Appeals court: State law supports OK for Duke’s $2B economic development plan

Duke Energy will be able to proceed with a nearly $2 billion economic development plan after the Court of Appeals of Indiana ruled a regulatory commission’s approval met the requirements of state law.

Duke submitted a petition in November 2021 requesting approval for a six-year plan for transmission, distribution and storage system improvements—or TDSIC—that had an estimated cost of $1.98 billion. The objectives were to improve reliability for customers, advance grid hardening and resiliency, enable expansion of renewable and distributed generation, and facilitate economic development growth.

Duke Industrial Group and other parties intervened, and the Indiana Utility Regulatory Commission held an evidentiary hearing in March 2022. The commission then issued an order approving Duke’s plan in June, finding that the costs were justified by the likely incremental benefits and that the plan was reasonable.

On appeal, the industrial group argued 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 plan.

The Court of Appeals disagreed with both arguments.

The industrial group argued it wasn’t enough that a TDSIC plan as a whole is cost-justified, but rather that each project within the plan is cost-justified. Duke’s plan included subcategories, such as $812 million for circuit improvement projects and $517 million for transmission line improvements.

The issue came down to whether the Indiana General Assembly intended for the applicable law to apply to each individual part of a plan or the plan as a whole.

In 2019, the Court of Appeals concluded the latter in NIPSCO Indus. Grp. v. N. Ind. Pub. Serv. Co., 197 N.E.3d 316 (Ind. Ct. App. 2022), trans. pending.

The industrial group argued in this case that NIPSCO was wrongly decided, but the court stuck with its interpretation, stating in the Thursday opinion 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.”

As for the commission’s determination that the incremental benefits associated with Duke’s plan justified its cost, the court couldn’t say the commission’s conclusion was unreasonable based on Duke’s evidence.

The industrial group also argued that the commission erred by treating deferred operating and maintenance expenses as if the expenses were capital investments. I.C. 8-1-39-9(c) says a public utility that recovers capital expenditures and TDSIC “shall defer” the remaining 20% of capital expenditures and TDSIC costs until its next general rate case.

The Court of Appeals opinion emphasized the word “shall.”

“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 opinion reads.

Finally, the industrial group argued the commission’s order was unsupported by evidentiary findings because the order didn’t address each challenge.

The court determined that while an order must contain specific findings on all the factual determinations material to its ultimate conclusions, findings aren’t required on particular arguments.

Thus, the commission’s order “includes sufficient particularity and specificity to allow for competent review,” and “provides a reasoned analysis outlining its decision.”

Judge Cale Bradford wrote the opinion. Judges Melissa May and Paul Mathias concurred.

The case is Indiana Office of Utility Consumer Counselor, Duke Industrial Group, and Citizens Action Coalition of Indiana, Inc. v. Duke Energy Indiana, LLC, and Indiana Utility Regulatory Commission, 22A-EX-1685.