                                                                           FILED
                                                                       Feb 19 2019, 8:38 am

                                                                           CLERK
                                                                       Indiana Supreme Court
                                                                          Court of Appeals
                                                                            and Tax Court




ATTORNEYS FOR APPELLANT                                    ATTORNEYS FOR APPELLEE
Jennifer A. Washburn                                       Robert E. Heidorn
Margo Tucker                                               P. Jason Stephenson
Citizens Action Coalition of Indiana,                      Vectren Corporation
Inc.                                                       Evansville, Indiana
Indianapolis, Indiana                                      Wayne C. Turner
                                                           Patrick A. Ziepolt
                                                           Hoover Hull Turner LLP
                                                           Indianapolis, Indiana




                                            IN THE
    COURT OF APPEALS OF INDIANA

Citizens Action Coalition of                               February 19, 2019
Indiana, Inc.,                                             Court of Appeals Case No.
Appellant-Intervenor,                                      18A-EX-140
                                                           Appeal from the Indiana Utility
        v.                                                 Regulatory Commission
                                                           The Honorable David E. Ziegner,
Southern Indiana Gas & Electric                            Commissioner
Company d/b/a Vectren Energy                               The Honorable Loraine L.
Delivery of Indiana, Inc.,                                 Seyfried, Chief Administrative
Appellee-Petitioner.                                       Law Judge
                                                           IURC Cause No.
                                                           44927



Brown, Judge.



Court of Appeals of Indiana | Opinion 18A-EX-140 | February 19, 2019                           Page 1 of 25
[1]   Southern Indiana Gas & Electric Company d/b/a Vectren Energy Delivery of

      Indiana, Inc. (“Vectren South” or “Petitioner”) filed a petition with the Indiana

      Utility Regulatory Commission (“Commission”) seeking approval of its energy-
                                                                    1
      efficiency Electric Demand Side Management (“DSM”) Plan for 2018-2020

      (“Plan”). Citizens Action Coalition of Indiana, Inc. (“CAC”) intervened in the

      proceeding. Following an evidentiary hearing, the Commission issued its

      decision (“Order”) that approved the Plan in its entirety, including a revised lost

      revenue recovery proposal that Vectren South had presented. CAC now

      appeals from the Commission’s Order, raising the following issues which we

      restate as follows:


              I. Whether the Commission’s Order is contrary to law;


              II. Whether the Commission’s Order impermissibly deviates
              from precedent;


              III. Whether the Commission’s Order is supported by substantial
              evidence; and


              IV. Whether the Commission’s approval of Vectren South’s
              energy efficiency goals is improper.


      We affirm.




      1
        According to Vectren South, Demand Side Management programs “are designed to reduce electricity
      consumption at a certain time – typically the time when customers are collectively maximizing demand on
      the electric system.” Appellee’s Brief at 10 n.2.

      Court of Appeals of Indiana | Opinion 18A-EX-140 | February 19, 2019                          Page 2 of 25
                                          Facts and Procedural History

[2]   Vectren South is a public utility based in Evansville that provides electric utility

      service to approximately 140,000 customers in six counties in southwestern

      Indiana. In 2015, the General Assembly passed a statute, Indiana Code § 8-1-
                                                                                         2
      8.5-10 (2015) (“Section 10”), requiring electricity suppliers to (among other

      things) periodically present to the Commission energy efficiency (“EE”) plans,
                                  3
      goals, and programs for approval by the Commission beginning no later than

      2017. See Ind. Code § 8-1-8.5-10(h). The statute specifically provides as

      follows:


               (h) Beginning not later than calendar year 2017, and not less than
               one (1) time every three (3) years, an electricity supplier shall
               petition the commission for approval of a plan that includes:


                        (1) energy efficiency goals;




      2
       “Electricity supplier” means a public utility “that furnishes retail electric service to customers in Indiana.”
      Ind. Code § 8-1-8.5-10(a). The term does not include a municipally owned utility and certain other
      corporations. Id.
      3
        “Energy efficiency” means “a reduction in electricity use for a comparable level of electricity service.” Ind.
      Code § 8-1-8.5-10(b). “Energy efficiency goals” means “all energy efficiency produced by cost effective plans
      that are: (1) reasonably achievable; (2) consistent with an electricity supplier’s integrated resource plan; and
      (3) designed to achieve an optimal balance of energy resources in an electricity supplier’s service territory.”
      Ind. Code § 8-1-8.5-10(c). “Energy efficiency program” or “program” means “a program that is: (1)
      sponsored by an electricity supplier; and (2) designed to implement energy efficiency improvements. The
      term does not include a program designed primarily to reduce demand for limited intervals of time, such as
      during peak electricity usage or emergency conditions.” Ind. Code § 8-1-8.5-10(d). According to Vectren
      South, energy efficiency (“EE”) programs “are sometimes called demand side management, or DSM,
      programs.” Appellee’s Brief at 10 n.2.

      Court of Appeals of Indiana | Opinion 18A-EX-140 | February 19, 2019                                 Page 3 of 25
                        (2) energy efficiency programs to achieve the energy
                        efficiency goals;


                        (3) program budgets and program costs; and


                        (4) evaluation, measurement, and verification
                                     4
                        [(“EM&V”) ] procedures that must include independent
                        evaluation, measurement, and verification.


               An electricity supplier may submit a plan required under this
               subsection to the commission for a determination of the overall
                                         [5]
               reasonableness of the plan either as part of a general basic rate
               proceeding or as an independent proceeding. . . .


      Id.


[3]   As an incentive for participation, the General Assembly included provisions

      within the statute allowing electricity suppliers, such as Vectren South, to
                                                                                                                6
      recover certain costs associated with their EE plans, including lost revenues.




      4
       “Evaluation, measurement, and verification (EM&V) is the collection of methods and processes used to
      assess the performance of energy efficiency activities so planned results can be achieved with greater certainty
      and future activities can be more effective.” DEPT. OF ENERGY, EVALUATION, MEASUREMENT, AND
      VERIFICATION OF ENERGY DATA, https://www.energy.gov/eere/slsc/evaluation-measurement-and-
      verification-energy-data (last visited Jan. 15, 2019).
      5
       In determining the overall reasonableness of the plan, the Commission is required to consider ten factors.
      See Ind. Code § 8-1-8.5-10(j).
      6
        Lost revenues can be described as: “the fixed costs previously approved by the Commission and included in
      rates that are not recovered as a result of the implementation of EE programs.” Exhibits Volume 2 at 102.
      According to Vectren South, “the purpose of recovery of lost [revenue] on verified energy savings from DSM
      programs is to return the utility to the position it would have been in absent implementation of a DSM
      measure.” Id. (internal quotations and emphasis omitted).



      Court of Appeals of Indiana | Opinion 18A-EX-140 | February 19, 2019                               Page 4 of 25
      See Ind. Code § 8-1-8.5-10(o) (“If the commission finds a plan submitted by an

      electricity supplier under subsection (h) to be reasonable, the commission shall

      allow the electricity supplier to recover or receive the following: . . . (2)

      Reasonable lost revenues.”). As explained by Vectren South: “When

      ratepayers use less electricity, because of energy efficiency programs, they are

      saving money. The utility is similarly losing revenue due to decreased sales of

      electricity.” Appellee’s Brief at 11. The instant case stems from the

      Commission’s approval of Vectren South’s Plan in its entirety, including

      Vectren South’s revised proposal to recover lost revenue.


[4]   On April 10, 2017, Vectren South filed a petition with the Commission seeking

      approval of its Plan, which outlined Vectren South’s EE programs and their

      budgets and costs. The Plan had an estimated cost of $28.6 million, with $9.5

      million in 2018, $9.6 million in 2019, and $9.5 million in 2020. The Plan

      included a portfolio of programs designed to achieve 111 million kilowatt hours

      (“kWh”) in energy savings and 26 thousand kilowatts (“kW”) in demand

      reduction during the three-year period. The Plan also included a request for
                                                                        7
      approval to recover, over the life of the measure, lost revenues resulting from




      7
       “Measure” is defined in pertinent part as “[s]pecific energy efficiency activities or equipment.” DEPT. OF
      ENERGY, ENERGY EFFICIENCY & RENEWABLE ENERGY 1, https://www.energy.gov/sites/prod/files/2014/
      05/f16/what_is_emv.pdf (last visited Jan. 15, 2019).
      “Measure life” is widely defined as “the average/median life over many data points, or customer
      experiences, of a particular EE program. It takes into consideration variations in the useful life of an EE
      measure among different types of customers by developing an average. [For example, a]n LED could last 5
      years in one home, 11 years in another and 30 years in another – with an average of 15 years.” Exhibits
      Volume 7 at 13.

      Court of Appeals of Indiana | Opinion 18A-EX-140 | February 19, 2019                            Page 5 of 25
      reduced demand for electricity (“Original Lost Revenue Proposal”). On April

      10, 2017, CAC filed a petition to intervene, which was granted on May 2, 2017.


[5]   At some point during the proceedings, Vectren South withdrew its Original

      Lost Revenue Proposal and submitted a revised proposal for the recovery of lost

      revenue (“Revised Lost Revenue Proposal”) that would allow recovery of lost

      revenues over twelve years. The Revised Lost Revenue Proposal was described

      as follows in the Commission’s Order through testimony provided by Rina H.

      Harris (“Ms. Harris”), Director of Energy Efficiency for Vectren Utility

      Holdings, Inc., at an evidentiary hearing held by the Commission on September
                 8
      6, 2017:


              Petitioner seeks authority to implement lost revenue recovery
              based upon the WAML[, the weighted averaged measure life,] of
              all programs included in the 2018-2020 Plan, with a 10%
              reduction in annual savings. Under this method, Vectren South
              would recover the amount of lost revenues associated with the
              WAML of its EE programs or the measure life, whichever is less.
              The WAML is the average life, weighted by savings in years, of
              all the various measures installed or actions taken in a portfolio
              of programs. [Ms. Harris] said that capping recovery of lost
              revenues based upon WAML is reasonable because it limits lost
              revenue recovery based on the average equipment life and
              measure persistence of the entire Plan. In addition, only 90% of
              annual savings would be recovered, reflecting the statistical
              certainty EM&V providers can obtain for lost revenues. She said
              that . . . the EM&V process utilizes at minimum a 90%



      8
       During this proceeding, the Commission heard evidence from Vectren South, from statutory party Indiana
      Office of Utility Consumer Counselor (“OUCC”), and from CAC.

      Court of Appeals of Indiana | Opinion 18A-EX-140 | February 19, 2019                        Page 6 of 25
              confidence interval (an industry accepted standard). She testified
              that all inputs in the WAML (less 10% for statistical certainty)
                                                                               [9]
              are grounded on evaluation and Technical Re[source] Manuals
              and provide a methodical cap to lost revenue recovery.


                                                     *****


              Ms. Harris testified that for the Plan, the WAML approach
              would reduce lost revenue recovery by approximately $18.8
              million over the life of the programs included in the Plan as
              compared to recovery using full measure life [under the Original
              Lost Revenue Proposal]. [Under the Revised Lost Revenue
              Proposal, l]ost revenues would be reduced by 26% with a 12-year
              weighted average cap plus 10% savings reduction.


      Appellant’s Appendix Volume 2 at 13. Vectren South predicted that “its lost

      revenue due to measures implemented in the 2018-2020 energy efficiency plan

      will be $73.6 million.” Appellee’s Brief at 21. However, it maintained that,

      under the Revised Lost Revenue Proposal, it was not seeking to recover its

      estimate of $73.6 million, but rather “only about $54.8 million, or $18.8

      [million] less . . . .” Id. at 22.


[6]   CAC argued for Vectren South’s lost revenue collection to be capped at the

      lesser of four years or the Plan’s measure life. A witness for CAC, Karl R.

      Rábago (“Mr. Rábago”), the principal of Rábago Energy, LLC, testified that




      9
       Per testimony provided at the evidentiary hearing, the Indiana Technical Resource Manual (“TRM”) is an
      essential document “for EM&V activities and for the calculation of lost revenues.” Exhibits Volume 8 at
      139.

      Court of Appeals of Indiana | Opinion 18A-EX-140 | February 19, 2019                        Page 7 of 25
“[b]y capping the lost revenue recovery at the lesser of [four] years or the life of

the measure, this mitigates the Pancake Effect [(the cumulative effect of lost

revenues over time on rates)].” Exhibits Volume 8 at 128. He explained that

“the problems of ‘pancaking’ and ‘piece-meal’ or ‘single-issue’ ratemaking

create serious problems of fairness and reasonableness if a [lost rate adjustment
                                10
mechanism (“LRAM”) ] is used for the entire useful life of the energy

efficiency measures.” Id. at 132. He further explained that “although

pancaking and piece-meal rate making problems can arise over any term

between rate cases, the amount of pancaking that will occur with a four-year

cap is reasonable because: A term greater than four years will create

unreasonable difficulty in tracking the pancake effect over time.” Id. at 130.

He urged the Commission to find that four years is the maximum reasonable

term for an LRAM “before the utility must present any remaining claimed lost

revenues in a base rate case . . . .” Id. He maintained that beyond four years,

the LRAM “would be subject to some volatility, as measures exited due to end

of useful life, and as new lost revenue collections were added due to subsequent

[p]lan approvals.” Id. at 132. He disagreed with Vectren South’s claim that a

four-year cap would create a perverse incentive for the utility to favor programs




10
  “Lost Revenue Adjustment Mechanism (LRAM) is a rate adjustment mechanism that allows the utility to
recover revenues that are ‘lost’ due to energy savings from approved efficiency programs.” Sara Hayes et al.,
Balancing Interests: A Review of Lost Revenue Adjustment Mechanisms for Utility Energy Efficiency Programs, 1
(September 2011) American Counsel for an Energy-Efficient Economy, https://aceee.org/sites/
default/files/publications/researchreports/u114.pdf (last visited Jan. 15, 2019).

Court of Appeals of Indiana | Opinion 18A-EX-140 | February 19, 2019                             Page 8 of 25
      with shorter-term useful lives to avoid the risk of under-recovery of lost

      revenues.


[7]   Mr. Rábago maintained that Vectren South’s WAML approach to the recovery

      of lost revenues comes with its own set of problems. He explained:


              The weighted average measure life is a mathematical solution to
              the rate volatility that results from long-term pancaking of an
              [LRAM], but potentially creates greater problems in terms of rate
              fairness. That is, the method would “smooth out” year to year
              volatility in the later years of the portfolio useful life by use of an
              averaging calculation. But without much more analysis and
              modeling, there is no way to tell if the proposed method limits
              recovery of lost revenues to reasonable and fair levels.


      Id. at 137.


[8]   He compared the dollar amounts between Vectren South’s Original Lost

      Revenue Proposal, the Revised Lost Revenue Proposal, and CAC’s proposal to

      cap lost revenue recovery at four years or the life of the measure, whichever is

      shorter. He determined that, under Vectren South’s Original Lost Revenue

      Proposal, ratepayers would pay $73.6 million in lost revenues for a program

      that costs $28.6 million to implement, and that although the total amount of

      lost revenues under the Revised Lost Revenue Proposal would be less, $54.8

      million, “[t]he pancake effect still exits, and the sheer total of lost revenues

      presented here at $54 million for just $28 million of actual program delivery is

      unreasonable.” Id. at 127. Mr. Rábago further testified that under CAC’s four-

      year-cap proposal, total lost revenues would amount to $21.8 million. He


      Court of Appeals of Indiana | Opinion 18A-EX-140 | February 19, 2019          Page 9 of 25
       disagreed with Vectren South’s position that the role of lost revenue recovery is

       to put a utility in the same revenue position it would have been in but for the

       implementation of EE measures. He testified that “the purpose of lost revenue

       recovery is to provide reasonable mitigation of the direct and causally-

       connected revenue losses resulting from utility sponsored [EE] programs and

       measures.” Id. at 121.


[9]    CAC also argued that testimony from a Vectren South witness, Dr. M. Sami

       Khawaja (“Dr. Khawaja”), Chief Economist at The Cadmus Group (an energy

       efficiency evaluation firm), created a conflict of interest and should be

       disregarded because The Cadmus Group had been retained by Vectren South to

       perform evaluation services for the past eight years. According to CAC,

       Section 10 requires that the EM&V procedures be independent, and that Dr.

       Khawaja’s advocacy position “in this proceeding . . . casts doubt on the

       integrity of the firm’s work as an independent evaluator.” Id. at 139.


[10]   On December 28, 2017, the Commission issued its twenty-eight-page Order,

       concluding in relevant part that “[b]ecause we approve Vectren South’s 2018-

       2020 Plan, we find that Vectren South shall be authorized to recover its

       associated program costs, including . . . lost revenues based upon the WAML

       less 10% reduction in savings . . . .” Appellant’s Appendix Volume 2 at 35.

       The Order reads in pertinent part:


               Historically, lost revenues in Indiana (and across the country)
               have been recovered based on a measure’s [effective useful life
               (“EUL”)] and the energy savings confirmed by EM&V. The

       Court of Appeals of Indiana | Opinion 18A-EX-140 | February 19, 2019        Page 10 of 25
        purpose of allowing lost revenue recovery is to assist in removing
        any disincentive a utility may have in promoting DSM, as
        opposed to pursuing a supply-side resource. See, Indianapolis
        Power & Light Co., Cause No. 43911 (IURC Nov. 4, 2010); 170
        IAC 4-8-3.


        Vectren South initially requested approval to recover lost revenue
        for the life of each EE measure implemented pursuant to the
        2018-2020 Plan. However, Petitioner subsequently modified its
        request and now seeks approval to recover lost revenues based
        upon the WAML of the Plan programs with a 10% reduction in
        savings to account for measure persistence. The effect of this
        change is to reduce lost revenue recovery based strictly on
        measure lives by 26% or $18.8 million. Thus, under the modified
        approach, Vectren South would recover approximately $54.8
        million of lost revenues over the 12-year WAML of the Plan.


        Both the OUCC and CAC encouraged the Commission to reject
        Vectren South’s WAML proposal. CAC recommended the use
        of a four-year cap on lost revenue recovery. CAC argues this
        recovery is reasonable because a term greater than four years
        creates unreasonable difficulties in tracking the accuracy of lost
        revenues, the pancaking or cumulative effect of lost revenues
        over time on rates, and lost revenue policies were created at a
        time when the period between rate cases was shorter. . . .


        Under the modified proposal, Vectren South would recover the
        amount of lost revenues associated with the WAML of the Plan
        portfolio of programs or the measure life of the EE program,
        whichever is shorter. Dr. Khawaja explained that it was
        appropriate to cap lost revenue based on the WAML because lost
        revenue will take place for the duration of the measure life. The
        WAML is based on the EUL, which is the median of a measure’s
        life. Dr. Khawaja testified that the EUL values used by
        Petitioner are conservative for an overall WAML of 12 years.
        Further, the proposed 10% reduction in annual energy savings
Court of Appeals of Indiana | Opinion 18A-EX-140 | February 19, 2019     Page 11 of 25
        reflects the use of the lower end 90% confidence level estimate of
        savings and equates to an even more conservative [10.7-year]
        measure life cap.


        In addition to the use of the 12-year WAML, Vectren South
        proposes to recover only 90% of the annual energy savings. CAC
        and other parties, in their post-hearing filing, argue that because
        EM&V is only conducted once for each Plan year, the initial
        determination of energy savings and lost revenue becomes
        progressively less reliable and more uncertain in successive years
        and therefore should not be relied upon. Further, they argue that
        the proposed 10% reduction in energy savings only addresses the
        degree of confidence in the threshold EM&V determination, not
        the eroding reliability of assumed savings.


        EM&V is the most established approach to reasonably estimating
        energy savings and lost revenues associated with EE programs.
        Vectren South’s approach appears reasonably designed to ensure
        it recovers only the lost revenues that EM&V can establish, with
        a high degree of confidence, will result from savings driven by
        EE measures. Recognizing that estimates are more certain in the
        immediate (as opposed to the distant) future, Vectren South’s
        evaluation process for estimating net energy savings utilizes at
        minimum a 90% confidence interval and supports a 10%
        degradation of annual savings within its lost revenue calculation,
        which results in a statistically conservative estimate. While we
        recognize that EM&V degrades over time based on accumulating
        changes, this degradation is built into the EM&V process. We
        further find that the approximate 26% reduction in recovered lost
        revenues compared to Petitioner’s initial proposal is intended to
        strike a reasonable balance in terms of offsetting the inherent
        financial harm to a utility caused by EE sales reductions, while
        also ensuring the recoveries are fully supported by conservative
        EM&V estimates that safeguard the cost and benefit analysis
        relied upon to determine that the EE Plan provides short- and
        long-term benefits to customers.

Court of Appeals of Indiana | Opinion 18A-EX-140 | February 19, 2019     Page 12 of 25
        As indicated above, CAC offered no basis on which we could
        make factual findings that a four-year cap would allow Vectren
        South to recover reasonable lost revenues. In fact, Ms. Harris
        testified that implementing a four-year cap on the Plan would
        cause approximately $52 million of financial harm to Vectren
        South in lost revenues over the life of the programs, which
        equates to approximately 70% of lost revenues. Rather than
        providing a reasoned explanation or analysis to support ending
        lost revenue recovery after four years regardless of measure life or
        evidence related to the financial effects of such a proposal on
        Petitioner, CAC instead offers a conclusory opinion that the
        magnitude of lost revenues exceeds the program costs and
        therefore this must result in it being an unreasonable proposal.
        CAC provided no factual basis to support its contention that lost
        revenues should not exceed program costs. It is inherent that
        energy savings validated by EM&V will create lost revenues.
        Consequently, cost-effective EE programs should have lower
        programs costs with larger energy savings, which does result in
        higher lost revenues relative to program costs.


                                               *****


        Accordingly, we find that Vectren South’s modified lost revenue
        recovery proposal, which has a strong nexus to the EM&V
        process, will allow the recovery of reasonable lost revenues. Our
        conclusion is consistent with the Commission’s DSM rules at 170
        IAC 4-8 and Section 10’s requirement that EM&V are included
        in any EE plan. Section 10(o) similarly recognizes the
        importance of subjecting lost revenues to EM&V in its
        reconciliation requirements when using forecasted data. Vectren
        South’s proposal recognizes that the EM&V process is not an
        exact science [] and employs limitations on EM&V
        quantification of savings (and thus lost revenues) that assures
        customers are billed for lost revenues based on a conservative
        determination of achieved savings to ensure the highest level of
        confidence in the energy savings that are attributed to EE

Court of Appeals of Indiana | Opinion 18A-EX-140 | February 19, 2019      Page 13 of 25
               measures. Neither CAC nor the OUCC provided us with
               sufficient evidence demonstrating that Vectren South’s proposal
               is unreasonable. Nor did they provide us with sufficient facts
               from which we could determine that either of their alternative
               proposals for caps on lost revenue recovery would allow Vectren
               South to recover reasonable lost revenues. Therefore, we find
               Vectren South’s modified proposal for lost revenue recovery is
               reasonable.


       Appellant’s Appendix Volume 2 at 31-33 (footnote omitted).


[11]   Regarding whether testimony from Dr. Khawaja should have been disregarded,

       the Commission determined that:


               Dr. Khawaja’s testimony was largely limited to addressing the
               reasonableness of EM&V results over time and how the issues of
               uncertainty and persistence are accounted for in the EM&V
               process and methodology. While it may have been more prudent
               for Petitioner to retain an EM&V witness not associated with
               Cadmus, we lack sufficient evidence to find that EM&V
               independence has been undermined – particularly given another
               request for proposals is planned to select an EM&V vendor to
               evaluate the 2018-2020 Plan and the ongoing participation by
                                                           11
               members of the [Vectren Oversight Board ] in the review of the
               EM&V analysis and reports.


       Id. at 28. CAC now appeals the Commission’s Order.




       11
         The Vectren Oversight Board is Vectren South’s EE program governance body. Both CAC and OUCC are
       voting members of the Board.

       Court of Appeals of Indiana | Opinion 18A-EX-140 | February 19, 2019                  Page 14 of 25
                                                     Discussion

                                               Standard of Review

[12]   The General Assembly created the Commission primarily as a factfinding 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’s assignment is to insure that public utilities provide

       constant, reliable, and efficient service to the citizens of Indiana. Id. “The

       Commission can exercise only power conferred upon it by statute.” Id.

       “Because the complicated process of ratemaking is a legislative rather than

       judicial function, it is more properly left to the experienced and expert opinion

       present in the Commission.” Citizens Action Coal. of Ind., Inc. v. N. Ind. Pub. Serv.

       Co., 76 N.E.3d 144, 151 (Ind. Ct. App. 2017) (internal quotations omitted).


[13]   Indiana Code § 8-1-3-1 (1993) authorizes judicial review of Commission orders

       by this Court. The review involves multiple tiers. U.S. Steel, 907 N.E.2d at

       1016. “On the first level, it requires a review of whether there is substantial

       evidence in light of the whole record to support the Commission’s findings of

       basic fact. Such determinations of basic fact are reviewed under a substantial

       evidence standard, meaning the order will stand unless no substantial evidence

       supports it.” Id. (citation and footnote omitted). We neither reweigh evidence

       nor assess witness credibility, and we consider only the evidence favorable to

       the Commission’s findings. Id. The Commission’s order is not binding if it

       lacks substantial evidence supporting the findings of the Commission or is

       unreasonable or arbitrary. Id.

       Court of Appeals of Indiana | Opinion 18A-EX-140 | February 19, 2019       Page 15 of 25
[14]   “At the second level, the order must contain specific findings on all the factual

       determinations material to its ultimate conclusions.” Id. We review the

       Commission’s conclusions of ultimate facts for reasonableness, the deference of

       which is based on the amount of expertise exercised by the agency. Id. If the

       order involves a subject within the Commission’s special competence, we

       should give it greater deference; if the subject is outside the Commission’s

       expertise, we give it less deference. Id. “More specifically, on matters within its

       jurisdiction, [the Commission] enjoys wide discretion and its findings and

       decision will not be lightly overridden simply because we might reach a

       different decision on the same evidence.” Citizens Action Coal. of Ind., Inc., 76

       N.E.3d at 151 (brackets and internal quotation omitted). “Essentially, so long

       as there is any substantial evidence to support the rates as fixed by the

       Commission as reasonable, the judicial branch of the government will not

       interfere with such legislative functions and has no power or authority to

       substitute its personal judgment for what it might think is fair or reasonable in

       lieu of [the Commission’s] administrative judgment.” Id. (brackets, emphasis,

       and internal quotations omitted).


[15]   Findings of fact are important because they help us understand the

       Commission’s reasoning and policy judgments and allow for a reasoned and

       informed basis of review, which decreases the likelihood that we will substitute

       our judgment on complex evidentiary issues and policy determinations best left

       to an agency with technical expertise. N. Ind. Pub. Serv. Co. v. LaPorte, 791




       Court of Appeals of Indiana | Opinion 18A-EX-140 | February 19, 2019        Page 16 of 25
       N.E.2d 271, 278 (Ind. Ct. App. 2003). Further, requiring findings of fact helps

       the Commission avoid arbitrary and capricious action. Id.


[16]   “Additionally, an agency action is always subject to review as 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.” U.S. Steel, 907

       N.E.2d at 1016.


                       I. Whether the Commission’s Order is Contrary to Law

[17]   CAC’s first argument is twofold. It contends that the Commission’s Order is

       contrary to law because the approval of Vectren South’s Revised Lost Revenue

       Proposal is unreasonable, and that it is inconsistent with Section 10. We

       address each argument in turn.


                A. Whether the Approval of the Revised Lost Revenue Proposal is
                                        Unreasonable

[18]   CAC maintains that the Commission should have reviewed Vectren South’s

       overall financial condition when it determined whether the Revised Lost

       Revenue Proposal was reasonable and just. The crux of CAC’s argument is

       that:


               [b]ecause the Commission[, in approving the Revised Lost
               Revenue Proposal,] has ignored the requirement that each
               utility’s rates must be set on the utility’s overall financial
               condition including total revenue and expense, the approval of
               Vectren [South]’s lost revenue rate recovery in the Order is not


       Court of Appeals of Indiana | Opinion 18A-EX-140 | February 19, 2019       Page 17 of 25
                just and reasonable, and should be declared unlawful by this
                Court.


       Appellant’s Brief at 29. According to CAC:


                The lost revenue rate approved in the Order [] was set merely on
                a forecasted estimation of the amount of lost sales attributable to
                the energy efficiency programs from an evaluation vendor with
                no cogent reference to the utility’s overall financial condition.
                The approved lost revenue rate in the Order just guarantees rate
                recovery based on projected savings without any consideration
                for other ratemaking principles. It also disregards the distinction
                between a utility who comes in for regular rate cases, regularly
                zeroing out lost revenue totals when resetting rates, versus a
                utility who does not reset rates but for once every 10, 15, 20
                years, resulting in exorbitant lost revenue rate recovery and
                millions of dollars in difference in terms of what the ratepayers is
                [sic] required to pay.


       Id. at 28. CAC also argues that to allow Vectren South to recover the requested
                                                                                               12
       amount dissuades Vectren South from filing general rate cases.


[19]   CAC further argues that the Revised Lost Revenue Proposal is unreasonable

       because it allows Vectren South to recover $54.8 million in lost revenue for EE



       12
          CAC posits that the approval of lost revenues is subject to a “just and reasonable” rates standard under
       Indiana Code § 8-1-2-4 (1984), the general rate statute, which provides in relevant part that “[t]he charge
       made by any public utility for any service rendered or to be rendered either directly or in connection
       therewith shall be reasonable and just, and every unjust or unreasonable charge for such service is prohibited
       and declared unlawful.” However, in its Surreply Brief, CAC clarifies that in referencing the statute, it was
       not raising a new argument. It acknowledges that it should have been more careful with its phrasing, but that
       “the point . . . is this: by failing to consider its precedent of capping the time a lost revenue rate adjustment
       mechanism may be used due to Indiana’s environment of infrequent rate cases, the Commission brings the
       just and reasonable rates requirement from I.C. § 8-1-2-4 and the examination of the utility’s overall financial
       condition to the forefront . . . .” Appellant’s Surreply Brief at 6.

       Court of Appeals of Indiana | Opinion 18A-EX-140 | February 19, 2019                               Page 18 of 25
       programs projected to cost $28.6 million to administer. It states that “lost

       revenue rates at 1.9 times greater than the cost to actually run the programs is

       far in excess of what is necessary to satisfy a monopoly utility’s shareholders’

       legitimate expectations.” Id. at 26. CAC claims that “[t]his lost revenue

       guaranteed rate is outside the zone of reasonableness in light of the legal

       framework, ratemaking policy, regulatory history, objective of the required cost-

       effectiveness in the statute, and the appropriate degree of reliability in

       forecasting estimated savings out beyond a few immediate years.” Id. CAC

       contends that “[i]t is particularly wasteful and results in artificially high prices

       to award a utility 1.9 times more in revenue than costs to run the energy

       efficiency programs with no shown correlation that this extra revenue will

       equate to more energy efficiency services or savings.” Id. at 27.


[20]   We are not persuaded by CAC’s arguments. Section 10(j)(8) provides that

       when the Commission makes a determination of the overall reasonableness of a

       plan, it must consider the lost revenues and financial incentives associated with

       the plan and sought to be recovered or received by the utility. Section 10(o)

       provides that if the Commission finds a plan submitted by a utility to be

       reasonable then the Commission must allow the utility to recover or receive

       reasonable lost revenues. Here, the Commission considered the lost revenues

       sought to be recovered and determined that CAC “provided no factual basis to

       support its contention that lost revenues should not exceed program costs.”

       Appellant’s Appendix Volume 2 at 33. Furthermore, Section 10 does not

       require the Commission to consider a utility’s overall financial condition in


       Court of Appeals of Indiana | Opinion 18A-EX-140 | February 19, 2019         Page 19 of 25
       determining whether lost revenues sought to be recovered are reasonable or

       whether recovery of the requested lost revenue dissuades Vectren South from
                                        13
       filing general rate cases.            As such, the Commission did not act contrary to law

       in determining that Vectren South’s Plan was reasonable.


        B. Whether the Approval of the Revised Lost Revenue Proposal is Inconsistent
                                      with Section 10

[21]   CAC also argues that the Commission’s approval of the Revised Lost Revenue

       Proposal is inconsistent with Section 10. It contends that the Commission’s

       Order “misinterprets and misconstrues” that section “establishing rates under

       Section 10 without any reference or consideration of ratemaking practices and

       the requirements of Indiana’s Public Service Commission Act (‘PSCA’).”

       Appellant’s Brief at 36. CAC specifically argues that “the most basic error is

       the Commission’s failure to reconcile its approval of [the Revised Lost Revenue

       Proposal] without any reference or application of ratemaking practices” and the

       Commission’s failure to “consider ratepayers in making a determination as to

       the reasonableness of this rate.” Id.


[22]   We observe that the requirement under Section 10 that electricity suppliers file a

       three-year EE plan was adopted by our General Assembly in 2015 as a separate




       13
          Cf. NIPSCO Indus. Grp. v. N. Ind. Pub. Serv. Co., 100 N.E.3d 234, 238 (Ind. 2018) (“General ratemaking is a
       ‘comprehensive’ process, requiring the Commission to ‘examine every aspect of the utility’s operations and
       the economic environment in which the utility functions to ensure that the data [the Commission] has
       received are representative of operating conditions that will, or should, prevail in future years.’” (emphasis
       added and citation omitted)), modified on reh’g.



       Court of Appeals of Indiana | Opinion 18A-EX-140 | February 19, 2019                              Page 20 of 25
       requirement that is in addition to long-standing requirements regarding general

       ratemaking. CAC points to no relevant authority indicating that the

       Commission was required to consider or apply procedures adopted in

       connection with general ratemaking cases when considering a petition filed in

       accordance with Section 10. CAC has failed to establish that the Commission’s

       approval of Vectren South’s Revised Lost Revenue Proposal is inconsistent

       with Section 10. We therefore find that the Commission’s approval of the

       Revised Lost Revenue Proposal was not inconsistent with Section 10 and was

       not contrary to law.


        II. Whether the Commission’s Order Impermissibly Deviates from Precedent

[23]   We next address whether the Commission impermissibly deviated from

       precedent. CAC maintains that the Commission’s Order “ignores available

       precedent related to the relationship between lost revenues and general rate

       cases that articulated principles by which to ascertain the reasonableness of lost

       revenue recovery proposals.” Id. at 29. According to CAC, “the relationship

       between rate cases and lost revenues, as articulated in the available precedent,

       was a material issue raised and put in dispute by the parties before the

       Commission in this proceeding, but it went unaddressed.” Id.


[24]   In support of its argument, CAC cites to four Commission decisions. See In re

       Ind. Power & Light Co., Cause No. 43911, 2010 WL 4499412, at *9 (November

       4, 2010) (denied lost revenue recovery “in the absence of a base rate case to

       ensure that class specific investment and investment recovery is properly

       aligned”); In re N. Ind. Pub. Serv. Co., Cause No. 43912, 2011 WL 3346770, at
       Court of Appeals of Indiana | Opinion 18A-EX-140 | February 19, 2019       Page 21 of 25
       *22 (July 27, 2011) (denied request to recover lost margins but remained

       “willing to consider a request for lost margins provided NIPSCO can

       demonstrate the revenue margin rates are reasonably reflective of today’s

       operations”); In re N. Ind. Pub. Serv. Co., Cause No. 44634, 2015 WL 9605053,

       at *42, 43 (December 30, 2015) (Commission acknowledged that it had

       “previously approved lost revenues over a measure’s life or until a utility’s next

       base rate case, whichever is shorter,” but due to “concerns with pancaking and

       the increased length of time between base rate cases for utilities in Indiana,”

       ultimately found NIPSCO’s lost revenue recovery should be limited to “(1) four

       years or the life of the measure, whichever is less, or (2) until rates are

       implemented pursuant to a final order in NIPSCO’s next base rate case,

       whichever occurs earlier.”); In re Duke Energy Ind., Inc., Cause No. 43955, 2016

       WL 1118794 (March 16, 2016) (denied approval of Duke’s EE plan, finding, in

       part, that recovery of lost revenues should be limited to a four-year term).

       However, nothing in our review of these decisions leads us to the conclusion

       that reversal is required in this case.


[25]   By its own acknowledgement, the Commission has previously approved the

       recovery of lost revenues over a measure’s life or until the utility’s next base rate

       case, whichever is shorter. The Commission has also previously approved a

       four-year cap on a utility’s lost revenue recovery. An agency may change its

       course and is not forever bound by prior policy or precedent as long as it

       explains its reasons for doing so. See Ind. Bell Tel. Co. v. Ind. Util. Reg. Comm’n,

       810 N.E.2d 1179, 1186 (Ind. Ct. App. 2004), trans. denied. In its Order, the


       Court of Appeals of Indiana | Opinion 18A-EX-140 | February 19, 2019          Page 22 of 25
       Commission found Vectren South’s Plan to be reasonable in its entirety, found

       Vectren South’s Revised Lost Revenue Proposal to be reasonable, and

       explained its reasons for doing so. The Commission did not impermissibly

       deviate from precedent.


                  III. Whether Substantial Evidence Supports the Commission’s
                                             Order

[26]   CAC’s next argument is that the Commission’s Order “lacks a reasonably

       sound basis of evidentiary support.” Appellant’s Brief at 34. Specifically, CAC

       maintains that “[t]he most fundamental problem with the evidentiary support

       for the approved lost revenue rate is the fact that there is no credible evidence

       that the investor owned electric utility experienced its claimed level of lost

       revenues or that the rate was established based on other financial aspects of the

       utility.” Id. CAC also argues that the Commission failed to consider the

       “relationship of the lost revenue rate with the resetting of rates in general rate

       cases”; the Order failed to “mention or weigh any of the critical cross-

       examination that was conducted by the other consumer parties”; and in

       reaching its determination, the Commission failed to consider the complete

       record. Id. at 34, 35. In addition, CAC claims that “[t]he reliance upon EM&V

       as a basis for approving lost revenue rates is nonsensical and not cost- or rates-

       based.” Id. at 34. CAC argues that the Order “mischaracterizes the role of

       [EM&V] and what EM&V has done, does and does not do for lost revenue rate

       recovery.” Appellant’s Reply Brief at 13. We disagree.




       Court of Appeals of Indiana | Opinion 18A-EX-140 | February 19, 2019       Page 23 of 25
[27]   It is expected that Vectren South would not present actual lost revenue

       amounts, as it was seeking pre-approval of the Plan and a request to recover

       proposed lost revenues. The evidence indicated that the lost revenues detailed at

       length by Vectren South were forecasted losses that would later be reconciled

       through EM&V. The Commission’s Order accurately reflects this point and the

       required reconciliation. Furthermore, Section 10 does not require the

       Commission to consider the relationship between lost revenue rates and the

       filing of general rate cases.


[28]   We find that CAC’s other arguments are an invitation for this Court to reweigh

       the evidence. The Commission reviewed the evidence of record and found the

       evidence presented by Vectren South to be more persuasive. We will not

       reweigh the evidence or reassess witness credibility on appeal. See U.S. Steel,

       907 N.E.2d at 1016.


           IV. Whether the Commission’s Approval of Vectren South’s EE Goals is
                                        Improper

[29]   CAC’s last argument concerns whether the Commission’s approval of Vectren

       South’s EE goals is improper because, according to CAC, the Commission

       failed to consider certain “[m]aterial [i]mpeaching [e]vidence” that was

       contained in the “Commission’s Director’s Draft Report.” Appellant’s Brief at

       38, 39. CAC specifically maintains that:


               [T]he Commission cherry-picked certain parts from its relevant
               Director’s Report but completely ignored the pertinent parts
               which impeached the very evidence upon which the Commission


       Court of Appeals of Indiana | Opinion 18A-EX-140 | February 19, 2019    Page 24 of 25
               relied to approve Vectren’s level of energy efficiency investment
               in this case.


               At a minimum, the Commission should have addressed its own
               Director’s concern as to whether Vectren’s “adjustments made to
               correct for admitted serious data limitations is sufficient to
               overcome the problems being addressed” and the Director’s
               ultimate conclusion that “[d]rawing strong policy
               recommendations in such circumstances is probably not
               warranted.” (Tr., [V]ol. 9, at 43). Instead, the Commission
               ignored these conclusions from its own Director, ignored the
               process it created to deal with most of the disputes over resource
               planning outside litigated cases (Appellant’s-Br. at 10), and gave
               the investor-owned utility carte blanche for this important
               resource decision to the detriment of ratepayers and those parties
               who invested substantial time and resources in the Commission
               created process. (Order at 15-17).


       Appellant’s Reply Brief at 23.


[30]   CAC’s argument, essentially, is an invitation to reweigh the evidence, which we

       cannot do. The record contains substantial evidence supporting the

       Commission’s determination that Vectren South’s EE goals are reasonable.


[31]   For the foregoing reasons, the Commission’s Order is affirmed.


[32]   Affirmed.


       Najam, J., and Altice, J., concur.




       Court of Appeals of Indiana | Opinion 18A-EX-140 | February 19, 2019        Page 25 of 25
