                                                                   FILED
                                                               Apr 05 2017, 6:36 am

                                                                   CLERK
                                                               Indiana Supreme Court
                                                                  Court of Appeals
                                                                    and Tax Court




ATTORNEY FOR APPELLANTS                                    ATTORNEYS FOR APPELLEE –
Jennifer A. Washburn                                       INDIANAPOLIS POWER & LIGHT
Indianapolis, Indiana                                      COMPANY
                                                           Peter J. Rusthoven
                                                           Teresa Morton Nyhart
                                                           Jeffrey M. Peabody
                                                           Barnes & Thornburg LLP
                                                           Indianapolis, Indiana
                                                           ATTORNEYS FOR APPELLEE –
                                                           INDIANAPOLIS POWER & LIGHT
                                                           INDUSTRIAL GROUP
                                                           Bette J. Dodd
                                                           Joseph P. Rompala
                                                           Lewis & Kappes, P.C.
                                                           Indianapolis, Indiana
                                                           ATTORNEYS FOR APPELLEE –
                                                           INDIANA UTILITY REGULATORY
                                                           COMMISSION
                                                           Curtis T. Hill, Jr.
                                                           Attorney General of Indiana
                                                           David Lee Steiner
                                                           Deputy Attorney General
                                                           Indianapolis, Indiana
                                                           Beth Krogel Roads
                                                           General Counsel
                                                           Indiana Utility Regulatory
                                                           Commission
                                                           Indianapolis, Indiana




Court of Appeals of Indiana | Opinion 93A02-1604-EX-804 | April 5, 2017                  Page 1 of 23
                                             IN THE
    COURT OF APPEALS OF INDIANA

Citizens Action Coalition of                               April 5, 2017
Indiana, Inc., Indiana                                     Court of Appeals Case No.
Association for Community and                              93A02-1604-EX-804
Economic Development, Indiana                              Appeal from the Indiana Utility
Coalition for Human Services,                              Regulatory Commission
Indiana Community Action                                   Cause Nos. 44576
Association, Indiana State                                            44602
Conference of the National                                 The Hon. Carol Stephan,
Association for the                                          Chair
Advancement of Colored People,
                                                           The Hon. James Huston
Inc., and National Association of                          The Hon. Carolene Mays-Medley
Social Workers Indiana Chapter,                            The Hon. Angela Weber
Appellants (Intervenors Below),                            The Hon. David E. Ziegner
                                                             Commissioners
        v.                                                 The Hon. Aaron Schmoll,
                                                             Administrative Law Judge
Indianapolis Power & Light
Company, et al.,
Appellee (Petitioner and Parties Below).




Bailey, Judge.




Court of Appeals of Indiana | Opinion 93A02-1604-EX-804 | April 5, 2017                Page 2 of 23
                                               Case Summary
[1]   Indianapolis Power & Light Company (“IPL”) petitioned the Indiana Utility

      Regulatory Commission (“the Commission”) for approval of an increase to its

      base rates for provision of electricity, which had been in effect since 1995. The

      Commission granted requests for intervention by Citizens Action Coalition,

      Indiana Community Action Association, Indiana Coalition for Human

      Services, Indiana Association for Community Economic Development,

      National Association of Social Workers Indiana Chapter, and Indiana State

      Conference of the National Association for the Advancement of Colored

      People (collectively, “Joint Intervenors”), and by IPL Industrial Group (“IPL

      Group”), The Kroger Company, and the City of Indianapolis.1 The proposed

      rate increase was approved by the Commission. After the denial of various

      petitions for reconsideration, Joint Intervenors appealed. We affirm. 2




      1
       The Indiana Office of the Utility Consumer Counselor (“the OUCC”) is a statutory party to rate
      proceedings, as a consumer representative.
      2
        By a separate order, we grant Joint Intervenors’ motion to dismiss the Commission as a party to this appeal.
      Because the Commission acted as a fact-finding administrative tribunal and no statute or administrative
      provision expressly makes the Commission a party on appeal, it is not a proper party on appeal from its own
      decision. See e.g., Citizens Action Coalition of Indiana, Inc. v. So. Indiana Gas & Electricity Co., 2017 WL 587261,
      slip op. at 1, n.1 (Ind. Ct. App. Feb. 14, 2017). See also City of Terre Haute v. Terre Haute Water Works Corp.,
      180 N.E.2d 110, 111 (Ind. Ct. App. 1962) (“When there are two opposing parties before [the Public Service
      Commission of Indiana], as here, its action in making findings and issuing an order deemed detrimental by
      one of the parties is similar to that of a court which makes a decision determining a controversy between
      adverse parties. A court is never a party to an appeal from its decision.”)

      Court of Appeals of Indiana | Opinion 93A02-1604-EX-804 | April 5, 2017                                Page 3 of 23
                                                            Issue
[2]   Joint Intervenors articulate four issues claiming that the order lacks adequate

      support, particularly challenging (1) the lack of findings specifically addressing

      the impact of a particular rate component, a declining block rate (“DBR”),

      upon energy conservation, (2) the lack of findings specifically addressing the

      effect of DBR on elderly and African-American customers, (3) the rejection of a

      proposal for 25% low-income customer subsidies, and (4) the rejection of

      mandatory reporting by IPL of interruption-in-service data. We consolidate

      and restate the issues to conform to our standard of review, that is, a

      Commission order will stand unless no substantial evidence supports it or it is

      contrary to law,3 and address the following issue: Whether the Commission’s

      rate approval order is not conclusive and binding due to a lack of specific

      findings on factual determinations material to its ultimate conclusions.



                                 Facts and Procedural History
[3]   On December 29, 2014, IPL, an investor-owned public utility providing

      electrical service to approximately 470,000 ratepayers in and around

      Indianapolis, filed a base-rate-increase petition with the Commission. IPL

      proposed that the fixed customer charge, a flat fee for access to the electrical

      grid, would rise from $6.70 per month to $11.25 per month for customers using




      3
          Northern Ind. Public Serv. Co. v. U.S. Steel Corp., 907 N.E.2d 1012, 1015 (Ind. 2009).


      Court of Appeals of Indiana | Opinion 93A02-1604-EX-804 | April 5, 2017                      Page 4 of 23
      0 to 325 kilowatt hours and from $11.00 to $17.00 for customers using over 325

      kilowatt hours. The energy charge, a volumetric charge equal to the approved

      rate multiplied by the number of kilowatt hours consumed, would rise from

      $0.093346 to $0.093935 for the first 500 kilowatt hours and from $0.070346 to

      $0.073000 thereafter.4 Because customers consuming greater than 500 kilowatt

      hours incrementally pay less than the lower-usage customers for the energy

      charge portion of the bill, the rate scheme incorporates a DBR.


[4]   The Commission consolidated the base rate case with a facilities investigation

      case and conducted nine days of evidentiary hearings. At the hearing, Joint

      Intervenors opposed the increase to the monthly fixed customer charge and

      presented testimony opposing the DBR on grounds that charging less at higher

      usage rates penalizes low volume customers and does not promote energy

      conservation. Also, Joint Intervenors urged adoption of a 25% subsidy for

      certain customers, to be funded by an incremental usage increase on other

      customers, and requested an order that IPL provide Joint Intervenors with data

      on service interruption events pertaining to low-income customers.


[5]   IPL presented testimony acknowledging that, in the absence of demand meters

      and/or time-of-use meters, the most cost-justified rate design would be a

      straight fixed-rate/variable rate. In this design, fixed rates are entirely




      4
        The inclusion of fuel and Demand Side Management (“DSM”) charges would cause a rise to $0.097416
      from $0.096827 and to $0.076481 from $0.073827, for the first 500 kilowatt hours and over 500 kilowatt
      hours, respectively. There was also a third block reduced rate for residential users of electric hot water
      heaters and space heaters who consumed over 1,000 kilowatt hours per month.

      Court of Appeals of Indiana | Opinion 93A02-1604-EX-804 | April 5, 2017                          Page 5 of 23
      recovered from the fixed charges and variable costs are entirely recovered from

      variable charges. However, IPL proposed gradualism as opposed to a total

      conversion to straight fixed-rate/variable rate methodology within one rate

      proceeding. Additionally, there was testimony that economically efficient

      pricing is achieved when a price is set equal to the marginal cost of production,

      and that flat energy charges (eliminating DBR) do not mirror costs in that it

      does not cost twice as much to produce twice as much electricity.


[6]   Economist Glenn Watkins (“Watkins”), who testified for the OUCC after

      conducting an evaluation of IPL’s proposal, opined that “the current level of

      customer charges is appropriate.” (Tr. at 8208.) According to Watkins, the

      proposed increases to the fixed monthly customer charge “violate the regulatory

      principle of gradualism, violate the economic theory of efficient competitive

      pricing, and are contrary to effective conservation efforts.” (Tr. at 8200.) With

      regard to DBR, Watkins recommended: “[DBR rates] be eliminated gradually

      to a flat rate structure. However, this restructuring of residential and small

      commercial rates should be done in a gradual and systematic manner to avoid

      rate shock to large volume heating customers.” (Tr. at 8212.) He

      recommended a phase out in three rate cases, with equal increments.


[7]   On March 16, 2016, the Commission issued its final order approving IPL’s

      proposed rate increase and rejecting the proposals for a low-income customer

      subsidy and service interruption reporting requirements. We do not re-produce

      the eighty-three-page opinion here, but recite portions relevant to Joint

      Intervenor’s positions:

      Court of Appeals of Indiana | Opinion 93A02-1604-EX-804 | April 5, 2017     Page 6 of 23
               Comprehensive Low Income Bill Payment Assistance Program


        Evidence. Joint Intervenors witness Howat recommended
        implementation of a low income rate that would be paid for by
        all classes of customers through a volumetric charge and that the
        low income rate be available to all residential customers at or
        below 150% of the poverty level. His recommendation was a
        25% discounted rate. He also recommended a plan to implement
        a low-income arrearage write-down program by retiring pre-
        program arrearages through 12 timely payments of discounted
        bills. He conducted and submitted analysis for the Commission’s
        consideration of the account activity among Low Income Home
        Energy Assistance program (“LIHEAP”) customers – number of
        overdue accounts, disconnect notices, and disconnection for
        nonpayment. Joint Intervenor witness Fraser presented
        demographic data concerning income levels and poverty rates in
        Indiana and Marion County.


        Industrial Group witness Phillips contended that recovery of
        social program costs is divorced from any cost causation
        principles and distorts electric price signals. He testified that the
        proposed program is best addressed by the Indiana state
        legislature.


        In rebuttal, IPL witness Gaske testified that the Joint Intervenors’
        proposal raises significant policy issues for the Commission to
        address and that perhaps the manner and amount of low income
        assistance would be more appropriately addressed in a generic
        proceeding involving all regulated electric utilities or by the
        legislature.


        Discussion and Findings. We recognize the importance of the
        issues raised by Joint Intervenors, but find that there are
        numerous implementation and policy related concerns. The
        timing of the introduction of the proposal in this proceeding has

Court of Appeals of Indiana | Opinion 93A02-1604-EX-804 | April 5, 2017         Page 7 of 23
        not provided an opportunity for sufficient consideration of the
        complexities involved. As pointed out by Mr. Phillips, the
        application of costs that could be considered beyond the cost of
        electric service distorts electric service price signals. A well-
        designed proposal would include a thorough understanding of
        how it would create or alleviate any costs of providing electric
        service. Further, access to key demographic and billing
        information the affected utility or utilities collect and hold is
        integral to evaluating any specific program design. Absent this
        information, we decline to adopt Mr. Howat’s recommendations
        in this proceeding.


        Joint Intervenors also have proposed that IPL be ordered to
        collect and report trend data on arrearages, disconnections, and
        related data points. While a properly designed program of the
        type suggested by Joint Intervenors would benefit from this
        information, and we encourage IPL to consider working with the
        Joint Intervenors and other interested stakeholders in further
        identifying beneficial information, we decline to order such
        collection and reporting solely on the basis of the evidence before
        us. We believe that any such effort is best pursued by the utility
        and interested stakeholders outside the regulatory constraints of a
        specific Commission directive.


        Rate Design.


        Evidence. Dr. Gaske explained that the rate design objective was
        guided by two goals: (1) the residential increase would remain
        less than 10%; and (2) no rate schedule would receive a rate
        decrease. The rate design proposed for residential and
        commercial rate classes by Dr. Gaske included moving
        additional fixed costs into the customer charge component of the
        bill. The result is a customer charge that increases by a greater
        percentage than the overall rate increase. He explained that the
        proposed level does not include all the fixed costs. In conducting
        the revenue proof, Dr. Gaske gave effect to the movement of
Court of Appeals of Indiana | Opinion 93A02-1604-EX-804 | April 5, 2017   Page 8 of 23
           customers who are eligible to migrate to a different rate schedule
           that would be more financially advantageous to them. He
           testified that after this case is concluded, IPL will notify those
           customers who would achieve lower bills by moving to a
           different rate schedule. The effect of this migration will result in
           the new rate schedule producing $1.187 million less in revenue,
           which was added to the overall rate increase requested.


           OUCC witness Watkins objected to the increase to the residential
           customer charge. He testified that it violates gradualism, violates
           efficient competitive pricing, and discourages conservation. Mr.
           Watkins also opposed Dr. Gaske’s proposed migration
           adjustment.5 The migration adjustment was based upon an
           analysis of customers and a determination that a number of the
           customers would be financially benefitted if they migrated to an
           alternative rate schedule. Mr. Watkins claimed that one cannot
           assume that a customer will choose to move to a more
           economical rate. He noted that savings for most would be less
           than 10%.


                                                    ...


           Joint Intervenor witness Howat also objected to the increase to
           the customer charge and continuation of declining block rates.
           He testified that rate structures such as these have a
           disproportionate impact on low income, elderly, and African
           American customers, and that on average, low income customers
           use less electricity than the average or than their higher income
           counterparts.


           Industrial Group witness Phillips objected to the proposed
           increase in the demand charge for the HL class. . . . Kroger



5
    Migration refers to movement between an SS (energy only) rate and SL (demand plus energy) rate.


Court of Appeals of Indiana | Opinion 93A02-1604-EX-804 | April 5, 2017                         Page 9 of 23
        witness Higgins testified that he supports IPL’s proposed rate
        design, including the increases to the demand charge for the HL
        and SL classes. City witness Sommer disagreed with IPL’s rate
        migration objective that no class receive a rate decrease. . . .


        In rebuttal, Dr. Gaske responded to Mr. Watkins’ testimony
        concerning economic efficiency and testified that economic
        theory supports the concept that economic efficiency is promoted
        by recovering fixed costs through a fixed charge and only
        variable costs in a variable charge. He noted that IPL is not
        proposing a straight fixed variable (“SFV”) rate design in this
        case. He testified that while a SFV rate design would provide
        better price signals, IPL’s proposed rates would continue to
        recover 75% of residential fixed costs through the energy charge
        and 81% of small commercial fixed costs. He agreed that
        declining block rates are not as cost-justified as a SFV rate design,
        but are more cost-justified than a flat energy charge in that the
        declining block rate structure represents a reasonable
        compromise approach in which successively larger rate blocks
        move closer to the marginal cost of energy. He further responded
        to Mr. Watkins’ contention that the increase in the customer
        charge violates a principle of gradualism by noting that
        gradualism looks at the total bill, which is the sum of both the
        customer and energy charges. The proposed increase in
        customer charge would significantly reduce the percentage
        increase in energy charge that would otherwise be required and
        thereby offset the increase in the customer charge which is the
        focus of Mr. Watkins’ argument.


        With respect to the Joint Intervenors’ position, Dr. Gaske cited
        details concerning the percentage of residential customers who
        are enrolled in the LIHEAP program and those who are not,
        showing that, in general, the energy usage characteristics among
        the residential class for LIHEAP customers are very similar to
        the no-assistance customers. As a result, proposals for lower
        customer charges and/or flat energy charges are likely to increase

Court of Appeals of Indiana | Opinion 93A02-1604-EX-804 | April 5, 2017   Page 10 of 23
        the monthly bills of the significant portion of low income energy
        assistance customers who have above-average energy use, and
        reduce the bills of the significant portion of customers who are
        not low income but have below-average energy use.


                                                   ...


        Discussion and Findings.


        Increase in Residential Customer Charge and Continuation of Declining
        Block Rates. There were only two arguments presented in
        opposition to IPL’s customer charge proposal: Mr. Watkins’
        contention that all costs are variable in the long run and therefore
        SFV rates represent inefficient pricing, and Mr. Howat’s
        testimony that Petitioner’s rate design produces a
        disproportionate impact on low income customers.


        As to the first argument, we note that IPL has not proposed SFV
        rates. While the proposed increases in the customer charge from
        $6.70 to $11.25 (for less than 325 kWh/month) and $11.00 to
        $17.00 (for greater than 325 kWh/month) move toward a more
        fixed and variable rate design consistent with traditional cost
        causation principals, it is demonstrably short of SFV rates. There
        is no evidence that the customer charge as designed even reaches
        the level of full distribution system fixed cost recovery. Cost
        recovery design alignment with cost causation principles sends
        efficient price signals to customers, allowing customers to make
        informed decisions regarding their consumption of the service
        being provided. The Commission investigated the rate design
        issue with regard to natural gas service in Cause No. 43180, and
        the general premise appears to be reasonably applicable to
        electric utilities in the context of distribution-related costs.
        Notwithstanding, gradualism in any movement is a reasonable
        consideration, and we find that the increase in customer charge is
        consistent with the Commission’s preference for gradual changes

Court of Appeals of Indiana | Opinion 93A02-1604-EX-804 | April 5, 2017    Page 11 of 23
              in rate structures. We note that IPL’s proposed customer charge
              represents the first increase in the customer charge since base
              rates were last changed in 1995.


              With respect to the second argument, Dr. Gaske’s analysis
              demonstrated that approximately 8-10% of the customers within
              each residential class receive energy assistance, yet the median
              usage and the 90th percentile usage for energy assistance
              customers compared to no-assistance customers is similar. While
              switching to an inclining block rate structure may benefit low
              income/low energy users, it would harm a substantial number of
              low income/high energy users. Many low-income customers use
              more than the residential average amount.


              Ultimately, we find that Petitioner’s proposed rate design to
              increase the customer charge and maintain declining block rates
              should be approved. We further find that this structure does not
              violate principles of gradualism, because gradualism is best
              considered in the context of the entire customer bill and not
              discrete charges within the bill.


      (App. at 91-96.)


[8]   The Commission subsequently issued a Nunc Pro Tunc Order unrelated to this

      appeal. On April 5, 2015, Joint Intervenors, IPL Group, and The Kroger

      Company filed petitions seeking reconsideration of various aspects of the Order.

      On June 1, 2016, the Commission denied those petitions. Joint Intervenors and

      the OUCC filed notices of appeal. Subsequently, the OUCC filed a motion to




      Court of Appeals of Indiana | Opinion 93A02-1604-EX-804 | April 5, 2017   Page 12 of 23
       dismiss its notice of appeal.6 The appeal initiated by Joint Intervenors

       proceeded.


                                          Standard of Review
[9]    The Commission was created by the Indiana General Assembly to act

       “primarily as a fact-finding body with the technical expertise to administer the

       regulatory scheme designed by the legislature.” Northern Ind. Public Serv. v. U.S.

       Steel, 907 N.E.2d 1012, 1015 (Ind. 2009). The Commission was assigned the

       responsibility “to insure that public utilities provide constant, reliable, and

       efficient service to the citizens of Indiana.” Id. The Commission can exercise

       only that power which has been conferred upon it by statute. Id.


[10]   This statutory scheme reflects a basic legislative policy that questions of rate-

       making methodology are best consigned to the Commission’s expertise. L.S.

       Ayres & Co. et al. v. IPALCO et al., 169 Ind. App. 652, 675-76, 351 N.E.2d 814,

       830 (1976). In each rate proceeding, the Commission’s primary objective is to

       establish a level of rates and charges that will permit the utility to meet its

       operating expenses plus a return on investment which will compensate its

       investors. City of Evansville v. Southern Ind. Gas & Elec. Co., 167 Ind. App. 472,

       479, 339 N.E.2d 562, 568 (1976).




       6
        The OUCC petitioned to be retained as a statutory party on appeal. This Court granted that motion on
       August 4, 2016.

       Court of Appeals of Indiana | Opinion 93A02-1604-EX-804 | April 5, 2017                     Page 13 of 23
[11]   Indiana Code Section 8-1-3-1 provides for judicial review of the Commission’s

       decisions in language almost identical to provisions for judicial review of other

       administrative agency actions:


               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 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.


[12]   Our review is two-tiered:

               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. Citizens Action Coalition of
               Ind., Inc. v. N. Ind. Pub. Serv. Co., 485 N.E.2d 610, 612 (Ind.
               1985). Such determinations of basic fact are reviewed under a
               substantial evidence standard, meaning the order will stand
               unless no substantial evidence supports it. McClain [v. Review Bd.
               Of Ind. Dept. of Workforce Dev., 693 N.E.2d 1314, 1317-18 (Ind.
               1998)]. In substantial evidence review, “the appellate court
               neither reweighs the evidence nor assesses the credibility of
               witnesses and considers only the evidence most favorable to the
               Board’s findings.” Id. The Commission’s order is conclusive and
               binding unless (1) the evidence on which the Commission based
       Court of Appeals of Indiana | Opinion 93A02-1604-EX-804 | April 5, 2017   Page 14 of 23
               its findings was devoid of probative value; (2) the quantum of
               legitimate evidence was so proportionately meager as to lead to
               the conviction that the finding does not rest upon a rational basis;
               (3) the result of the hearing before the Commission was
               substantially influenced by improper considerations; (4) there
               was not substantial evidence supporting the findings of the
               Commission; (5) the order of the Commission is fraudulent,
               unreasonable, or arbitrary. Id. at 1317 n.2. This list of
               exceptions is not exclusive. Id.


               At the second level, the order must contain specific findings on
               all the factual determinations material to its ultimate conclusions.
               Citizens Action Coalition, 485 N.E.2d at 612. McClain described
               the judicial task on this score as reviewing conclusions of
               ultimate facts for reasonableness, the deference of which is based
               on the amount of expertise exercised by the agency. McClain,
               693 N.E.2d at 1317-18. Insofar as the order involves a subject
               within the Commission’s special competence, courts should give
               it greater deference. Id. at 1318. If the subject is outside the
               Commission’s expertise, courts give it less deference. Id. In
               either case courts may examine the logic of inferences drawn and
               any rule of law that may drive the result. Id. 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 standard and legal principles involved in producing its
               decision, ruling, or order. Citizens Action Coalition, 485 N.E.2d at
               612-13.


       Northern Indiana Public Serv., 907 N.E.2d at 1016.


                     Declining Block Rates – Disparate Impact
[13]   At the hearing, Joint Intervenors opposed a rate scheme inclusive of DBR, that

       is, the volumetric charge decrease from $0.093935 to $0.070346 after the first

       Court of Appeals of Indiana | Opinion 93A02-1604-EX-804 | April 5, 2017   Page 15 of 23
       500 kilowatt hours of usage. Joint Intervenors argued that this is a disincentive

       for conservation and disproportionately harms elderly, African-American, and

       low income customers.


[14]   In response to an inquiry about the “general public policy” applicable to DBR,

       Watkins testified:


               In 1978, Congress passed the Public Utility Regulatory Policies
               Act (“PURPA”). Among other things, PURPA established
               various conservation initiatives and mandates for electric utilities.
               Included in this Act is a clear policy to eliminate declining-block
               energy rates unless supported by costs. Specifically, PURPA
               states:


               ‘Declining Block Rates. The energy component of a rate, or the
               amount attributable to the energy component in a rate, charged
               by any electric utility for providing electric service during any
               period to any class of electric consumers may not decrease as
               kilowatt-hour consumption by such class increases during such
               period except to the extent that such utility demonstrates that the
               costs to such utility or providing electric service to such class,
               which costs are attributable to such energy component, decrease
               as such consumption increases during such period.’


               Since this time, most states and commissions have abandoned
               the once prevalent declining-block rate structures in favor of flat,
               or inverted, block rates. The general policy supporting the
               elimination of such declining-block rates is that this type of rate
               structure is clearly at odds with energy conservation due to the
               fact that the incremental price of electricity decreases as
               consumption increases, thereby creating somewhat of an
               incentive to use more and more electricity. Indeed, declining-
               block electricity rates became popular in the 1960s and early
               1970s and were used as a promotional tool to encourage the

       Court of Appeals of Indiana | Opinion 93A02-1604-EX-804 | April 5, 2017    Page 16 of 23
               increased usage of relatively cheap electricity during a time in
               which there were significant natural gas shortages through the
               Country.


       (Tr. at 8210.)


[15]   On appeal, Joint Intervenors claim that the Commission’s order “is deficient

       because the Commission failed to make basic findings of fact or a conclusion of

       law as to whether DBR has a deleterious effect on energy conservation and

       energy efficiency programs sponsored by the utility.” Appellant’s Br. at 25.

       According to Joint Intervenors, the Commission “ignored the substantial

       evidence presented by both CAC and the OUCC, demonstrating that ‘this type

       of structure is clearly at odds with energy conservation due to the fact that the

       incremental price of electricity decreases as consumption increases, thereby

       creating somewhat of an incentive to use more and more electricity.”’

       Appellant’s Br. at 27 (quoting App. at 190-91). They ask that we remand the

       order “for the Commission to determine whether the DBR rate structure is

       deleterious to energy conservation and utility-sponsored energy efficiency

       programs.” Appellant’s Br. at 30.


[16]   We do not find this particular relief warranted. Joint Intervenors did not bring

       a declaratory judgment action; rather, they intervened in a rate case. Rate-

       making is a legislative as opposed to a judicial function, and our Indiana

       Legislature has seen fit to establish a commission for the express purpose of

       hearing evidence and balancing and weighing the many complicated factors

       which must be taken into consideration in setting utility rates. State ex rel.

       Court of Appeals of Indiana | Opinion 93A02-1604-EX-804 | April 5, 2017    Page 17 of 23
       Indianapolis Water Co. v. Boone Circuit Court, 261 Ind. 583, 586-87, 307 N.E.2d

       870, 872 (1974). The enabling act does not authorize the Commission to issue

       declaratory rulings. See U.S. Steel Corp. v. No. Ind. Public Serv. Co., Inc., 482

       N.E.2d 501, 506 (Ind. Ct. App. 1985), trans. denied.


[17]   In their insistence upon particular language, Joint Intervenors attempt to shift

       the focus from the reasonableness of the order approving the rate change as a

       whole to one component. As the Commission acknowledged, an ideal rate

       scheme would closely align recovery of fixed costs with fixed rates and variable

       costs with variable rates based upon usage. However, there was ample

       testimony to support the Commission’s conclusions that, in light of the fact that

       IPL’s base rates had not been increased since 1995, an abrupt rate structure

       overhaul ignoring the principles of gradualism would be undesirable.

       Ultimately, the Commission incorporated the principle of “gradualism,” (App.

       at 96), and approved a rate structure that was not a straight fixed rate/variable

       rate structure.


[18]   Joint Intervenors make a cursory claim that “approval of DBR despite its

       deleterious effect on energy conservation is contrary to federal law, state rule,

       and existing precedent.” Appellant’s Br. at 27. They note that the National

       Energy Policy Act of 1992 encourages state regulators of utilities to consider

       setting rates to promote energy efficient investments. They also note that, in a

       separate utility case, the Commission found the utility’s proposal to gradually

       eliminate DBR rates to be reasonable. See In re Verified Petition of So. Ind. Gas &

       Electric Co., Cause No. 43839, 2011 Ind. PUC LEXIS 115, 215 (I.U.R.C. Apr.

       Court of Appeals of Indiana | Opinion 93A02-1604-EX-804 | April 5, 2017     Page 18 of 23
       27, 2011). The parties do not dispute the proposition that public policy, federal

       and State, favors and encourages conservation.


[19]   Nonetheless, encouragement is not a mandate. Joint Intervenors direct us to no

       statutory requirement that each individual component of a rate scheme reflect

       the most environmentally conservative approach or that abandonment of older

       methodology be immediate and total. At bottom, Joint Intervenors suggest a

       reweighing of evidence, with conservation – based upon their interpretation of

       customer usage signals – being paramount. They do not demonstrate the

       unreasonableness of the rate increase as a whole.


[20]   In a similar vein, Joint Intervenors argue that the Commission “did not make

       any specific findings of fact or make an ultimate finding of reasonableness as to

       the material issue raised regarding whether the continuance of the DBR

       structure disproportionately harms elderly consumers and African American

       consumers.” Appellant’s Br. at 31. Joint Intervenors observe that the

       Commission has a duty to see that the rates are fair and reasonable, both to the

       consumers and to the utility; claim that “no party rebutted the [Joint

       Intervenor] evidence on this issue”; and ask for remand “to determine whether

       the DBR rate structure disproportionately harms elderly and African American

       ratepayers.” Appellant’s Br. at 31-32.




       Court of Appeals of Indiana | Opinion 93A02-1604-EX-804 | April 5, 2017   Page 19 of 23
[21]   Joint Intervenors presented testimony to the effect that lower income customers

       use less electricity on average.7 IPL presented testimony that their customers

       participating in energy assistance programs show similar characteristics of

       usage compared to customers not receiving assistance, looking at median usage

       and 90th percentile usage. Even assuming that DBR has a disproportionate

       negative impact upon certain groups of customers, the Commission is required

       by statute to approve rates that are fair and reasonable inclusive of the entire

       customer base. There is no statutory requirement that the impact upon

       particular sub-groups be separately addressed. Joint Intervenors have not

       demonstrated that the Commission failed to conform to statutory standards.


[22]   “On matters within its jurisdiction, the Commission enjoys wide discretion.

       The Commission’s findings and decision will not be lightly overridden just

       because we might reach a contrary opinion on the same evidence.” NIPSCO

       Indus. Grp. v. No. Ind. Public Serv. Co., 31 N.E.3d 1, 5-6 (Ind. Ct. App. 2015)

       (internal citation omitted.) As explained by Watkins, “it is generally accepted

       that to the extent possible, joint costs should be allocated to customer classes

       based on the concept of cost causation,” but “although there are certain

       principles used by all cost of service analysts, there are often significant

       disagreements on the specific factors that drive individual costs.” (Tr. at 8147-

       48.)




       7
           The data base was not limited to IPL or Indiana customers.


       Court of Appeals of Indiana | Opinion 93A02-1604-EX-804 | April 5, 2017    Page 20 of 23
[23]   Challengers have the burden of showing there is insufficient evidence in the

       record to support the findings of the Commission; they cannot merely cite to

       other evidence of record which would support a determination more favorable

       to their position. Bethlehem Steel Corp. v. N. Ind. Pub. Serv. Co., 397 N.E.2d 623,

       628 (Ind. Ct. App. 1979). Here, the findings contain enough detail such that we

       can determine whether the order is reasonable, within the wide discretion of the

       Commission.


                  Subsidy Program and Reporting Requirements
[24]   Joint Intervenors complain that the Commission did not make sufficient

       findings to support its rejection of Joint Intervenors’ requests for a 25% subsidy

       to low-income customers and for mandatory reporting of service interruption

       events so as to assist the Intervenors in supporting future arguments with such

       data. As a threshold matter, we observe that Joint Intervenors argue that the

       Commission must make findings with respect to disparate socioeconomic

       impact of rate increases, but have not shown that the Commission had a

       statutory duty to make any findings at all in this regard. Joint Intervenors were

       permitted to intervene in a rate-making case, but this did not change the nature

       of the proceeding from rate-making to a broad socio-economic inquiry akin to

       that which might be undertaken by the General Assembly.


[25]   The Commission is to approve rates that are just and reasonable. Within the

       statutory language, there is no requirement that the unique position of

       particular groups of consumers be separately considered. Joint Intervenors are


       Court of Appeals of Indiana | Opinion 93A02-1604-EX-804 | April 5, 2017   Page 21 of 23
       not entitled to specific findings on propositions they have injected unless it is a

       matter material to the rate decision. Citizens Action Coalition, 485 N.E.2d at 612.

       In other words, the Commission does not have to justify to Joint Intervenors

       why it rejected a subsidy outside general rate-making principles and a reporting

       obligation. Joint Intervenors had to justify to the Commission why a direct

       subsidy and reporting requirement should be adopted within a rate case. They

       failed to do so.


[26]   That said, the Commission has shown some inclination to hear socio-economic

       evidence in a rate case. It did not simply ignore the Joint Intervenors’

       argument. Rather, after hearing limited evidence, the Commission

       acknowledged the need for broader-based evidence and observed that the

       legislature is better suited to determinations of if and when one citizen is

       burdened to benefit another. Undeniably, lower income persons at times

       struggle to obtain basic necessities. But the struggle for necessities of life is

       broader; what of those who have above-poverty incomes but increased

       expenses, a larger family size, or significant medical needs? The drawing of

       lines in the face of myriad considerations and competing concerns is

       traditionally a function performed by our General Assembly. See Citizens Action

       Coalition v. Public Serv. Co., 450 N.E.2d 98, 103 (Ind. Ct. App. 1983) (affirming

       the Commission decision declining to require Indiana electric utilities to offer a

       “life-line” rate structure providing a below-cost rate for essential residential

       customer needs and observing, “any decision to implement an assistance




       Court of Appeals of Indiana | Opinion 93A02-1604-EX-804 | April 5, 2017     Page 22 of 23
       program not based on sound regulatory principles must be made by the

       legislature.”)8


[27]   Again, Joint Intervenors have not shown that the Commission failed to

       conform to statutory standards or failed to make requisite findings.



                                                  Conclusion
[28]   Joint Intervenors have not shown that the Commission decision approving a

       rate design that includes DBR is unsupported by requisite findings. Joint

       Intervenors have not shown that the rate approval order is non-binding due to a

       lack of more extensive factual findings on matters introduced by Joint

       Intervenors which were not directly material to components of the approved

       rate design.


[29]   Affirmed.


       Najam, J., and May, J., concur.




       8
        In the order affirmed on appeal, the Commission found that a rate “targeted” to specific income or
       demographic groups of residential customers was prohibited by law and a general lifeline rate structure was
       not an effective and equitable means of providing assistance to low-income residential customers. Citizens
       Action Coalition, 450 N.E.2d at 100.

       Court of Appeals of Indiana | Opinion 93A02-1604-EX-804 | April 5, 2017                         Page 23 of 23
