FOR PUBLICATION


ATTORNEYS FOR APPELLANTS:                    ATTORNEYS FOR APPELLEES:

JEROME E. POLK                               Duke Energy Indiana, Inc.:
Polk & Associates                            JON B. LARAMORE
Davie, Florida                               JANE DALL WILSON
                                             Faegre Baker Daniels LLP     Sep 08 2014, 9:03 am
                                             Indianapolis, Indiana
JENNIFER A. WASHBURN
Citizens Action Coalition of Indiana, Inc.   KELLEY A. KARN
Indianapolis, Indiana                        ELIZABETH A. HERRIMAN
                                             Duke Energy Indiana, Inc.
                                             Plainfield, Indiana

                                             Office of Utility Consumer Counselor:
                                             A. DAVID STIPPLER
                                             RANDALL C. HELMEN
                                             LORRAINE HITZ-BRADLEY
                                             Office of Utility Consumer Counselor
                                             Indianapolis, Indiana


                               IN THE
                     COURT OF APPEALS OF INDIANA


CITIZENS ACTION COALITION OF                 )
INDIANA, INC., SAVE THE VALLEY, INC.,        )
SIERRA CLUB, and VALLEY WATCH, INC.,         )
                                             )
       Appellants-Intervenors,               )
                                             )
               vs.                           )
                                             )
DUKE ENERGY INDIANA, INC.,                   )      No. 93A02-1305-EX-394
                                             )
       Appellee-Petitioner,                  )
                                             )
INDIANA OFFICE OF UTILITY                    )
CONSUMER COUNSELOR,                          )
                                             )
       Appellee-Statutory Party.             )
        APPEAL FROM THE INDIANA UTILITY REGULATORY COMMISSION
                                James D. Atterholt, Chairman
 Kari A.E. Bennett, Larry S. Landis, Carolene R. Mays, and David E. Ziegner, Commissioners
                   1

                         David E. Veleta, Administrative Law Judge
                                  Cause No. 43114 IGCC-9


                                         September 8, 2014

                                OPINION - FOR PUBLICATION

KIRSCH, Judge


      Citizens Action Coalition of Indiana, Inc., Save the Valley, Inc., Sierra Club, and

Valley Watch, Inc. (collectively, “Intervenors”) appeal the order of the Indiana Utility

Regulatory Commission (“the Commission”) approving Duke Energy Indiana, Inc.’s

(“Duke”) request to include power plant construction costs incurred from October 1, 2011

through March 31, 2012 in a rate adjustment rider.

      On appeal, Intervenors raise the following restated issues:

      I.        Whether the Commission erred when it authorized Duke to pass on to
                ratepayers 100% of Duke’s requested financing costs for the period
                under review when the Commission’s authorization was made in the
                absence of findings of fact and conclusions thereon regarding costs
                incurred during a three-month delay; and

      II.       Whether the Commission erred by allowing Duke to consider 50% of
                the power plant to be “in-service,” and thereby increase customer
                rates, despite Duke’s admission that the plant had not reached its “In-
                Service Operational Date” as that term was defined in a Commission-
                approved settlement agreement to which Duke was a party, when such
                determination was made in the absence of Commission findings of
                fact and conclusions thereon.


      1
          Kari A.E. Bennett was absent when the Order at issue was approved on April 3, 2013.


                                                   2
       We remand for additional findings.

                           FACTS AND PROCEDURAL HISTORY2

       In 2006, Duke operated a coal and oil-fired generating station at its Edwardsport

facility in Knox County, Indiana. The facility, which had a capacity of 160 megawatts,

had been placed “in-service” between 1944 and 1951, and was nearing the end of its useful

economic life. On September 7, 2006, Duke and Southern Indiana Gas and Electric

Company, d/b/a Vectren Energy Delivery of Indiana, Inc.3 filed a Verified Petition with the

Commission, pursuant to Indiana Code chapters 8-1-8.5, 8-1-8.7, and 8-1-8.8, requesting

the issuance of applicable certificates of public convenience and necessity (“CPCN”) and

applicable certificates of clean coal technology for the construction of a 630-megawatt

capacity, integrated gasification combined cycle (“IGCC”) power plant at the Edwardsport

location. An IGCC generating facility converts coal into synthesis gas, which is used to

fuel highly efficient combustion turbines.

       In the Verified Petition, Duke requested: approval of the estimated costs and

construction schedule of the IGCC Project (“the Project”); authority pursuant to Indiana

Code section 8-1-8.8-12 to recover construction and operating costs associated with the




       2
          Oral argument was held on June 25, 2014 at Purdue University’s Krannert Graduate School of
Management. We extend our thanks to counsel for the quality of the oral and written arguments, for
participating in post-argument discussions with the audience, and for commuting to West Lafayette. We
especially thank the Executive Education Program at the Krannert Graduate School of Management for
their accommodations and the students in the audience for their thoughtful post-argument questions.
       3
           Vectren later withdrew from the IGCC Project.


                                                   3
Project on a timely basis via applicable rate adjustment mechanisms;4 authority to use

accelerated depreciation for the Project; approval of certain additional financial incentives

associated with the Project; authority to defer its property tax expense, post-in-service

carrying costs, depreciation costs, and operation and maintenance costs associated with the

Project on an interim basis until the applicable costs are reflected in Duke’s retail electric

rates; and authority to recover other related costs associated with the Project. In re Duke

Energy Ind., Inc., 43114, 2007 WL 4150583 (Nov. 20, 2007). Duke also asked the

Commission to conduct an ongoing review of the construction of the Project. Id.

        Pursuant to Indiana Code section 8-1-1.1-5.1, the Indiana Office of the Utility

Consumer Counselor (“OUCC”) participated in the proceedings before the Commission on

behalf of consumers and ratepayers. Intervenors, Duke Energy Indiana Industrial Group

(“Industrial Group”), and Nucor Steel, a Division of Nucor Corporation (“Nucor”), among

others, were additional parties to this proceeding.

        On November 20, 2007, the Commission issued its final order in consolidated Cause

Numbers 43114 and 43114-S1 and made several determinations, including: (1) approval




        4
           The Commission is required to provide new energy generating facilities with the financial
incentive of being able to timely recover from ratepayers, through a rate adjustment mechanism, the costs
incurred in the construction of the facility. Ind. Code § 8-1-8.8-12(a) (emphasis added). An eligible utility
must apply to the Commission for approval of a rate adjustment mechanism. I.C. § 8-1-8.8-12(b). Such
application must include at least a schedule for completion of the construction and a statement of the amount
of capital investment being made by the applicants. I.C. § 8-1-8.8-12(c). As applicable, the Commission
shall allow an eligible business to recover: (1) the costs associated with qualified utility system property;
and (2) qualified utility system expenses. I.C. § 8-1-8.8-12(d). A retail rate adjustment mechanism
proposed by a utility may be based on actual or forecasted data. I.C. § 8-1-8.8-12(f).


                                                     4
of CPCNs for the Project under IC 8-1-8.55 and 8-1-8.7;6 (2) approval of Duke’s estimated

costs of $1.985 billion as reasonable to complete the Project; and (3) agreement that

ongoing review of the construction of and cost recovery for the Project would be conducted

in semi-annual proceedings. Id. The semi-annual proceedings included a rate adjustment

mechanism, the IGCC Rider. In each IGCC Rider, the Commission would review the

progress of the Project’s construction and consider Duke’s request to immediately recover

construction costs, financing costs, and other operating costs that Duke had incurred during

the previous six-month period. Once approved, these costs were immediately added to

customers’ rates. Each six-month period was numbered, with the first being IGCC-1, the

second IGCC-2, and so forth.               In the instant action, Intervenors appeal from the

Commission’s order (“Order”) in the ninth semi-annual review, IGCC-9.7


        5
           Indiana Code chapter 8-1-8.5, which addresses Utility Powerplant Construction, prohibits a public
utility from constructing an electric generating facility without first obtaining from the Commission a
CPCN stating that public convenience and necessity will be served by constructing the facility. Ind. Code
§ 8-1-8.5-2. As a condition for receiving this CPCN, the utility must file an estimate of construction costs
in such detail as the Commission may require. The Commission must review the continuing need for the
facility under construction and, when requested by the public utility, must engage in an ongoing review of
the construction progress. Ind. Code § 8-1-8.5-6. Under such a program, the utility must submit, at intervals
mutually agreed to by the utility and the Commission, a progress report and any revisions in the cost
estimates for the construction. I.C. § 8-1-8.5-6(a).
        6
          Indiana Code chapter 8-1-8.7, which addresses Clean Coal Technology, prohibits an electric
generating plant from constructing a clean coal technology plant without first obtaining from the
Commission a CPCN stating that public convenience and necessity will be served by such technology. Ind.
Code § 8-1-8.7-3. Prior to granting this CPCN, the Commission must approve the estimated costs of
construction. I.C. § 8-1-8.7-4. Thereafter, the Commission must review the continuing need of the clean
coal plant under construction and, when requested by the public utility, must engage in an ongoing review
of the construction progress. I.C. § 8-1-8.7-7. Additionally, at intervals mutually agreed to by the utility,
the applicant must submit a progress report of the construction as it proceeds and any revisions in the cost
estimates for the construction. Id.
        7
         On September 11, 2013, the Commission entered its order in IGCC-10, the subsequent semi-
annual review covering April 1, 2012 through September 30, 2012. 2013 WL 5275998 (Ind. U.R.C.).
Intervenors have appealed that order in Case No. 93A02-1310-EX-835.


                                                     5
       In May 2008, Duke filed its petition in IGCC-1, which included a request by Duke

to revise the projected cost estimate of the Project from $1.985 billion to $2.35 billion and

a request for approval to undertake studies related to carbon capture at the Project and for

cost recovery for such studies. On January 7, 2009, the Commission issued its order in

IGCC-1 approving: (1) Duke’s increase in cost estimate to $2.35 billion and its ongoing

review progress report; (2) timely recovery from ratepayers of construction and operating

costs, including financing, through the IGCC Rider for the six months under review; and

(3) studies related to carbon capture at the Project and cost recovery for such studies. In re

Duke Energy Ind., Inc., 431114 IGCC-1, 2009 WL 214580 (Jan. 7, 2009).                  In the

subsequent two reviews, the Commission also approved Duke’s cost recovery requests in

IGCC-2 and IGCC-3.

       On November 24, 2009, in connection with IGCC-4, Duke requested approval from

the Commission to recover from ratepayers the costs it had incurred during the six-month

period ending September 30, 2009. Duke also requested a subdocket, referred to as IGCC-

4S1, asking the Commission to approve an increase to the cost estimate for the entire

project. In re Duke Energy Ind., Inc., 2012 WL 6759528 (Ind. U.R.C., Dec. 27, 2012).

Under IGCC-4S1, Duke initially requested an increase in the Project’s cost from $2.35

billion to $2.88 billion including allowance for funds used during construction

(“AFUDC”). Id. Subsequently, Duke proposed to voluntarily cap the costs that it would

seek from customers and sought approval of a Project cost estimate of $2.72 billion in

direct construction costs, plus all associated AFUDC costs on the $2.72 billion for a total

of approximately $3 billion. Id.

                                              6
       On July 28, 2010, the Commission issued its interim order in IGCC-4, approving

Duke’s six-month costs and the IGCC Rider on an interim basis, pending the outcome of

IGCC-4S1. On September 17, 2010, Duke, Industrial Group, and the OUCC submitted a

settlement agreement to the Commission in IGCC–4S1, which set a hard cap cost of $2.975

billion on the construction costs of the Project. Subsequently, amidst an ethics scandal

involving Duke and the Commission, the settlement agreement was withdrawn.

       About two years later, on April 30, 2012, Duke filed a modified settlement

agreement in IGCC-4S1 (“Agreement”) to which Duke, Industrial Group, OUCC, and

Nucor were all parties. Appellants’ App. at 321-32. This Agreement included a $2.595

billion hard cost cap for construction costs and provided a partial cap on capital costs up

through the Plant’s in-service date. Id. at 322. The Agreement included conditions that

Duke had to meet before the Plant would be declared in-service and also stated that the

“In-Service Operational Date shall not be prior to September 24, 2012.” Id. at 323.

Intervenors were not signatories to the Agreement in IGCC-4S1 and actively opposed it

being approved by the Commission.

       On December 27, 2012, the Commission issued its final order approving the

Agreement in IGCC-4S1, again over Intervenors’ objections.              The Commission

simultaneously issued final orders in several other IGCC Rider proceedings that were then

pending, but were essentially concluded: Cause Nos. 43114 IGCC-5, IGCC-6, IGCC-7,

and IGCC-8. In these Orders, the Commission began implementation of the IGCC-4S1

settlement. In re Duke Energy Ind., Inc., 2012 WL 6759529, (Ind. U.R.C., Dec. 27, 2012);

In re Duke Energy Ind., Inc., 2012 WL 6759530 (Ind. U.R.C., Dec. 27, 2012); In re Duke

                                            7
Energy Ind., Inc., 2012 WL 6759531 (Ind. U.R.C., Dec. 27, 2012); and In re Duke Energy

Ind., Inc., 2012 WL 6759532 (Ind. U.R.C., Dec. 27, 2012).

       On June 8, 2012, Duke filed its Verified Petition in the instant action, IGCC-9,

requesting:

       [T]hat the Commission, for ratemaking purposes, authorize the addition of
       the actual expenditures for its IGCC Project made through March 31, 2012,
       to the value of Petitioner’s property. Petitioner further requests that the
       Commission approve and authorize the requested rate adjustment allowing
       Petitioner to earn a return on said amount, in addition to the return on value
       of its used and useful utility property and on its construction work in progress
       investment previously approved by the Commission. Petitioner also requests
       recovery of certain other applicable costs and credits via the IGCC Rider,
       including . . . depreciation, and Indiana Coal Gasification Technology
       Investment Tax Credit, as well as reconciliation of amounts necessary to
       adjust the IGCC Rider charges and credits to actual amounts.

Appellants’ App. at 36-37. That same day, the parties offered written testimony into

evidence. That evidence was admitted without objection. Duke’s testimony was submitted

by W. Michael Womack, Vice President of the Project; Jack L. Stultz, General Manager

II, Regulated Fossil Stations; and Diana L. Douglas, Duke’s Director of Rates. Appellant’s

App. at 9. Kerwin L. Olson, Executive Director for Citizens Action Coalition of Indiana,

Inc., submitted testimony, again without objection, on behalf of Intervenors on December

10, 2012. Id. at 10. The pertinent portions of the testimony will be discussed below.

       The Commission held a hearing on Duke’s petition on January 15, 2013. About two

weeks later, Duke filed its post-hearing argument in the form of a Proposed Order.

Intervenors filed Exceptions to Duke’s Proposed Order on February 21, 2013, setting out

the following specific legal and factual objections to the relief Duke requested in this case.

       1.     Duke is not entitled to recover financing costs for the three[-]month

                                              8
        delay that occurred as a result of events that took place during the review
        period at issue in this case. Duke failed to carry its burden of proof that the
        Project financing costs attributable to this three month delay were reasonable
        and necessary, as required under Indiana Code § 8-1-8.8-12.

        2.      Duke should not be permitted to increase customer rates by declaring
        50% of the plant “in-service,” given that the plant admittedly did not meet
        the definition of the “In-Service Operational Date” included in the 4S1
        Settlement Agreement and approved by the Commission’s 4S1 final order.
        Duke contends the in-service definition in the Settlement is to be used purely
        for ratemaking purposes. Yet at the same time, Duke’s witness Diana
        Douglas acknowledged that Duke’s proposed “partial” in-service declaration
        will, in fact, increase customer rates.8

Appellants’ App. at 418.

        Duke filed a Reply to these arguments on February 28, 2013. Id. at 466-85. In

pertinent part, Duke asserted:

        3)      no evidence has been presented in this proceeding that the schedule
                update testified to by [Duke’s] witness Mr. Womack was
                unreasonable or caused by imprudence;

        4)      the principles of collateral estoppel or issue preclusion do not apply
                to this proceeding, which covers an entirely different time period than
                that reviewed by the Commission in IGCC-4S1;

        5)      the determination that a portion of the Edwardsport IGCC Project
                should be placed in[-]service for income tax purposes does not
                contravene the Settlement Agreement approved by the Commission
                in IGCC-4S1, nor does it negatively impact customers;

        6)      [Duke’s] calculation of its AFUDC is proper and logical, and [Duke]

        8
         Intervenors raised three objections, two of which they raise on appeal. Intervenors’ third
objection was:

        Under Indiana law, a utility may not earn a return on customer contributed capital.
        Deferred taxes constitute “customer contributed” capital. Consequently, Duke cannot be
        permitted to earn a return on deferred taxes as part of its financing costs accrued as
        allowance for funds used during construction (“AFUDC”).

Appellants’ App. at 418.

                                                    9
                 has not and is not earning a return on its deferred tax balance.

Id. at 466-67.

       On April 3, 2013, the Commission entered its Final Order in IGCC-9, approving the

financing costs that Duke incurred during the IGCC-9 review, which included an alleged

$61 million of financing costs that Duke incurred during the three-month delay. The

Commission approval allowed Duke to pass along to ratepayers, through the IGCC Rider,

all of the IGCC-9 financing costs including the $61 million.

       In its order, the Commission set forth “Discussions and Findings,” but failed to

make findings regarding the reasonableness of the three-month delay or whether 50% of

the IGCC Plant was deemed to be in-service. Intervenors now appeal the Commission’s

order. Additional facts will be supplied where necessary.

                               DISCUSSION AND DECISION

       In IGCC-9, the Commission approved Duke’s construction progress and granted

Duke’s request to recover from ratepayers all costs incurred from October 1, 2011 through

March 31, 2012. In its order, the Commission set forth the following “Discussions and

Findings”:

       6. A. Ongoing Review Progress Report for IGCC-9. Mr. Womack testified
       concerning the IGCC Project progress report and issues relating to start-up,
       testing, validation, and commissioning activities and explained in detail the
       schedule delays resulting from the increase in bulk commodity quantities.
       He explained the IGCC Project has encountered delays in testing and
       commissioning due to issues that have been uncovered and subsequently
       corrected. Thus, the facts explored in previous IGCC proceedings relating
       to the increased commodity quantities continue to have an impact on the
       IGCC Project through the ongoing review period of this proceeding. Joint
       Intervenors reiterated their prior testimony considered in previous IGCC
       dockets that these delays have been caused by mismanagement of the IGCC

                                                10
Project.

Joint Intervenors renewed their previous concerns related to the “cascade
effect” of construction problems and the impact of the “deep conflict”
between GE [General Electric (“G.E.”), Duke’s primary equipment vendor
for the Project,] and the Company and its impact on the IGCC Project. The
Commission finds that these concerns of Joint Intervenors have been
addressed in other proceedings and we are not persuaded that evidence
presented herein alters those findings. Accordingly, they will not be
addressed again in the present docket.

We further find that the Company has adequately satisfied the information
reporting requirements to the Commission for purposes of these review
proceedings as specified in the IGCC-1 and IGCC-2 Orders and subsequently
amended in Cause No. 43114 IGCC-8. Accordingly, we approve the
ongoing progress report for IGCC-9.

B. Ratemaking Issues. Joint Intervenors contend that Duke is not entitled to
cost recovery in this proceeding and that Joint Intervenors believe CWIP
[construction work in progress] is inappropriate. However, pursuant to
Indiana Code ch. 8-1-8.8, and this Commission’s Orders in previous IGCC
proceedings, the Commission finds no basis to discontinue the recovery
mechanism for the 1GCC Project it previously found appropriate within the
statutory construct in Indiana.

Joint Intervenors assert that the Company’s calculation of AFUDC is
incorrect. Ms. Douglas explained that Petitioner calculated its AFUDC rates
in conformance with FERC’s general instructions for the computation of
AFUDC rates (found in the Code of Federal Regulations), which this
Commission has adopted for use by Indiana electric utilities, and that the
Company’s calculation does not include accumulated deferred income taxes
because it is not one of the elements specified to be included in the
calculation by FERC. She also explained that deferred income taxes are not
included when calculating AFUDC rates in recognition of the fact that
plant[,] which has not yet been placed in[ ]service[,] generally will not
generate cumulative deferred income tax balances because it is not yet
depreciating. We agree with Ms. Douglas that excluding deferred income
taxes from the calculation of AFUDC rates is in accordance with the FERC
instructions we have adopted for use by Indiana electric utilities and,
therefore, is in accordance with this Commission’s rules. We therefore find
the Company’s calculation of AFUDC rates to be applied to IGCC
investment is correct.


                                    11
       Ms. Douglas testified as to the updated IGCC Rider and the associated
       calculations and assumptions contained in that Rider. Joint Intervenors did
       not present evidence of any miscalculations or propose any alternative
       calculations. The OUCC found the figures used in the calculation of the
       Rider to be supported by the exhibits of the Company. Based on our review
       of the evidence presented on this issue, we find that Duke’s IGCC Rider, as
       sponsored by the testimony of Ms. Douglas, accurately reflects the net retail
       jurisdictional IGCC Project investment as of March 31, 2012, and that the
       proposed IGCC-9 Rider is accurately calculated and accurately incorporates
       the provisions of the Cause No. 43114 IGCC-4S1 Settlement Agreement.
       We find that the IGCC Project costs, including the actual IGCC Project
       investment incurred through March 31, 2012, up to the amount of the Hard
       Cost Cap and Additional AFUDC, as defined by the IGCC 4S1 Settlement
       Agreement and reflected in the testimony and exhibits of Ms. Douglas, are
       hereby approved consistent with our findings herein.

       Ms. Douglas also sponsored Petitioner’s Exhibit C-6 which shows the impact
       of the proposed IGCC Project ratemaking treatment. The monthly bill of a
       residential customer using 1,000 kilowatt-hours will decrease by $0.14 or
       approximately 0.2% with implementation of this factor.

Appellants’ App. at 26-27.

       On appeal, Intervenors contend that it was contrary to law for the Commission to

pass IGCC-9 costs on to ratepayers without making findings regarding Intervenors’

objections that Duke has negatively impacted customers’ rates by being three months

behind in construction and by prematurely declaring 50% of the Edwardsport Plant to be

in-service.

       The Indiana Code authorizes judicial review of Commission orders as follows:

       Any person, firm, association, corporation, limited liability company, city,
       town, or public utility adversely affected by any final decision, ruling, or
       order of the commission may, within thirty (30) days from the date of entry
       of such decision, ruling, or order, appeal to the court of appeals of Indiana
       for errors of law under the same terms and conditions as govern appeals in
       ordinary civil actions, except as otherwise provided in this chapter and with
       the right in the losing party or parties in the court of appeals to apply to the
       supreme court for a petition to transfer the cause to said supreme court as in

                                             12
       other cases. An assignment of errors that the decision, ruling, or order of the
       commission is contrary to law shall be sufficient to present both the
       sufficiency of the facts found to sustain the decision, ruling, or order, and the
       sufficiency of the evidence to sustain the finding of facts upon which it was
       rendered.

Ind. Code § 8-1-3-1 (emphasis added).

       Recently, our Supreme Court set forth the standard of review for the Commission

order as follows:

       The General Assembly created the Indiana Utility Regulatory Commission
       primarily as a fact-finding body with the technical expertise to administer the
       regulatory scheme devised by the legislature.” N. Ind. Pub. Serv. Co. v.
       United States Steel Corp., 907 N.E.2d 1012, 1015 (Ind. 2009) [hereinafter
       NIPSCO]. The Indiana Code authorizes judicial review of IURC orders as
       follows:

              An assignment of errors that the decision, ruling, or order of the
              commission is contrary to law shall be sufficient to present both the
              sufficiency of the facts found to sustain the decision, ruling, or order,
              and the sufficiency of the evidence to sustain the finding of facts upon
              which it was rendered.

       Ind. Code § 8-1-3-1 (2012). This amounts to a multiple tiered review.
       NIPSCO at 1016. First, the order must contain specific findings on all the
       factual determinations material to its ultimate conclusions. Id. We review
       the conclusions of ultimate facts, or mixed questions of fact and law, for their
       reasonableness, with greater deference to matters within the IURC’s
       expertise and jurisdiction. Id. (citing McClain v. Review Bd. of Ind. Dep’t of
       Workforce Dev., 693 N.E.2d 1314, 1317-18 (Ind. 1998)). Second, the
       findings of fact must be supported by substantial evidence in the record. Id.
       We neither reweigh the evidence nor assess the credibility of witnesses and
       consider only the evidence most favorable to the IURC’s findings. Id.
       (quoting McClain, 693 N.E.2d at 1317). Finally, we review whether IURC
       action is contrary to law, “but this constitutionally preserved review is
       limited to whether the Commission stayed within its jurisdiction and
       conformed to the statutory standards and legal principles involved in
       producing its decision, ruling, or order.” Id.

Ind. Gas Co., Inc. v. Ind. Fin. Auth., 999 N.E.2d 63, 65-66 (Ind. 2013) (emphasis added).


                                              13
       The parties disagree regarding the extent to which the findings must be set forth in

the Commission’s order. Intervenors contend, “By simply ignoring the central dispute in

the case, the Commission failed to satisfy its duty ‘to articulate the policy and evidentiary

factors underlying its resolution of all issues which are put in dispute by the parties.”

Appellants’ Br. at 13 (quoting L.S. Ayres & Co. v. Indianapolis Power & Light Co., 169

Ind. App. 652, 676, 351 N.E.2d 814, 830 (Ind. Ct. App. 1976)). Duke maintains that the

Commission is not required to resolve all issues that are put in dispute by the parties, but

instead, the Commission’s order must contain specific findings on all factual

determinations material to its ultimate conclusions. Appellee’s Br. at 9-10 (quoting L.S.

Ayres, 169 Ind. App. at 661, 351 N.E.2d at 822). We find the Commission’s order was

deficient under both standards and that the Commission failed to articulate the policy and

evidentiary factors underlying the issues put in dispute by Intervenors. As we explain

below, the Commission also failed to make adequate findings on all factual determinations

material to its ultimate conclusions to allow Duke to pass along to ratepayers all of Duke’s

IGCC-9 costs.

                   I.     Three-Month Delay and Financial Impact

       As part of the IGCC-9 review, Duke requested Commission approval to change the

IGCC Rider to recover financing costs incurred from October 1, 2011 through March 31,

2012. Intervenors insist that the Commission’s order, which lacked specific findings on

the three-month delay, is contrary to law. Specifically, Intervenors contend that the

Commission was required to make findings regarding whether Duke was entitled to the full

recovery of its requested financing costs in light of the fact that, during the period under

                                             14
review, there was a three-month delay in Project testing and a commensurate $61 million

cost associated with that delay.

       We agree with Intervenors that the findings were insufficient to support the

Commission’s conclusion that Duke was entitled to recover through the IGCC Rider the

$61 million in financing charges incurred during the three-month delay in commissioning

the Plant. The first paragraph of the section titled “Ongoing Review Progress Report for

IGCC-9,” is merely the Commission’s reiteration of Womack’s and Intervenors’ testimony

regarding the delay—Womack testified that the delays were caused by the increase in bulk

commodity quantities, while Intervenors testified that the delays were caused by Duke’s

mismanagement of the Project. This paragraph contains no findings. In the second

paragraph of that section, the Commission states that Intervenors renewed their previous

concerns relating to the “cascade effect” of construction problems and the impact of the

“deep conflict” between G.E. and the Company and its impact on the IGCC Project. Again,

this language does not reflect a Commission finding. The only true finding is as follows:

“The Commission finds that these concerns of Joint Intervenors have been addressed in

other proceedings and we are not persuaded that evidence presented herein alters those

findings. Accordingly, they will not be addressed again in the present docket.” Appellant’s

App. at 26. As we discuss below, the evidence before the Commission did not support this

finding.




                                            15
        Although the IGCC Project is ongoing, each of the IGCC reviews covers a distinct

six-month period.9 During the IGCC-9 review, Intervenors focused specifically on a three-

month delay that occurred during the period from October 1, 2011 through March 31, 2012.

In written testimony, Womack confirmed that, in 2010, Duke set a schedule forecasting

that the Edwardsport Plant would be in-service by September of 2012 and would reach

“substantial completion” in December of 2012. Appellants’ App. at 59. In November

2011, one month into the IGCC-9 review period, the in-service date was still projected to

be September 2012. Tr. at 23-24. However, over the course of the six-month IGCC-9 test

period, the Project schedule fell behind by three months. This delay was supported by

Womack’s testimony that within one month of the conclusion of the IGCC-9 test period,

the projected in-service date was postponed until December 2012 and the “substantial

completion date” was postponed until March 2013. Id. at 25-26.

        Intervenors’ counsel J. David Agnew, recognizing that various delays had plagued

the Project, reminded Womack that during the IGCC 4-S1 hearings, Womack had testified

regarding Project delays and cost overruns pertaining to “unexpected quantity increases in

the Fall of 2009.” Id. at 18. To distinguish the current delay, Agnew asked Womack

whether the three-month10 delay under this IGCC-9 review was a function of those same


        9
           Duke also recognizes the distinct nature of these proceedings as reflected by the following
comment it made in its February 2013 reply to Intervenors’ objections: “[T]he principles of collateral
estoppel or issue preclusion do not apply to this proceeding, which covers an entirely different time period
than that reviewed by the Commission in IGCC-4S1.” Appellant’s App. at 467.
        10
           During the hearing, Agnew referred to a six-month delay. Noting that by October 31, 2012, the
IGCC Project was delayed an additional three months, Agnew discussed both of these delays together. The
delay at issue, however, is the three-month delay that occurred during the six month review in question,
which ended March 31, 2012.

                                                    16
quantity increases. Id. at 19. Womack responded, “[T]here may have been some residual

impact from the quantity increases”; however, quantity increases “was not the primary

reason for the delay.” Id. at 19-20. Womack conceded that the reasons for the three-month

delay “were different—primarily different than the quantity increases.” Id. Upon further

questioning, Womack admitted that “primarily, the quantity increases impacted the

construction period most and then a slight increase on the start-up period,” the latter of

which was the period at issue. Id. at 21-22.

         Intervenors also introduced evidence that Duke was responsible for the delay

because the testing problems, and therefore the delay, fell within Duke’s area of

responsibility.    To support this position, Intervenors introduced, without objection,11

monthly Progress Reports that G.E. had prepared during the IGCC-9 period. Id. at 156-57.

In these Progress Reports, G.E. “blamed the quality—or lack thereof—of Duke’s

‘commissioning’ activities for these equipment problems and resulting delay.” Appellants’

Br. at 7. Contrary to the Commission’s statement, the Intervenors’ concern of the three-

month delay during IGCC-9 was not “addressed in other proceedings.” Appellant’s App.

at 26.

         As to the financial impact, Intervenors cite to Douglas’s testimony establishing the

financing costs during the IGCC-9 period. During the Commission hearing, Douglas

quantified the revenue requirement for financing costs (when grossed up for taxes) as




         11
          After being specifically asked if she had any objections to these reports being introduced into
evidence, Duke’s attorney replied that she did not object. Tr. at 156.


                                                   17
roughly $122 million. Tr. at 145-46, 150. Douglas confirmed that to get the per month

financing charge, the $122 million would be divided by six, which would result in roughly

$61 million for three months of financing costs. Id. at 150.

       Intervenors point to the January 2013 testimony of Douglas, who testified that

financing costs related to Duke’s construction work in progress (“CWIP”), i.e., financing

costs recovered through the IGCC Rider (plus an additional “gross up” to factor in the cost

of taxes) amounted to $20.38 million per month, or roughly $61 million for three months.

Id. at 145-51

       Duke counters that the Commission properly declined to rely on the G.E. Progress

Reports to reach its determination because those Reports were “plainly hearsay to the

extent introduced for the truth of the matter asserted.” Appellees’ Br. at 12. Furthermore,

even if Intervenors proved imprudent delay, Duke alleges that no evidence was introduced

during the hearing to quantify the costs of that delay. Duke insists that Douglas did not

equate $61 million with the delay in the scheduled in-service date, “nor did she calculate

or quantify the potential impact of any alleged schedule delay on the IGCC-9 rates.”

Appellant’s App. at 477. Duke finds that Intervenors’ claim on appeal that this was the

“central dispute in the case” is a fallacy. Appellees’ Br. at 14 (citing Appellants’ Br. at 13).

       In its final order, the Commission approved 100% of Duke’s requested financing

costs for the IGCC-9 review period. Intervenors contend, and even Duke agreed, “The

Commission did not specifically address Joint Intervenors’ contention that the purported

delay led to financing charges of $61 million.” Appellants’ Reply Br. at 7 (citing Appellees’

Br. as 16). Intervenors maintain that Duke cannot cure this defect by arguing that “there

                                              18
was ‘sufficient evidence’ on which the Commission could have relied in entering its order.”

Id. at 8 (emphasis in original). If the Commission agreed with Duke, and disagreed with

Intervenors, regarding the impact of the delay on rates, Intervenors argue that the

Commission should have made findings to support its determination.12 Id.

         We need not find that the three-month delay was the “central dispute” to conclude

that Commission findings relating to the delay and its impact on ratepayers were “material

to [the Commission’s] ultimate conclusions.” L.S. Ayres, 169 Ind. App. at 661, 351 N.E.2d

at 822. We remand this issue to the Commission for findings as to whether the three-month

delay was chargeable to Duke, and if so, what impact that delay had on Duke’s customers’

rates.

                                            In-Service Date

         Intervenors also argue that it was contrary to law for the Commission to make no

findings regarding Duke’s request that 50% of the Plant be declared in-service as of August

12, 2012, where Duke admitted that the plant had not reached its “In-Service Operational

Date” as that term was defined in a Commission-approved settlement agreement to which

Duke was a party, and the resolution of this issue impacted Duke’s customers’ rates.

Intervenors’ contention arises in the following context.


         12
            Duke claims that it “provided extensive testimony” to rebut Intervenors’ contention that Duke
caused the delay. Appellees’ Br. at 5. First, Duke’s witnesses testified that “delays occur as part of every
construction project, especially a large one such as this, and were not caused by mismanagement.” Id.
(citing Tr. at 309-10). Second, Womack testified, “the required schedule extension[s] have been driven by
the circumstances of the Project, caused largely by circumstances outside the Company’s control” and “are
certainly not the result of Duke Energy mismanagement.” Id. (citing Tr. at 310). Duke reminded this court
that the G.E. Progress Reports cannot be trusted because they were prepared in anticipation of commercial
litigation, i.e., a suit by Duke against G.E. Id. Because Duke made these rebuttals, the Commission should
have made findings regarding the impact of the delay and resulting financing costs.

                                                    19
        In her written testimony, Douglas explained the financing, depreciation, and other

costs that Duke proposed to immediately pass through to ratepayers by means of the IGCC

Rider. In her corrected testimony, filed four months later, Douglas added the following

three sentences:

        [Duke] has determined that approximately half of the Edwardsport IGCC
        plant (consisting primarily of the power block, including the gas CTs,
        HRSGs, and steam turbine) should be declared to be in-service as of August
        1, 2012, for income tax purposes, which will produce bonus depreciation in
        2012 sufficient to prevent the use of the Section 199 deduction in 2012. The
        remainder of the plant is expected to be declared in-service for income tax
        purposes in 2013. [Duke’s] external auditors will be reviewing the income
        tax in-service decision at year-end.

Appellants’ App. at 265-66 (emphasis added). Douglas offered no explanation regarding

how Duke’s declaration of 50% in-service as of August 1, 2012, was consistent with the

Agreement’s definition that September 24, 2012 was the earliest that the Plant could be

deemed in-service. On cross-examination Douglas claimed that the Agreement was not

violated because its language was meant to limit Duke’s ability to declare the plant in-

service for ratemaking and accounting purposes, but not for tax purposes.13 Tr. at 127-29.

        The Commission, however, had conflicting evidence on this issue from Douglas

herself where, in her written rebuttal, Douglas admitted that the in-service declaration

would not only affect Duke’s taxes, it would also have an accounting and ratemaking effect

in IGCC-9, saying, “Mr. Olson is not correct, however, that this determination does not


        13
            However, Douglas admitted that the Agreement’s definition relating to in-service makes no
distinction between in-service for ratemaking purposes and in-service for tax purposes. Appellants’ App.
at 209. It is a well-established principle of Indiana law that any ambiguities in a contract are to be strictly
construed against the drafter. Heartland Crossing Found., Inc. v. Dotlich, 976 N.E.2d 760, 763 (Ind. Ct.
App. 2012). Duke, as a signatory to that Agreement, had a measure of control over the terms, and
Intervenors opposed the Agreement and therefore did not draft any of its terms.

                                                      20
affect the accounting or the rates the Company is proposing in IGCC-9.” Appellants’ App.

at 405. When asked at the hearing to explain the impact this partial in-service declaration

would have on customer rates in IGCC-9, Douglas explained: “They were higher - the

rates were higher than they would have been had we been able to utilize the Section 199

deduction.” Tr. at 120. Intervenors’ attorney asked, “So am I correct that the declaration

of in-service does cause rates to be higher than they otherwise would be,” Douglas

responded, “Yes, in this particular proceeding.” Id. at 122. In other words, by declaring

the Plant partially in-service, Duke has caused retail rates to rise.

       Intervenors highlight that Douglas did not disclose until the hearing in January 2013,

that declaring the Plant partially in-service would increase retail rates. Id. For that reason,

Intervenors, assuming that the partial in-service would not impact rates or accounting,

initially took no position on this issue. Appellants’ App. at 350.

       Douglas’s belated revelation that customer rates within the IGCC-9 period would

increase as a result of Duke’s decision to declare the Plant partially in-service, placed

Intervenors at a distinct disadvantage. First, the soonest Intervenors could object to this

change in in-service date was in their exceptions to Duke’s proposed order. Second,

Intervenors were unable to conduct discovery to determine the long-term rate implications

of this premature in-service declaration. Accordingly, because of the lateness of Douglas’s

revelation, Intervenors recommended that any increase to Duke’s IGCC Rider rates

attributable to the in-service declaration should be approved by the Commission only on

an “interim” basis, i.e., subject to possible refund after the long-term ratemaking

implications could be evaluated. Appellants’ App. at 438. The Commission neither

                                              21
accepted nor rejected this recommendation. Instead, the Commission simply ignored the

in-service issue entirely. In its final order, the Commission made no reference to Douglas’s

testimony on cross examination, nor to the fact that Intervenors had changed their position

in response to Duke’s change in position.         Instead, the Order simply summarized

Intervenors’ initial position - i.e., taking no position, so long as customer rates would not

be impacted - without ever addressing the evidence admitted at the hearing or Intervenors’

post-hearing arguments based on that evidence.

       Here, the Commission reached no conclusion and made no findings on whether or

how the Plant could be declared 50% in-service for ratemaking purposes. “The subject

matter of the regulatory process is too complex to permit the judicial non-expert any clear

insight concerning the legal and factual issues which the Commission thought ‘material’

to its decision.” L.S. Ayres, 169 Ind. App. at 676, 351 N.E.2d at 830. The declaration of

in-service was pertinent to the ratemaking treatment of Duke’s request under IGCC-9.

Neither during the formal hearings nor in the Commission’s final written order was any

attempt made to articulate the reasons underlying the Commission’s apparent acceptance

of Duke’s request that the 50% of the Plant be deemed to be in-service. “Since the record

is clearly insufficient to disclose the factors considered, we are incapable of determining

that the considerations which actually motivated the Commission’s decision were

reasonably related to the discharge of its statutory duty.” L.S. Ayres, 169 Ind. App. at 677,

351 N.E.2d at 830. We must remand this portion of the proceedings to the Commission

for 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.

                                             22
We remand to the Commission for actions consistent with this opinion.

      Remanded for additional findings.

BAILEY, J., and MAY, J., concur.




                                          23
