The Indiana Court of Appeals recently issued an opinion in a public-utility rate-making case involving Hamilton Southeastern Utilities, Inc. (“HSE”), the largest investor-owned sewer utility in Indiana, which currently services more than 20,000 customers in Hamilton County, Indiana. The issue in the case stemmed from an order of the Indiana Utility Regulatory Commission (IURC), a legislatively-created agency that regulates public utilities in Indiana. Under Indiana law, the IURC is charged with acting as an impartial fact-finding body with technical expertise to administer the regulatory scheme set forth by Indiana’s legislature. The IURC’s role is to make sure that public utilities in Indiana provide constant, reliable, and efficient services.
In this case, the IURC excluded certain expenses from the calculation of HSE’s utility rate, approved a development charge in one of HSE’s service areas, and included income tax liability in the calculation of HSE’s utility rate. Adverse parties to the case included the Indiana Office of Utility Consumer Counselor (OUCC), which is a state agency representing the interests of ratepayers, consumers and the public in utility matters, and the Apartment Association of Indiana, Inc., a state-wide trade organization representing the interests of several multi-family housing units within HSE’s service territory. As a preliminary matter, the Indiana Court of Appeals held that the IURC, initially included as a party on appeal, was not a proper party in the present case.
The Indiana Court of Appeals reversed the decision of the IURC excluding HSE’s affiliate expenses from HSE’s rate calculation because the IURC acted arbitrarily in relying, without explanation, upon guidelines promulgated by the National Association of Regulatory Utility Commissioners (NARUC). However, the Court of Appeals upheld the IURC’s decision with respect to excluding paid-in-arrears affiliate expenses from HSE’s calculation of working capital and the IURC’s conclusion that HSE can recover, as part of its operating costs, the income taxes of HSE’s shareholders actually paid as part of an S Corporation.
You can find the full Indiana Court of Appeals opinion here:
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