted consumer-contributed capital; the Petitioner had employed the $6.5 million in reserves in the same manner as investor-contributed capital; and the method adopted by the Commission for the treatment of Petitioner's "deferred tax" reserves had resulted in a schedule of rates that were not "reasonable and just" as required by statutory authority. Id. at 585-87. In so holding, the Court rejected the City's contention that the Public Service Commission Act requires exclusion of consumer-contributed capital from the rate base in all cases, recognizing that the decision of whether to include a portion of the deferred tax reserves was best consigned "to the Commission's informed discretion."
Duke does not dispute the general proposition that a proper return on investment excludes allowing a return on customer-contributed
Indeed, this is not the Interveners' initial challenge to the AFUDC calculation. The AFUDC methodology is in accordance with a settlement approved by the Commission and was unsuccessfully challenged on appeal of prior litigation between the same parties. The order on IGCC 10, which gave rise to the instant appeal, implemented the settlement in this respect.
"Res judicata prevents the repetitious litigation of disputes that are essentially the same." Wright v. State, 881 N.E.2d 1018, 1021 (Ind.Ct.App.2008), trans. denied. This doctrine is divided into two branches: claim preclusion and issue preclusion. Id. at 1022. Issue preclusion, also referred to as collateral estoppel, precludes re-litigation of issues actually and necessarily decided in an earlier litigation between the same parties or those in privity with the parties. Scott v. Scott, 668 N.E.2d 691, 699 (Ind.Ct.App. 1996). Furthermore, a party cannot escape the effect of claim preclusion merely by using different language in framing the issue and defining the alleged error. Ben-Yisrayl v. State, 738 N.E.2d 253, 258 (Ind. 2000).
In Duke II, we addressed the Intervener's contention that "the computation of AFUDC failed to account for an `interest-free loan from customers' in the form of deferred utility taxes":
Duke II, No. 93A02-1301-EX-76, Slip op. at 12-13.
Ultimately, the Commission is charged with the independent oversight of ratemaking decisions. The Commission is
The Interveners have not demonstrated that the Commission acted contrary to law by approving the order in ICGG-10.
Affirmed.
KIRSCH, J., and MAY, J., concur.
The settling parties later expanded to include Nucor Steel.
Absent fraud, concealment, or gross mismanagement, a utility shall recover through rates the actual costs the utility has incurred in reliance on a certificate issued under this chapter, and as modified under sections 5.5 and 6 of this chapter as follows:
Yes. [Duke] has agreed on a prospective basis to include zero cost deferred taxes in the capital structure, which effectively reduces the weighted cost of capital. Exclusion of zero cost capital from the capital structure had been granted in the original CPCN order in Cause No. 43114 as a form of incentive to [Duke] and was capped at $1.985 billion of IGCC investment. The actual impact that the exclusion of deferred income taxes has on the capital structure varies with the weighting of deferred income taxes as well as the weighting of other elements in the capital structure. The incentive provided about a 100 basis point increase in the weighted cost of capital. This increase in the weighted cost of capital, when applied to the amount of IGCC investment eligible for the incentive, equates to about $22 million of additional revenue requirement on an annual basis. By removing this incentive, ratepayers would immediately benefit from the reduced weighted average rate of return in the initial amount of approximately $22 million annually. ([Duke II] Tr. 35,224.)