ATTORNEYS FOR APPELLANTS ATTORNEYS FOR APPELLEES
UNITED STATES GYPSUM, ET AL. INDIANA GAS
John F. Wickes, Jr. Ronald E. Christian
Todd A. Richardson Robert E. Heidorn
Pamela H. Sherwood Daniel W. McGill
Indianapolis, IN Stanley C. Fickle
OFFICE OF UTILITY CONSUMER COUNSELOR
Anne E. Becker CITIZENS GAS & COKE
Christopher C. Earle Harry V. Huffman
Timothy Stewart Michael B. Cracraft
Indianapolis, IN Philip B. McKiernan
CITIZENS ACTION COALITION, ET AL.
C. Kirby Mullen PROLIANCE ENERGY
Michael A. Mullett Wayne C. Turner
Reed W. Cearley Steven M. Sherman
Indianapolis, IN Indianapolis, IN
ENRON CAPITAL & TRADE AMICI CURIAE OHIO VALLEY
L. Parvin Price GAS CORP., ET AL.
George T. Patton, Jr. George A. Porch
Jeffrey M. Reed Evansville, IN
Peter L. Hatton
SUPREME COURT OF INDIANA
UNITED STATES GYPSUM, INC.; GENERAL ) MOTORS CORP.; REID HOSPITAL & ) HEALTHCARE SERVICES; BELDEN WIRE & ) CABLE CO.; ELI LILLY & CO.; KNAUF ) FIBER GLASS GMBH; DANA CORP.; ALUMINUM ) CO. OF AMERICA; HAYES WHEELS INTL; ) THOMPSON CONSUMER ELECTRONICS; VISY ) PAPER, INC.; JEROME E. POLK; GRANT ) SMITH; JULIA L. VAUGHN; MARK S. BAILEY; ) WILLIAM G. SIMMONS; TIMOTHY E. PETERSON; ) ROBERT V. BENGE; CITIZENS ACTION ) COALITION OF INDIANA, INC.; UNITED ) Supreme Court SENIOR ACTION, INC.; INDIANA OFFICE OF ) No. 93S02-9904-EX-251 UTILITY CONSUMER COUNSELOR; and ENRON ) CAPITAL & TRADE RESOURCES CORP., ) ) Court of Appeals Appellants (Petitioners and ) No. 93A02-9710-EX-667 Intervenors below ) ) v. ) ) INDIANA GAS CO., INC.; BOARD OF ) DIRECTORS FOR UTILITIES OF THE DEPT. ) OF PUBLIC UTILITES OF THE CITY OF ) INDIANAPOLIS, AS SUCCESSOR TRUSTEE OF ) A PUBLIC CHARITABLE TRUST, d/b/a ) CITIZENS GAS & COKE UTILITY; AND ) PROLIANCE ENERGY, LLC, ) ) Appellees (Respondents below ). )
September 22, 2000
Historically, LDCs purchased both gas and transportation of that gas as a single
bundled product from interstate pipelines. Beginning in 1978, Congress and the Federal
Energy Regulatory Commission (FERC) took steps to stimulate competition, leading interstate pipelines to
offer transportation as a separate service. This created a competitive market
for the gas itself and allowed customers to sell or release pipeline capacity
that they did not need. With these changes emerged interstate marketers who
sell gas to LDCs and large volume consumers. These large volume consumers
are known as transportation customers because they buy gas directly from the marketer
but rely on LDCs to provide local, intrastate pipeline transportation.
Against this background, IGC Energy, Inc. (Indiana Gass sister company) See footnote and Citizens By-Products Coal Co. (a wholly owned subsidiary of Citizens Gas) entered into a Fundamental Operating Agreement in March 1996 creating ProLiance Energy, a limited liability company. ProLiance was designed to allow the Utilities to benefit from the synergistic effects of combined gas supply and planning functions, including enhanced leverage in the wholesale gas marketplace and non-duplication of resources previously devoted by each Utility to those functions. Each of ProLiances creators owns 50% of ProLiance and, through a board, maintains 50% control over it, thus allowing the Utilities the advantages of dealing with an affiliate rather than a third-party marketer.
ProLiance, in turn, entered into separate Gas Sales and Portfolio Administration Agreements with each of the Utilities, covering four and a half years. These agreements made ProLiance responsible for procuring wholesale gas supply and interstate pipeline transportation service for the Utilities. To that end, ProLiance took over the Utilities existing gas supply contracts and pipeline capacity and assumed responsibility for negotiating new supply contracts when current ones expire. ProLiance also became responsible for scheduling gas delivery to the Utilities and for developing future supply plans, subject to the Utilities approval. These agreements were filed with the Commission.
The agreements provide that the Utilities will purchase gas from ProLiance at index prices established in trade publications, although the price that ProLiance actually pays for gas may differ from the index price. Additionally, the agreements say the Utilities will pay ProLiance an annual administration fee for performing gas-supply and planning services that the Utilities previously performed themselves. ProLiance also provides the Utilities with a transportation credit in exchange for ProLiances right to sell off any unused pipeline capacity available once ProLiance has met the gas needs of the Utilities and their gas customers. The transportation credit and the administration fee are partially based on historic benchmarks.
Some of the Utilities transportation customers petitioned the Commission to disapprove the ProLiance
agreements. Ten residential customers of Citizens Gas filed joinders purporting to add
themselves as petitioners. The Office of Utility Consumer Counselor (OUCC) appeared on
behalf of the public and opposed the ProLiance agreements. Some citizen groups
and gas marketers also intervened and opposed the agreements. We refer to
these customers and groups adverse to the ProLiance agreements collectively as Opponents.
The Commission conducted a five-day hearing. On September 12, 1997, the Commission
concluded, in lengthy findings, that the ProLiance agreements were in the public interest,
so it refused to disapprove them.
The Court of Appeals reversed and instructed the Commission to disapprove the agreements. United States Gypsum, Inc. v. Indiana Gas Co., 705 N.E.2d 1017 (Ind. Ct. App. 1998). It concluded that ProLiances index-based pricing arrangement was an attempt by the Utilities to circumvent traditional regulation and that their failure to offer a proposal under the Alternative Utility Regulation Act, Indiana Code Chapter 8-1-2.5, required the Commission to disapprove the ProLiance agreements. 705 N.E.2d at 1021-22.
After hearing oral argument, we granted transfer at the request of the Utilities and ProLiance.
Our Standard of Review
An order of the Commission is subject to appellate review to determine whether it is supported by specific findings of fact and by sufficient evidence, as well as to determine whether the order is contrary to law. Citizens Action Coalition of Indiana, Inc. v. Public Serv. Co., 582 N.E.2d 330 (Ind. 1991). On matters within its jurisdiction, the Commission enjoys wide discretion. See In re Northwestern Indiana Telephone Co., 201 Ind. 667, 171 N.E. 65 (1930). The Commissions findings and decision will not be lightly overridden just because we might reach a contrary opinion on the same evidence. Public Serv. Commn v. City of Indianapolis, 235 Ind. 70, 131 N.E.2d 308 (1956).
Opponents petitioned under a statute that allows the Commission to investigate a complaint
by a sufficient number of complainants against any public utility that any regulation
. . . practice or act whatsoever affecting or relating to the service
of any public utility, or any service in connection therewith, is in any
respect unreasonable, unsafe, insufficient or unjustly discriminatory. . . . Ind. Code
(emphasis added). A public utility is defined, in pertinent part,
as any corporation, company, partnership, [or] limited liability company . . . that
may own, operate, manage, or control any plant or equipment within the state
for the . . . production, transmission, delivery, or furnishing of heat, light,
water, or power. . . . Ind. Code § 8-1-2-1(a).
Opponents named both Utilities and ProLiance as respondents to their petition and believe
that all three are subject to investigation under Section 54. It is
undisputed that Indiana Gas is a public utility. However, the Commission granted
ProLiances motion to dismiss, in part, after finding that ProLiance is not a
public utility. The Commission found that ProLiance does not own, operate, manage,
or control any plant or equipment for producing, transmitting, delivering or furnishing gas,
and that the Utilities retained control over their facilities. (R. at 1603.)
It found that all distribution functions remained with the Utilities. Consequently, the Commission
concluded that Section 54 did not provide it with jurisdiction over ProLiance itself.
Opponents attack this conclusion on two grounds. First, they say that the
Commission construed public utility too narrowly. They argue that ProLiances integral role
in gas supply planning and procurement makes it a public utility. Nonetheless,
we agree with the Commission because the functions performed by ProLiance do not
constitute operation, management, or control of a plant or equipment for transmitting or
delivering gas; ProLiance performs services for the Utilities, not for the Utilities retail
customers. We decline Opponents invitation to equate office equipment and clerical supplies,
such as telephones and computers that ProLiance uses, with a plant or equipment
for distributing gas within the meaning of Ind. Code § 8-1-2-1(a)(2).
Second, Opponents say that the Commission had jurisdiction because ProLiance is an affiliated
interest within the meaning of Indiana Code § 8-1-2-49(2). Subsection 49(2) allows
the Commission access to the records of affiliated interests involving transactions with the
public utility related to matters within the Commissions jurisdiction, not including ownership of
stock. See id. Further, Subsection 49(2) provides that [n]o management, construction,
engineering, or similar contract, made after March 8, 1933, with any affiliated interest
is effective until it is filed with the Commission, and the Commission has
authority to disapprove such contracts if they are not in the public interest.
Despite granting ProLiances motion to dismiss in part, the Commission ordered ProLiance to remain a party to this proceeding, pursuant to Indiana Code § 8-1-2-49, for the purposes of answering the other parties discovery requests and providing information to the Commission. (R. at 1597, 1602.) Furthermore, the Commission squarely decided under Subsection 49(2) that the ProLiance agreements were in the public interest. Although Subsection 49(2) may have given the Commission access to certain affiliate records and accounts and the authority to review affiliate contracts, we find no error in the Commissions determination that it lacked plenary jurisdiction over ProLiance itself under Section 54.
Next, we consider whether the Section 54 petition gave the Commission jurisdiction over Citizens Gas. Indiana Code § 8-1-2-1(a) specifically exempts municipally owned facilities from the definition of public utility. The Commission concluded that Citizens Gas is a municipal utility and therefore not a public utility subject to investigation under Section 54. See Cities & Towns of Anderson v. Public Serv. Commn, 397 N.E.2d 303, 310 (Ind. Ct. App. 1979) (Commissions authority to investigate complaints against public utilities under Section 54 does not extend to municipal utilities); Citizens Gas & Coke Util. v. Sloan, 136 Ind. App. 297, 196 N.E.2d 290, (en banc), rehg denied, 136 Ind. App. 311, 311-12, 197 N.E.2d 312, 313 (1964) (Section 54s similarly-worded predecessor, § 54-408 (Burns' 1951 Replacement) did not allow Commission general authority to investigate Citizens Gas, a municipal utility).
Opponents agree that Citizens Gas is a municipal utility. Despite the earlier Court of Appeals opinions, Opponents argue that the Commission may investigate Citizens Gas under Section 54. Opponents reason that the rules of service and rates adopted by Citizens Gass board of directors take effect
only after the rules and rates have been filed with and approved by the commission and such approval shall be granted by the Commission only after notice of hearing and hearing as provided by IC 8-1-1 and IC 8-1-2, and only after determining compliance of the rates of service with IC 8-1.5-3-8 and IC 8-1.5-3-10 and only after determining compliance of the rules of service with IC 8-1-1 and IC 8-1-2, along with the rules and standards of service for municipal utilities of Indiana approved by the commission.
Ind. Code § 8-1-11.1-3(c)(9). Opponents say that these cross-references to Chapter 8-1-2 necessarily make a complaint about Citizens Gas the proper subject of a petition under Section 54. In addition, symmetry favors treating municipal utilities like public utilities, Opponents contend.
We are not persuaded. The legislature explicitly exempted municipal utilities from the definition of public utility. Other statutes explicit references to municipal utilities in conjunction with public utilities show that the legislature knows how to say and include municipal utilities when it so desires. See, e.g., Ind. Code § 8-1-2-42(a),(g); accord Stucker Fork Conservancy Dist. v. Indiana Utility Regulatory Commn, 600 N.E.2d 955, 957-58 (Ind. Ct. App. 1992) (municipal utilities are subject to Commissions jurisdiction only when specifically provided for by statute). Thus, we hold that the Commission correctly determined that its jurisdiction under Section 54 did not extend to Citizens Gas. See footnote
In sum, we affirm the Commissions conclusion that it lacked plenary jurisdiction over ProLiance and Citizens Gas in this Section 54 proceeding. In any event, Indiana Gas is a public utility, so we address the remaining issues.
The bedrock principle behind utility regulation is the so-called regulatory compact, which
arises out of a bargain struck between the utilities and the state. As a quid pro quo for being granted a monopoly in a geographical area for the provision of a particular good or service, the utility is subject to regulation by the state to ensure that it is prudently investing its revenues in order to provide the best and most efficient service possible to the consumer. At the same time, the utility is not permitted to charge rates at the level which its status as a monopolist could command in a free market. Rather, the utility is allowed to earn a fair rate of return on its rate base. Thus, it becomes the Commissions primary task at periodic rate proceedings to establish a level of rates and charges sufficient to permit the utility to meet its operating expenses plus a return on investment which will compensate its investors.
Indiana Gas Co., Inc. v. Office of Utility Consumer Counselor (Indiana Gas I), 575 N.E.2d 1044, 1046 (Ind. Ct. App. 1991) (citations omitted).
This fair-rate-of-return concept underlies traditional rate regulation. See Office of Utility Consumer
Counselor v. Gary- Hobart Water Corp., 650 N.E.2d 1201 (Ind. Ct. App. 1995);
Indiana Gas I, 575 N.E.2d at 1046. In determining fair rates,
the Commission considers a representative level of anticipated revenues and expenses and the
property employed by the utility to provide service to its customers. See
City of Evansville v. Southern Indiana Gas & Elec. Co., 167 Ind. App.
472, 478-82, 339 N.E.2d 562, 568-71; Re Northern Indiana Public Serv. Co., No.
40180, 166 PUR4th 213, 224 (IURC December 28, 1995). The Commission compares
the property used and useful for the production of current service to the
utilitys revenues in order to quantify the return being provided by the existing
rates. Id. If the Commission determines that a utilitys rates have
become unjust and unreasonable, it may modify them by ordering just and reasonable
rates to be charged prospectively. Ind. Code § 8-1-2-68. This rate-setting
procedure is comprehensive: the Commission must examine every aspect of the utilitys
operations and the economic environment in which the utility functions to ensure that
the data it has received are representative of operating conditions that will, or
should, prevail in future years. City of Evansville, 167 Ind. App. at
482, 339 N.E.2d at 570-71.
Traditional regulation also allows a gas utility to obtain an adjustment of its rates to reflect fluctuations in gas cost without undergoing a formal rate proceeding. See Ind. Code § 8-1-2-42(g). A gas cost adjustment permits the utility to pass along to its customers on a dollar-for-dollar basis any fluctuations in the gas cost experienced by the utility. Indiana Gas Co., Inc. v. Office of Utility Consumer Counselor (Indiana Gas II), 610 N.E.2d 865, 867 (Ind. Ct. App. 1993); see Indiana Gas I, 575 N.E.2d at 1046-49. As part of the gas cost adjustment, the Commission applies an earnings test to ensure that the utilitys gas costs are not being passed along to the consumer in a way that allows the utility to earn a higher return than that authorized by the Commission in the utilitys last rate case. Indiana Gas I, 575 N.E.2d at 1046 (citing Ind. Code § 8-1-2-42(g)(3)(C)). The clear legislative intent here is preventing a utility from overearning. Id. at 1052. For this reason, the earnings test applies when gas costs decrease as well as when they increase. Id. at 1049.
When a gas cost adjustment is sought, the OUCC may examine the books
and records of the utility to determine the cost of gas on which
the adjustment is being sought, and it must make a report to the
Commission. Ind. Code § 8-1-2-42(g)(1). In any event, the OUCC must
examine a gas utilitys books and records pertaining to the cost of gas
not less than annually and provide the Commission with a report; if appropriate,
the OUCC may request a reduction or elimination of a gas cost adjustment.
Ind. Code § 8-1-2-42(g)(2).
The Commission found that the index-priced supply arrangement in the ProLiance agreements allowed Citizens Gas and the parent of Indiana Gas an opportunity to profit indirectly from the commodity cost of gas. It characterized this as a result not specifically contemplated in the pertinent subsections of Section 42. (R. at 1641.) The Commission expressed a preference for considering such an arrangement as a proposal under the AUR Act. Nevertheless, it noted that both Utilities had gas cost adjustment proceedings pending, concluded that this situation could be remedied through proper notice, hearing, and findings in connection with the [Utilities] GCA [gas cost adjustment] filings and that such an alternative measure should be explored in that proceeding. (R. at 1642.)
Contrary to Opponents claim on appeal, the Commission was not constrained to considering
the ProLiance agreements as a proposal under the AUR Act. The Act
permits a utility to propose, and the Commission to adopt, alternatives to traditional
regulation. Citizens Action Coalition, Inc. v. Indiana Statewide Assn of Rural Elec.
Cooperatives, 693 N.E.2d 1324 (Ind. Ct. App. 1998). Our examination of the
Act reveals that it is concerned with the regulation of retail service, rates
and charges, not wholesale supply arrangements to a utility.
The legislative findings prefacing the Act, passed in 1995, refer to the Commissions
goal of providing safe, adequate, efficient, and economical retail energy services. . .
. Ind. Code § 8-1-2.5-1(1)(West Supp. 1999)(emphasis added). They note that an
environment in which Indiana consumers will have available state-of-the-art energy services at economical
and reasonable costs will be furthered by flexibility in the regulation of energy
services. Id. at (4) (emphasis added). Further, they note the need for
the Commission to exercise its authority in a flexible manner to regulate and
control the provision of energy services to the public in an increasingly competitive
environment, giving due regard to the interests of consumers and the public, and
to the continued availability of safe, adequate, efficient, and economical energy service. Id.
at (6) (emphasis added). The AUR Act defines retail energy service to
mean energy service furnished by an energy utility to a customer for ultimate
consumption. Ind. Code § 8-1-2.5-3 (West Supp. 1999).
The AUR Act allows the Commission two alternatives to traditional regulation. First,
the Commission may, after notice and a hearing, commence an orderly process to
decline to exercise, in whole or in part, its jurisdiction over either the
energy utility or the retail energy service of the energy utility, or both.
Ind. Code § 8-1-2.5-5(a)(West Supp. 1999). Or, second,
(a) [I]n approving retail energy services or establishing just and reasonable rates and charges, or both for an energy utility electing to become subject to this section, the commission may do the following:
(1) Adopt alternative regulatory practices, procedures, and mechanisms, and establish rates and charges
(A) are in the public interest . . .; and
(B) enhance or maintain the value of the energy utility's retail energy services or property;
including practices, procedures, and
mechanisms focusing on the price, quality,
reliability, and efficiency of the service
provided by the energy utility.
(2) Establish rates and charges based on market or average prices, price caps,
index based prices, and prices that:
(A) use performance based rewards or penalties, either related to or unrelated to the energy utility's return or property; and
(B) are designed to promote efficiency in the rendering of retail energy services.
. . . .
(c) An energy utility electing to become subject to this section shall file with the commission an alternative regulatory plan proposing how the commission will approve retail energy services or just and reasonable rates and charges for the energy utility's retail energy service.
Ind. Code § 8-1-2.5-6(a), (c)(West Supp. 1999)(emphasis added). A utilitys request for
relief under Section 6 shall be limited to approval of its energy services
or the establishment of its rates and charges, or both. Ind. Code
§ 8-1-2.5-4 (West Supp. 1999).
These repeated references to retail energy services and the establishment of rates and
charges persuade us that the legislature did not intend to compel the Commission
to exercise jurisdiction over a wholesale gas supply arrangement based on index pricing,
even one between a utility and its affiliate, solely under AUR procedures.
The Commission found that it had the authority under traditional regulatory practice to
consider the ProLiance agreements, including their index-based pricing of wholesale gas supply.
We agree. The AUR Act was intended to supplement, not restrict, the
authority that the Commission enjoys under traditional regulation.
At least two traditional regulatory tools pre-dating the AUR Act allow the Commission
to exercise regulatory authority here. The first, discussed above, requires that certain
affiliate contracts be filed with the Commission before becoming effective and allows the
Commission to disapprove them if they are not in the public interest. See
Ind. Code § 8-1-2-49(2). Here, the Opponents themselves invoked Section 49 as
authority for the Commission to consider the ProLiance agreements. In the end,
the Commission concluded under Section 49 that the ProLiance agreements were in the
The second method, a gas cost adjustment proceeding under Indiana Code § 8-1-2-42(g),
has also been discussed above. The Commission found that the ProLiance agreements
raised concern because they created the possibility for Citizens Gas and the parent
of Indiana Gas to profit from the commodity cost of gas. Yet
the Commission was satisfied that those concerns could and should be addressed in
the Utilities pending gas cost adjustment proceedings. (R. at 1642, 1652.) The
Commission also expressed a willingness to scrutinize carefully the gas costs associated with
ProLiance: it explicitly warned that the actual costs the Utilities pay for gas
will not necessarily be allowed as reasonable gas costs under these circumstances because
risks and opportunities have been shifted among the Utilities, their investors, and customers.
(R. at 1654.)
Opponents object to consideration of the ProLiance index-pricing arrangements in a gas cost
adjustment proceeding because, they say, the OUCC will not have access to critical
ProLiance records and information, including its actual cost of gas. The Opponents
fear is not well founded in light of the provisions in Ind. Code
§ 8-1-2-49(2) affording the Commission access to records of a utilitys affiliated interests
while it is pursuing matters within the Commissions jurisdiction.
See footnote Thus, we conclude
that this index-based pricing of wholesale gas supply to the Utilities did not
require approval under the AUR Act.See footnote
We conclude also that the Commission may consider the reasonableness of the transportation
credit and the administration fee in the gas cost adjustment proceeding, as it
has indicated an intent to do. (R. at 1651.) Gas costs may
include the gas utility's costs for gas purchased by it from pipeline suppliers
. . . and other expenses relating to gas costs as shall be
approved by the commission. Ind. Code § 8-1-2-42(g);
see Re Northern Indiana
Public Serv. Co., 166 PUR4th at 226 (gas costs calculations include commodity, pipeline
capacity and storage costs, as well as credits generated against costs, including those
received by LDCs from pipeline suppliers and revenues to LDCs from release of
capacity); accord Teledyne, 666 N.E.2d at 1282 (gas costs properly included extra expense
that gas utility incurred as a result of tariffs imposed by interstate pipelines
to cover their transition costs in implementing FERC order to unbundle services).
We hold that the Commission was not constrained to considering these agreements only
as a proposal under the AUR Act.
The Commission rejected the Opponents arguments that the ProLiance agreements required preapproval as
a transfer of Indiana Gass works or system to ProLiance. It construed
works and system in light of Illinois-Indiana Cable Television Assn v. Public Service
Commn, 427 N.E.2d 1100, 1108 (Ind. Ct. App. 1981). In Illinois-Indiana Cable,
the Court of Appeals determined that the Commission lacked jurisdiction under Section 83
over a public utilitys lease of part of its poles to accommodate attachments
by a cable television company. Id. The court construed a utilitys franchise, works
or system to mean an entire operational unity of a utility. Id.
Applying Illinois-Indiana Cable here, the Commission found that the agreements provide for Indiana
Gas to retain ownership, management and complete unilateral control of its physical [g]as
delivery, distribution transportation and storage facilities. (R. at 1606.) Likewise, the
Commission concluded that Indiana Gas remains the certified provider of gas to customers
in its service area and has not contracted with ProLiance for the operation
of any part of its franchise, works or system. (R. at 1606.)
The Commission also noted that Indiana Gas will continue to develop demand
forecasts, review and approve supply plans developed by ProLiance, operate gas storage fields,
etc. (R. at 1606.)
On appeal, the Opponents argue that the Commission erred by reading the words
works and system too narrowly to include only physical facilities. They claim that
Indiana Gass assignment of existing gas supply contracts and transfer of pipeline capacity
and some gas-supply and planning personnel to ProLiance constituted a transfer of a
part of Indiana Gass works or system.
The statutes do not define the terms works and system.
For our purposes,
it is important that the legislature has defined a utility as any plant
or equipment in the state used for, inter alia, the transmission, delivery, or
furnishing of power. Ind. Code § 8-1-2-1(g) (emphasis added). A public
utility is an entity that may own, operate, manage, or control any plant
or equipment in the state for the same purposes. Ind. Code §
8-1-2-1(a)(emphasis added). In another utility statute, the legislature refers to a franchise
to own, operate, manage, or control any plant or equipment of any public
utility. . . . Ind. Code § 8-1-2-91 (emphasis added). More generally,
the primary focus of public utility regulation is ensuring that the utilities provide
reasonably adequate service and facilities. Ind. Code § 8-1-2-4. This service
includes the product itself, the use or accommodation afforded the customers and the
equipment employed by the utility in performing the service. Prior v. GTE North,
Inc., 681 N.E.2d 768, 773 (Ind. Ct. App. 1997), trans. denied.
Where statutes address the same subject, they are in pari materia, and we
harmonize them if possible. See Citizens Action Coalition v. Northern Indiana Public Serv.
Co., 485 N.E.2d 610, 617 (Ind. 1985), cert. denied, 476 U.S. 1137 (1986).
Consequently, we agree with the Commission that Indiana Gas did not transfer
ownership or control over its works or system. Indiana Gas did not
transfer to ProLiance any plant or equipment for distributing gas. And although
wholesale gas supply and the planning and scheduling thereof are unquestionably important to
Indiana Gas, none of the matters relied upon by the Opponents constitute an
indivisible part of Indiana Gass system or works absent some closer nexus with
the Utilities customer service or distribution functions.
Opponents also claim that certain prohibitions in Indiana Code § 8-1-2-84 regulating mergers
between two public utilities prohibited the agreements between Indiana Gas and ProLiance absent
prior approval by the Commission. However, as we previously held, the Commission
properly determined that ProLiance is not a public utility. Still, Opponents insist
that Indiana Gas violated at least Indiana Code § 8-1-2-84(f), which applies to
a single public utility and reads, No such public utility shall encumber its
used and useful property or business or any part thereof without the approval
of the Commission and the consent, authority, and approval of the owners of
three-fourths (3/4) of its voting stock. The term encumber usually means to
charge, or burden with financial obligations or mortgages. Underwood v. Fairbanks, Morse
& Co., 205 Ind. 316, 334, 185 N.E. 118, 124 (1933). Opponents
do not argue, much less demonstrate, how these transfers were an encumbrance.
On appeal, Opponents repeat their claim that Indiana Gas breached the settlements by
transferring its capacity to an affiliate that has the potential for profiting by
selling capacity releases. They also claim that, at the least, Indiana
Gas breached the settlements by rendering itself unable to perform its contractual obligations,
relying on Strodtman v. Integrity Builders, Inc., 668 N.E.2d 279 (Ind. Ct. App.
1996), trans. denied.
The Opponents arguments have some allure. It is apparent that what the settling parties anticipated from the settlement is different from what they will now receive. On the other hand, settlements were not ordinary contracts. In proposing the settlements to the Commission, the parties cited Indiana Code §§ 8-1-2-24 8-1-2-25. Indiana Code § 8-1-2-24 allows a public utility to enter an arrangement with its customers or consumers, subject to the Commissions finding that the arrangement is reasonable, just and consistent with the purposes of Indiana Code Chapter 8-1-2. Such settlements are under the Commissions supervision and regulation. See Ind. Code § 8-1-2-24. The Commission may order rates and regulations
as may be necessary to give effect to such arrangement, but the right and power to make such other and further changes in rates, charges and regulations as the Commission may ascertain and determine to be necessary and reasonable, and the right to revoke its approval and amend or rescind all orders relative thereto, is reserved and vested in the Commission, notwithstanding any such arrangement and mutual agreement.
Ind. Code § 8-1-2-25. In other words, a settlement approved by the Commission loses its status as a strictly private contract and takes on a public interest gloss. Citizens Action Coalition v. PSI Energy, Inc., 664 N.E.2d 401, 406 (Ind. Ct. App. 1996).
Here, the Commission found not only that the settlements were not breached, but also that the ProLiance agreements were in the public interest and that the reasonableness of the transportation credit can be explored in pending gas cost adjustment proceedings. (R. at 1651, 1653.) In light of the Commissions factual findings and the substantial deference owed to the Commission in supervising settlements and even modifying or revoking orders entered attendant thereto, we find no error.
The Commission accordingly considered much more than just the cost effect to consumers.
It examined Indiana Gass earlier settlements and the negotiations surrounding ProLiances formation.
It considered the lack of competitive bidding in the formation of what
became ProLiance, but it found that the Utilities would be unable to match
ProLiances benefits by using a non-affiliated supplier. (R. at 1616, 1618-19.)
It noted too that anti-competitive price patterns have not emerged, that ProLiance has
not detrimentally affected the gas transportation market, and that ProLiance has left the
affected markets . . . as robust after the formation of ProLiance as
they were prior to its formation. (R. at 1636-37, 1650.)
Regarding its continuing ability to monitor the effects of ProLiance, the Commission found,
as we do, that gas cost adjustment proceedings will allow the Commission to
ensure that charges for gas, as well as the transportation credit and administration
fee, are reasonable. Similarly, the Commission explained that it could scrutinize any
unreasonable rate impact resulting from ProLiance in a rate proceeding. (R. at 1615.)
These findings dispel the Opponents argument that the Commissions public interest determination was
Dickson, Sullivan, and Boehm, JJ., concur.
Rucker, J., not participating.