Opinion
Court of Appeals Case No. 22A-EX-1685
03-09-2023
INDIANA OFFICE OF UTILITY CONSUMER COUNSELOR, Duke Industrial Group, and Citizens Action Coalition of Indiana, Inc., Appellants-Intervenors, v. DUKE ENERGY INDIANA, LLC, and Indiana Utility Regulatory Commission, Appellees-Petitioner/Administrative Agency.
Attorneys for Appellant Duke Industrial Group: Todd A. Richardson, Joseph P. Rompala, Tabitha L. Balzer, Aaron A. Schmoll, Lewis Kappes, P.C., Indianapolis, Indiana Attorneys for Appellee Duke Energy Indiana, LLC: Andrew J. Wells, Elizabeth A. Heneghan, Duke Energy Business Services LLC, Plainfield, Indiana, Peter J. Rusthoven, Nicholas K. Kile, Lauren M. Box, Kian J. Hudson, Barnes & Thornburg LLP, Indianapolis, Indiana Attorneys for Appellee Indiana Utility Regulatory Commission: Theodore E. Rokita, Attorney General of Indiana, Aaron T. Craft, Section Chief, Civil Appeals, Benjamin Jones, Assistant Section Chief, Civil Appeals, Deputy Attorneys General, Indianapolis, Indiana, Beth E. Heline, General Counsel, Jeremy Comeau, Bradford Hines, Assistant General Counsels, Indiana Utility Regulatory Commission, Indianapolis, Indiana
Attorneys for Appellant Duke Industrial Group: Todd A. Richardson, Joseph P. Rompala, Tabitha L. Balzer, Aaron A. Schmoll, Lewis Kappes, P.C., Indianapolis, Indiana
Attorneys for Appellee Duke Energy Indiana, LLC: Andrew J. Wells, Elizabeth A. Heneghan, Duke Energy Business Services LLC, Plainfield, Indiana, Peter J. Rusthoven, Nicholas K. Kile, Lauren M. Box, Kian J. Hudson, Barnes & Thornburg LLP, Indianapolis, Indiana
Attorneys for Appellee Indiana Utility Regulatory Commission: Theodore E. Rokita, Attorney General of Indiana, Aaron T. Craft, Section Chief, Civil Appeals, Benjamin Jones, Assistant Section Chief, Civil Appeals, Deputy Attorneys General, Indianapolis, Indiana, Beth E. Heline, General Counsel, Jeremy Comeau, Bradford Hines, Assistant General Counsels, Indiana Utility Regulatory Commission, Indianapolis, Indiana
Bradford, Judge. Case Summary
[1] On November 23, 2021, Duke Energy Indiana, LLC ("Duke"), petitioned the Indiana Utility Regulatory Commission ("the Commission") for approval of a six-year plan for transmission, distribution, and storage system improvements pursuant to Indiana Code section 8-1-39-10(a), including targeted economic development plans pursuant to Indiana Code sections 8-1-39-10 and 8-1-39-11 (the "TDSIC 2.0 Plan"). Various groups, including the Duke Industrial Group ("the Industrial Group"), petitioned to intervene in the proceeding, which petitions were granted. On March 24, 2022, the Commission held an evidentiary hearing, after which it granted Duke's petition for approval of the TDSIC 2.0 Plan. On appeal, the Industrial Group alleges that the Commission erred by misapplying two sections of Indiana's TDSIC statute, found at Indiana Code chapter 8-1-39, and by failing to make necessary factual findings relating to the merits of its objections to Duke's TDSIC 2.0 Plan. Concluding that the Commission neither misapplied the challenged sections of the TDSIC statute nor failed to make necessary factual findings, we affirm.
While the Indiana Office of Utility Consumer Counselor, the Industrial Group, and Citizens Action Coalition of Indiana, Inc. are all listed as appellants in this appeal, only the Industrial Group filed an appellant's brief challenging the Commission's order granting Duke's TDSIC 2.0 Plan.
Facts and Procedural History
[2] On November 23, 2021, Duke submitted a petition requesting approval of the TDSIC 2.0 Plan, which had a total estimated cost of $1.98 billion. The stated objectives of the TDSIC 2.0 Plan were to improve reliability for Duke's customers, advance grid hardening and resiliency, enable expansion of renewable and distributed generation, and facilitate economic development growth.
Duke's petition also included a request for targeted economic development ("TED") costs. However, the Commission opened a separate docket to review the TED project, see IURC Cause No. 45647 S1, leaving only the portion of its petition relating to the TDSIC 2.0 Plan at issue in this appeal.
The total cost of Duke's improvement plan covered in its petition was $2.14 billion. However, only $1.98 billion of that total related to proposed TDSIC 2.0 Plan improvements, with the rest relating to proposed TED projects.
[3] A significant portion of the TDSIC 2.0 Plan was devoted to distribution system improvements—i.e. , improvements at the more local level directly servicing retail customers—and includes subcategories of circuit improvement projects ($812 million), substation improvements ($177 million), and a contingency amount to buffer against unanticipated cost increases ($155 million). The remaining portion of the plan addressed transmission system improvements—i.e. , parts of the bulk electric system that typically deal with much higher voltages—including transmission line improvements ($517 million), transmission substation improvements ($198 million), and a similar contingency amount ($122 million). Duke asserted that the improvements included in the TDSIC 2.0 Plan would enhance reliability by reducing both the total customer interruptions of power and the total minutes of interruption.
[4] The Industrial Group, which is comprised of seven of Duke's large industrial customers, and various other interested parties intervened. The Commission held an evidentiary hearing on March 24, 2022. Following the close of the evidentiary record, the Industrial Group filed exceptions and a post-hearing brief regarding the proposed order submitted by Duke. On June 15, 2022, the Commission issued an order approving Duke's TDSIC 2.0 Plan, finding that the costs were justified by the likely incremental benefits and the TDSIC 2.0 Plan was reasonable.
Discussion and Decision
I. Overview of TDSIC Statutes
[5] "Under traditional rate regulation, an energy utility must first make improvements to its infrastructure before it can recover their cost through regulator-approved rate increases to customers." NIPSCO Indus. Grp. v. N. Ind. Pub. Serv. Co. , 100 N.E.3d 234, 236 (Ind. 2018), modified on reh'g , September 25, 2018. These after-the-fact rate increases are accomplished "through periodic rate cases, which are expensive, time consuming, and sometimes result in large, sudden rate hikes for customers." NIPSCO Indus. Grp. v. N. Ind. Pub. Serv. Co. , 31 N.E.3d 1, 4 (Ind. Ct. App. 2015).
[6] Therefore, under certain circumstances, the legislature has authorized utilities to obtain regulatory preapproval for designated improvements before the utility engages in the work:
The TDSIC Statute, [Indiana Code chapter] 8-1-39, enacted in 2013, is one such procedure. It encourages energy utilities to replace their aging infrastructure by modernizing electric or gas transmission, distribution, and storage projects. This TDSIC procedure, pronounced "tee-DEE-zick", is a process for utilities to assess a distinct charge—a Transmission, Distribution, and Storage System Improvement Charge—for completed projects deemed eligible improvements under the Statute. In contrast to traditional ratemaking, the TDSIC procedure permits a utility to seek preapproval of designated capital improvements to the utility's infrastructure and then to recover the costs of those improvements every few months as they are completed.
NIPSCO Indus. Grp. , 100 N.E.3d at 238–39 (cleaned up). "Presumably understanding that these modernization projects require significant investments of time and money, the legislature drafted the TDSIC Statute to allow utilities to first petition the Commission for approval of a multi-year TDSIC plan and then petition the Commission for periodic rate adjustments based on [the approved plan's] progress." NIPSCO Indus. Grp. v. N. Ind. Pub. Serv. Co. , 125 N.E.3d 617, 624 (Ind. 2019).
[7] The intent of this is that "[e]veryone reaps a benefit when utilities are allowed to plan for investments and necessary and reasonable infrastructure projects." Id. at 619. On the utilities side, "the statute allows utilities to seek pre-approval from [the Commission] for certain electric or gas infrastructure projects and to recoup the costs of those projects through periodic petitions to the Commission for increases to its rates." Id. And
[o]n the consumers’ side, the statute requires the Commission to make [advance] determinations regarding the
public convenience, necessity, and reasonableness of planned projects before approving a plan to complete them. This process protects both suppliers and consumers of electric and gas services, improves the stability of the provision of these services, and increases the predictability of costs associated with providing and using these services.
Id. at 619. To gain approval from the Commission, the TDSIC statute requires that a "plan must satisfy certain enumerated statutory criteria." IPL Indus. Grp. v. Indpls. Power & Light Co. , 159 N.E.3d 617, 621 (Ind. Ct. App. 2020), trans. denied. "[T]he burden of showing a project's eligibility for TDSIC treatment" is on the utility. NIPSCO Indus. Grp. , 31 N.E.3d at 9.
[8] The TDSIC statute requires that a utility's plan include only "eligible transmission, distribution, and storage improvements." Ind. Code § 8-1-39-7.8. By statutory definition, improvements are not TDSIC-eligible unless they are "undertake[n] for purposes of safety, reliability, system modernization, or economic development[.]" Ind. Code § 8-1-39-2(a)(1). The TDSIC statute requires the Commission to make "[a] finding of the best estimate of the cost of the eligible improvements included in the plan[;]" "[a] determination whether public convenience and necessity require or will require the eligible improvements included in the plan[;]" and "[a] determination whether the estimated costs of the eligible improvements in the plan are justified by incremental benefits attributable to the plan." Ind. Code 8-1-39-10(b).
[9] Because the burden of proof lies on the utility, a utility cannot simply propose whatever costs it wishes to the Commission—it must instead persuade the Commission that the cost it proposes to recover in its TDSIC plan is actually the "best estimate," and not inflated or an over-estimate of the expense of the work. Ind. Code § 8-1-39-10(b)(1). If the TDSIC plan is approved and the utility starts incurring costs, it may adjust its rates only to recover the approved costs. Ind. Code § 8-1-39-9(a). If the utility overruns that cost estimate, it must return to the Commission and offer additional, specific justification for the additional costs before it can change its rates to reflect them. Ind. Code § 8-1-39-9(g).
II. Standard of Review
[10] "The General Assembly created the [Commission] primarily as a fact-finding body with the technical expertise to administer the regulatory scheme devised by the legislature." N. Ind. Pub. Serv. Co. v. 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.
[11] In challenging the Commission's order on appeal, the Industrial Group contends that the Commission has misinterpreted and misapplied two sections of the TDSIC statute.
In statutory construction, our primary goal is to ascertain and give effect to the intent of the legislature. The language of the statute itself is the best evidence of legislative intent, and we must give all words their plain and ordinary meaning unless otherwise indicated by statute. Furthermore, we presume that the legislature intended statutory language to be applied in a logical manner consistent with the statute's underlying policies and goals.
NIPSCO Indus. Grp. , 31 N.E.3d at 6. Furthermore, when an agency interprets a statute it administers, the question on judicial review is whether "[the agency's] interpretation is reasonable." Moriarity v. Ind. Dept. of Nat. Res. , 113 N.E.3d 614, 619 (Ind. 2019). If it is, the interpretation is entitled to deference, and the courts "stop our analysis and need not move forward with any other proposed interpretation." Id.
[12] The Industrial Group also challenges the sufficiency of the Commission's factual findings. We employ a multi-level review when reviewing the Commission's factual findings. On the first level, we review an agency's findings of basic fact to determine whether they are supported by substantial evidence in light of the whole record. U.S. Steel , 907 N.E.2d at 1016. Such determinations will stand unless no substantial evidence supports them. Id. "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. (internal quotation omitted).
The Commission's order is conclusive and binding unless (1) the evidence on which the Commission based 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.
[13] At the second level, we review an agency's "specific findings on all the factual determinations material to its ultimate conclusions." Id. In doing so, we review "conclusions of ultimate facts for reasonableness, the deference of which is based on the amount of expertise exercised by the agency." Id.
Insofar as the order involves a subject within the Commission's special competence, courts should give it greater deference. If the subject is outside the Commission's expertise, courts give it less deference. In either case courts may examine the logic of inferences drawn and any rule of law that may drive the result.
Id. (internal citations omitted). "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." Id.
III. Analysis
A. Indiana Code section 8-1-39-10 –Incremental Benefits Attributable to Plan
[14] With respect to a petition for approval of a public utility's TDSIC plan for eligible transmission, distribution, and storage improvements, Indiana Code section 8-1-39-10(b) provides
Following notice and hearing, and not more than two hundred ten (210) days after the public utility petitions the commission under subsection (a), the commission shall issue an order on the petition. The order must include the following:
(1) A finding of the best estimate of the cost of the eligible improvements included in the plan.
(2) A determination whether public convenience and necessity require or will require the eligible improvements included in the plan.
(3) A determination whether the estimated costs of the eligible improvements included in the plan are justified by incremental benefits attributable to the plan.
If the commission determines that the public utility's TDSIC plan is reasonable, the commission shall approve the plan and authorize TDSIC treatment for the eligible transmission, distribution, and storage improvements included in the plan.
Indiana Code section 8-1-39-2(a) defines "eligible transmission, distribution, and storage system improvements" as new or replacement electric or gas transmission, distribution, or storage utility projects that:
(1) a public utility undertakes for purposes of safety, reliability, system modernization, or economic development, including the extension of gas service to rural areas;
(2) were not included in the public utility's rate base in its most recent general rate case; and
(3) either were:
(A) described in the public utility's TDSIC plan and approved by the commission under section 10 of this chapter and authorized for TDSIC treatment;
(B) described in the public utility's update to the public utility's TDSIC plan under section 9 of this chapter and authorized for TDSIC treatment by the commission; or
(C) approved as a targeted economic development project under section 11 of this chapter.
The statute goes on to state that the term includes:
(1) projects that do not include specific locations or an exact number of inspections, repairs, or replacements, including inspection[-]based projects such as pole or pipe inspection projects, and pole or pipe replacement projects; and
(2) projects involving advanced technology investments to support the modernization of a transmission, distribution, or storage system, such as advanced metering infrastructure, information technology systems, or distributed energy resource management systems.
[15] The Commission found that the proposed TDSIC 2.0 Plan improvements "were shown to be eligible improvements under [ Indiana Code section] 8-1-39-2" and were "justified by the incremental benefits attributable to TDSIC 2.0." Appellant's App. Vol. II pp. 30, 34. The Industrial Group challenges the Commission's findings, arguing that the Commission erred in determining that some of the proposed TDSIC 2.0 improvements were justified by the incremental benefits attributable to the TDSIC 2.0 because "many of the projects proposed by Duke" were not justified as they had "benefit to cost ratios of less than 1.0." Appellant's Br. p. 24.
[16] The Industrial Group argues that it is not enough that a TDSIC plan, as a whole, be cost-justified, but rather that each project included in a TDSIC plan must be cost-justified. In support of its interpretation of Indiana Code section 8-1-39-10(b)(3), the Industrial Group argues as follows:
The theory that projects can be included in a TDSIC Plan without a showing of cost-justification is contrary to the language of the provision and would undermine its purpose in the statutory structure. Section 10(b)(3) does not dilute the cost-justification requirement by saying "overall," "as a whole," "in its entirety" or other comparable phrase. To the contrary, the statute states the cost-justification requirement applies to "the eligible
improvements included in the plan." Undeniably, the 90 projects with benefit to cost ratios below 1.0 were "improvements" that Duke "included in the plan." By the statutory terms, then, those projects must be cost-justified in order to satisfy the standard for approval.
The purpose of Section 10(b)(3) is to protect ratepayers from excessive costs and wasteful spending by the utility, and to ensure the benefits of the proposed system work are valuable enough to make the investment worthwhile. That function would be subverted if utilities were at liberty to treat TDSIC Plans as a repository for unnecessary or overpriced projects, in themselves lacking cost-justification, but supposedly subject to approval merely by being packaged in a Plan with an aggregate net positive value. There is no language in the TDSIC Statute indicating the General Assembly meant to encourage utilities to pad TDSIC Plans with filler projects that are not cost-justified, such that beneficial projects can be counter-balanced by unjustified investments that customers are nevertheless obliged to fund through rates, so long as the overall Plan has a net value greater than zero. Any such implication runs directly counter to the express policy of cost discipline set forth in Section 10(b)(3).
Appellant's Br. pp. 26–27.
[17] For their parts, the Commission and Duke both assert that the Commission correctly considered the TDSIC 2.0 Plan as a whole when determining whether the proposed improvements were justified by the incremental benefits attributable to Duke's TDSIC 2.0 Plan. The Commission asserts that the General Assembly "directed the Commission to consider the costs of the improvements in relation to the plan's overall incremental benefits, just as the Commission did here." Appellee IURC's Br. p. 18. The Commission further asserts that
[a]n incorrect hypothetical that a utility could pad a TDSIC plan with wasteful projects is not borne out in this case where all the projects have either quantifiable or non-quantifiable—but still very real—benefits to safety or other benefits. A plan burdened by costs imposed by a number of wasteful projects would still require other incremental benefits sufficient to justify those costs. [Ind. Code] § 8-1-39-10(b)(3). And such an outcome would be further tempered by the Commission's other required determination that the TDSIC plan is "reasonable" overall. Id. So a hypothetical TDSIC plan littered with unreasonable or imprudent projects could still be rejected by the Commission as unreasonable, regardless of the overall incremental benefits of the plan. The Industrial Group's interpretation, moreover, would also undermine the TDSIC statute's purpose in incentivizing public utilities to proactively improve their aging utility infrastructure. The aim is not to limit projects but to encourage modernization projects as long as the plan has the requisite benefits. Some projects with a negative cost basis will naturally need to be completed as foundational work for projects with a positive cost basis, and nothing in the statute requires that the benefits be quantitative in nature. So not only is the Industrial Group's policy concern overblown, but also its atextual reading would undermine the very purpose of the TDISC statute.
Appellee IURC's Br. p. 19. Duke asserts that the Industrial Group's "tortured construction is the antithesis of [ Indiana Code section 8-1-39-10(b)(3) ]’s plain, natural reading." Appellee Duke's Br. p. 27. Duke further asserts that
[a]t a minimum, it is reasonable to read "cost of eligible improvements included in the plan" to encompass all cost of all improvements included in the entire plan. It is reasonable to read "incremental benefits attributable to the plan"—by which the cost of eligible improvements must be "justified"—to encompass all benefits attributable to entire plan. Even had the Industrial Group offered a plausible alternative reading—which it did not—the IURC's reasonable reading is entitled to deference, and the courts stop our analysis and need not move forward with any other proposed interpretation.
Appellee Duke's Br. p. 29 (emphases in original, internal quotation omitted).
[18] In considering the Industrial Group's challenge to the Commission's order, we are faced with the question of whether the General Assembly intended for the determination required in Indiana Code section 8-1-39-10(b)(3) to apply to each individual part of the plan or the plan as a whole. We recently concluded the latter, concluding that Indiana Code section 8-1-39-10(b), "as written, is satisfied when the improvements are justified by the benefits attributable to the plan as a whole." NIPSCO Indus. Grp. v. N. Ind. Pub. Serv. Co. , 197 N.E.3d 316, 328 (Ind. Ct. App. 2022), trans. pending (" NIPSCO "); see also IPL Indus. Grp. , 159 N.E.3d at 627 (affirming the Commission's approval of the proposed TDSIC plan based on the overall plan's benefits as reflected by the Commission's determination that the proposed plan would "reduce risk of asset failure and maintain service reliability," and would provide "incremental benefits compared to how the future would otherwise unfold"), trans. denied. Despite the Industrial Group's assertion that NIPSCO was "wrongly decided," Appellant's Br. p. 29, our interpretation of the statute remains the same, i.e. , that Indiana Code section 8-1-39-10(b)(3), as written, is satisfied when the proposed improvements are justified by the benefits attributable to the plan as a whole. In our view, any other conclusion would be counterintuitive as it would discount the fact that some eligible improvements, when reviewed in a vacuum, may not appear to have significant value, but, when considered together with other eligible improvements, clearly have significant overall value.
[19] Turning our attention to the Commission's determination that the incremental benefits associated with Duke's TDSIC 2.0 Plan justified its cost, we observe that both prior to and during the evidentiary hearing, the Commission heard that Duke's objectives for the TDSIC 2.0 Plan were to (1) improve reliability for customers, (2) advance grid hardening and resiliency, (3) enable expansion of renewable and distributed generation, and (4) facilitate economic development growth. The primary components of the TDSIC 2.0 Plan included "capital investments in both Transmission and Distribution systems." Conf. Ex. Vol. I p. 21. Duke's evidence indicated that
[t]he investments in the transmission system were selected to enhance system reliability, hardening, safety, and resiliency of substations and transmission lines. The six-year transmission plan includes 70 distinct projects on 50 transmission lines, and investment in transmission assets is included in 115 projects at 103 substations. Primary asset improvements to the transmission delivery system, include investments in substations, communication and monitoring assets, transformers, circuit breakers, switches, controls, relays, poles, and towers.
The investments in the distribution system are also intended to greatly enhance
the reliability, hardening, safety, and resiliency of our delivery system. These goals include investments in infrastructure components such as substations, circuit breakers, reclosers, switches, controls, relays, transformers, capacitors, distribution poles, circuits, and conductor. For instance, the six-year distribution plan includes thousands of projects that include improvements to the distribution assets at 458 substations and 23 project categories touching 1272 distribution circuits. Many distribution investments also modernize our grid through the installation of technology which leverages recent advancements in system automation equipment. Those targeted investments will increase functionality and flexibility of the overall system resulting in enhanced reliability. Included are investments in programs such as self-optimizing grid investments, targeted undergrounding, automated lateral devices), and Integrated Volt-VAR Control.
Conf. Ex. Vol. I pp. 21–22.
[20] Duke presented evidence showing how the TDSIC 2.0 Plan met each of its objectives. For example, as for Duke's primary objective to improve reliability, Duke presented evidence establishing that "while some measurements of circuit and system reliability will continue to be impacted by factors beyond the utility's control, like storms, vehicle accidents, and vegetation," Duke expected to show a measurable improvement to reliability through these investments. Conf. Ex. Vol. I p. 22. Duke's evidence indicated that once completed, the proposed improvements "will produce a minimum 19% improvement to System Average Interruption Duration Index (‘SAIDI’) and a minimum 17% improvement to System Average Interruption Frequency Index (‘SAIFI’)." Conf. Ex. Vol. I p. 22. Duke's evidence indicated that the proposed improvements would "avoid future customer interruptions (‘CI’) and customer minutes interrupted (‘CMI’)." Conf. Ex. Vol. I p. 21. In addition to these quantitative benefits, Duke presented evidence indicating other qualitative benefits, including updates to Duke's infrastructure, some of which is more than forty years old, by modernizing the grid to allow Duke to serve an anticipated increased energy demand and better accommodate both current and future customers.
[21] Duke also presented evidence from James Shields of Black & Veatch Management Consulting LLC ("Black & Veatch"), which worked with Duke to develop the TDSIC 2.0 Plan. Shields testified that Black & Veatch's goal was to identify "system improvements and asset replacements that [would] produce the greatest benefits to [Duke's] customers." Conf. Ex. Vol. VII p. 71. In analyzing potential improvements, Black & Veatch used "Copperleaf's[ ] decision analytics tool that provides a framework for quantifying benefits and optimizing investments with a Risk Adjusted Project Prioritization (‘RAPP’) modeling tool that identified high risk assets" and, in collaboration with Duke, "identified transmission line, substation, and distribution line programs that supported the objectives of" the TDSIC 2.0 Plan. Conf. Ex. Vol. VII pp. 71–72. Shields explained that in each of these areas, "more granular sub-programs were identified that provided system reinforcements." Conf. Ex. Vol. VII p. 72
"Copperleaf is a decision analytics software tool used for critical infrastructure investment planning." Conf. Ex. Vol. VII p. 73. "The tool provides a framework to quantify benefits associated with critical infrastructure investments in the electric, natural gas, water, wastewater, oil, and gas industries." Conf. Ex. Vol. VII p. 73. "Value models are developed for each investment type with specific value measures that quantify the benefits of the investments." Conf. Ex. Vol. VII p. 73. "Once the cost of each investment is paired with the benefits, the Copperleaf tool is able to run various investment scenarios to produce an optimized investment plan" that aligns with the objectives of a utility's overall plan. Conf. Ex. Vol. VII p. 73.
Then, financial, and non-financial benefit categories were identified across the sub-programs. Benefit categories were then mapped to each of the applicable sub-programs so that the benefits produced by project in each sub-programs could be quantified. Benefits categories were also mapped to a value model within Copperleaf. Within the value models, value measures were created to quantify the benefits of candidate projects. The value models allowed the Copperleaf tool to calculate the net benefit for each candidate project considered in [the TDSIC 2.0 Plan] development. Projects were grouped by transmission circuits, substations, and distribution circuits before optimizing the portfolio of projects modeled in Copperleaf. Optimizing the investments in this way helped ensure that high value projects were located in the areas on the system that produced the greatest value.
Conf. Ex. Vol. VII p. 72.
[22] In analyzing the proposed improvements included in the TDSIC 2.0 Plan, Black & Veatch determined that the TDSIC 2.0 Plan, as a whole, had "a 2.8 benefit to cost ratio." Conf. Ex. Vol. VII p. 85. Black & Veatch broke down the various types of included improvements and provided the following benefit to cost ratio for each:
Conf. Ex. Vol. VII p. 85. Duke's evidence indicated that while there were some improvements included in its TDSIC 2.0 Plan that had a benefit to cost ratio of less than one, meaning that the benefit did not appear to outweigh the cost, there were "other benefits that [could] be accrued to these projects" that were not easily captured in the benefit analysis. Tr. Vol. II p. 180. Further, the evidence indicated that the Black & Veatch calculation did not account for the fact that several improvements were specifically included because they would affect critical customers, such as a hospitals or schools. As for the projects relating to converting from 4kV to 12kV, the evidence indicated that the improvements would result in benefits to Duke's customers that Black & Veatch was not able to capture in its value models. For example, "for the customers that are served off 4kV systems to have the availability of self-optimizing grid, distributed energy, [and other benefits] ... that are associated with all the other projects." Tr. Vol. II p. 177.
[23] The Commission concluded that Duke's TDSIC 2.0 Plan was reasonable. In reaching this conclusion, the Commission concluded that
[t]he evidence demonstrates [Duke's] TDSIC 2.0 will provide reliability benefits to [its] customers, such as reducing the frequency and duration of interruptions, hardening and resiliency of the grid, and modernizing the grid to manage growing renewables and distributed generation on [its] system. In doing so, TDSIC 2.0 also provides incremental benefits to [Duke's] retail and wholesale customers.
Accordingly, based on the evidence, the Commission finds [Duke] has sufficiently prioritized and optimized the incremental benefits of TDSIC 2.0 and otherwise shown a sound basis for the proposed projects and associated costs; therefore, the Commission determines the estimated costs of [Duke's] TDSIC 2.0 projects are justified by the incremental benefits attributable to TDSIC 2.0.
Appellant's App. Vol. II pp. 33–34. We cannot say that the Commission's conclusion in this regard is unreasonable. The Commission's interpretation is therefore entitled to deference and, as such, we "stop our analysis and need not move forward with any other proposed interpretation." Moriarity , 113 N.E.3d at 619.
B. Indiana Code section 8-1-39-9 –Carrying 20% of Operating and Maintenance ("O & M") Expenses Over Until Next General Rate Case
[24] Indiana Code section 8-1-39-9(a) provides that
a public utility that provides electric or gas utility service may file with the commission rate schedules establishing a TDSIC that will allow the periodic automatic adjustment of the public utility's basic rates and charges to provide for timely recovery of eighty percent (80%) of approved capital expenditures and TDSIC costs.
The petition must:
(1) use the customer class revenue allocation factor based on firm load approved in the public utility's most recent retail base rate case order;
(2) include the public utility's TDSIC plan for eligible transmission, distribution, and storage system improvements; and
(3) identify projected effects of the plan described in subdivision (2) on retail rates and charges.
A public utility that recovers capital expenditures and TDSIC costs under subsection (a) shall defer the remaining twenty percent (20%) of approved capital expenditures and TDSIC costs, including depreciation, allowance for funds used during construction, and post in service carrying costs, and shall recover those capital expenditures and TDSIC costs as part of the next general rate case that the public utility files with the commission.
[25] The Commission found that
the O & M associated with TDSIC 2.0 begins years after [Duke's] rate case in Cause No. 45253 and is directly related to capital projects within TDSIC 2.0. These costs will not be incurred until these assets are installed. Because the O & M expenses are associated with new capital projects, the Commission finds they are not duplicative and already recovered
in [Duke's] rates. The Commission, therefore, approves the inclusion of the O & M expense in this case. In doing so it is noted that if in the future the OUCC suspects [Duke] is double-recovering O & M costs in a TDSIC cost recovery proceeding, our findings in this proceeding do not preclude the OUCC from pursuing these matters in discovery and providing the Commission with relevant information when cost recovery is considered.
Appellant's App. Vol. II p. 36. The Commission then ordered that
4. [Duke] is authorized to recover 80% of [its] approved six-year TDSIC 2.0 Plan costs through Standard Contract Rider No. 65.
5. [Duke] is authorized to defer 20% of eligible and approved capital expenditures and TDSIC costs, including O & M, depreciation, property taxes, AFUDC, and PISCC under Ind. Code § 8-1-39-9(c) as part of [its] next general rate case.
Appellant's App. Vol. II p. 38.
[26] In challenging the Commission's order, the Industrial Group contends that the Commission erred by treating deferred O & M expenses as if the expenses were capital investment. In support of this claim, the Industrial Group argues that the reference to "post in service carrying costs" in Indiana Code section 8-1-39-9(c) should be interpreted as applying "to capital expenditures, not to O & M expenses recoverable as TDSIC costs." Appellant's Br. p. 44 (emphasis in original). For its part, the Commission asserts that "[t]he plain and unambiguous meaning of the TDSIC statute's text allows a utility to recover carrying costs for deferred O & M expenses." Appellee IURC's Br. p. 23. For its part, Duke asserts that "the Industrial Group asks for a one-of-a-kind, extra-textual exception—that utilities cannot recover carrying costs on the deferred recovery of O & M expenses alone." Appellee Duke's Br. p. 35. Duke further asserts that the Commission "was correct—and certainly reasonable—to interpret Section 9 to permit recovery of all carrying costs imposed by the delayed recovery the statute requires." Appellee Duke's Br. p. 35.
[27] Again, Indiana Code section 8-1-39-3(c) provides that a utility that recovers capital expenditures and TDSIC costs "shall defer" recovery of "twenty percent (20%) of approved capital expenditures and TDSIC costs, including depreciation, allowance for funds used during construction, and post in service carrying costs" until its next general rate case. (Emphases added). Indiana Code section 8-1-39-7 defines "TDSIC costs" as
the following costs incurred with respect to eligible transmission, distribution, and storage system improvements incurred both while the improvements are under construction and post in service :
(1) Depreciation expenses.
(2) Operation and maintenance expenses.
(3) Extensions and replacements to the extent not provided for through depreciation, in the manner provided for in IC 8-1.5-3-8.
(4) Property taxes.
(5) Pretax returns.
The term includes costs associated with a targeted economic development project approved under section 11 of this chapter.
(Emphases added). The plain language of Indiana Code section 8-1-39-9(c) provides that recovery of twenty percent of both approved capital expenditures and TDSIC costs, including depreciation, allowance for funds used during construction, and post in service carrying costs, shall be deferred until the utility's next statutory rate case. Given that Indiana Code section 8-1-39-7 clearly defines TDSIC costs to include O & M expenses incurred both while the improvements are under construction and post in service, we conclude that the Commission's interpretation of the statutes to include O & M expenses in the amount for which recovery is deferred is, at the very least, reasonable. The Commission's interpretation is therefore entitled to deference and, as such, we "stop our analysis and need not move forward with any other proposed interpretation." Moriarity , 113 N.E.3d at 619.
Strengthening our conclusion that the Commission's interpretation was reasonable, we note that the Commission has, for many years, routinely interpreted Indiana Code section 8-1-39-9(c) to allow for deferral of O & M costs. See generally N. Ind. Pub. Serv. Co. , Cause No. 45560, 2021 WL 5770302 *22 (I.U.R.C. Dec. 1, 2021) (including O & M expenses in the amount deferred until the utility's next general rate case); N. Ind. Pub. Serv. Co. , Cause No. 44872, 2017 WL 6508949 *42 (I.U.R.C. December 13, 2017) (same); Ind. Gas Co. , Cause No. 44430 TDSIC 3, 2016 WL 1306032 *21 (I.U.R.C. March 30, 2016) (same); Duke Energy Ind., Inc. , Cause No. 44367 FMCA 1, 2015 WL 5920878 *16 (I.U.R.C. Oct. 7, 2015) (same); N. Ind. Pub. Serv. Co. , Cause No. 44340 FMCA 3, 2015 WL 4638840 *7 (I.U.R.C. July 29, 2015) (same); Indpls. Power & Light Co. , Cause No. 44540, 2015 WL 4638843 *39 (I.U.R.C. July 29, 2015) (same); Duke Energy Ind., Inc. , Cause No. 44367, 2014 WL 2990489 *17 (I.U.R.C. June 25, 2014) (same); N. Ind. Pub. Serv. Co. , Cause no. 44340, 2014 WL 916162 *20 (I.U.R.C. Jan 29, 2014) (same).
C. Sufficiency of the Commission's Evidentiary Findings
[28] The Industrial Group also contends that the Commission's order "was unsupported by specific findings on the merits of the disputed issues." Appellant's Br. p. 49. Specifically, the Industrial Group argues that "despite vigorous objections supported by detailed legal analysis, the Commission granted the relief sought by Duke without addressing the merits of the disputes raised below." Appellant's Br. p. 48. For its part, Duke asserts that the Commission's order was not unsupported by factual findings as it "has findings on all factual matters material to its ultimate conclusions, including that [the] costs of [the proposed] TDSIC 2.0 improvements are justified by the plan's benefits." Appellee Duke's Br. p. 44. Likewise, the Commission asserts that its order "is not deficient merely because [it] did not address each of the Industrial Group's challenges." Appellee IURC's Br. p. 28.
[29] With regard to the required level of specificity in factual findings, we have concluded that while an order "must contain specific findings on all the factual determinations material to its ultimate conclusions ... [s]pecific findings are not required on particular arguments by the parties." IPL Indus. Grp. , 159 N.E.3d at 627.
Findings need to be only specific enough to permit us to intelligently review the agency decision. Agency findings are specific enough when they are given with sufficient particularity and specificity such that the reviewing court can adequately and competently review the agency's decision. An appeal based on an alleged lack of specific findings presents a mixed question of law and fact. In these situations, we review the Commission's conclusions for reasonableness, deferring to the Commission based on the amount of expertise exercised by it.
Id. at 627–28 (cleaned up).
[30] We agree that the Commission "was not required to address the Industrial Group's every objection in point-by-point fashion nor respond to every argument raised by every party to the proceeding," Appellee IURC's Br. p. 15, and conclude that the Commission's order is specific enough to permit us to intelligently review the Commission's decision. The Commission's order clearly lays out the statutory requirements for TDSIC plans and the evidence proffered by Duke in support of the TDSIC 2.0 Plan. The Commission's order includes sufficient particularity and specificity to allow for competent review as it clearly addresses the evidence presented as it relates to the relevant statutory requirements and provides a reasoned analysis outlining its decision regarding the reasonableness of Duke's TDSIC 2.0 Plan. As such, we are unpersuaded by the Industrial Group's claim that the Commission committed reversible error by failing to make findings that explicitly reject each of its arguments in opposition to Duke's TDSIC 2.0 Plan.
[31] The judgment of the Commission is affirmed.
May, J., and Mathias, J., concur.