Nipsco Indus. Grp. v. N. Ind. Pub. Serv. Co.

197 N.E.3d 316

NIPSCO INDUSTRIAL GROUP, Appellant/Intervenor/Cross-Appellee,andOffice of the Utility Consumer Counselor, Appellant/Statutory Party,

v. NORTHERN INDIANA PUBLIC SERVICE COMPANY, Appellee/Petitioner,andIndiana Utility Regulatory Commission, Appellee/Cross-Appellant.

Court of Appeals Case No. 22A-EX-187

Court of Appeals of Indiana.

Filed September 29, 2022

Attorneys for Appellant, NIPSCO Industrial Group: Todd A. Richardson, Joseph P. Rompala, Aaron A. Schmoll, Lewis & Kappes, P.C., Indianapolis, Indiana

Attorneys for Appellant Indiana, Office of Utility Consumer, Counselor: William I. Fine, Randall C. Helmen, Jeffrey M. Reed, Indiana Office of Utility Consumer, Counselor, Indianapolis, Indiana

Attorneys for Appellee, Northern Indiana Public Service, Co.: Robert E. Heidorn, Bryan Michael Likins, NiSource, Inc., Indianapolis, Indiana, Brian J. Paul, Faegre Drinker Biddle & Reath LLP, Indianapolis, Indiana

Attorneys for Appellee Indiana, Utility Regulatory Commission: Beth E. Heline, General Counsel, Jeremy Comeau, Assistant General Counsel, Indiana Utility Regulatory Commission, Indianapolis, Indiana, Theodore E. Rokita, Attorney General of Indiana, Benjamin Jones, Assistant Section Chief, Civil Appeals, Office of the Indiana Attorney General, Indianapolis, Indiana

Bradford, Chief Judge.

Case Summary

[1] In June of 2021, Northern Indiana Public Service Company ("NIPSCO") petitioned the Indiana Utility Regulatory Commission ("the Commission") for approval of its five-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 section 8-1-39-10(c) ("the TDSIC Plan"). Various groups, including the NIPSCO Industrial Group ("the Industrial Group"), petitioned to intervene in the proceeding, which petition was granted. In October of 2021, the Commission held an evidentiary hearing, after which it granted NIPSCO's petition for approval of the TDSIC Plan. The Commission cross-appeals, claiming that the Industrial Group lacks standing to prosecute this appeal. On direct appeal, the Industrial Group and the Indiana Office of the Utility Consumer Counselor (collectively, "Appellants") allege that the Commission has misapplied the TDSIC statute in some respects and inappropriately considered evidence regarding the regional and national economic impact of the TDSIC Plan. Because we reject the Commission's assertion that the Industrial Group lacks standing and disagree with Appellants’ contentions, we affirm.

Facts and Procedural History

[2] On June 1, 2021, NIPSCO petitioned the Commission for approval of its TDSIC Plan for the period from June 1, 2021, through December 31, 2026. Various organizations, including the Industrial Group, requested permission to intervene, which requests were granted. The Industrial Group is "an ad hoc group of industrial users" served by NIPSCO and consists of seven of its largest customers. Appellants’ App. Vol. II p. 101.

[3] On October 5, 2021, the Commission conducted an evidentiary hearing. As the Commission summarized in its order, NIPSCO divided its Plan into three segments of work:

(1) Aging Infrastructure projects, aimed at maintaining safe and reliable performance [and] replacing aging, high risk equipment [...]; (2) System Deliverability projects, aimed at maintaining adequate system capacity to reliably serve customer loads; and (3) Grid Modernization projects, [to install] technologies that support improved reliability [and] asset health [...] and prepare for future customer expectations.

Order p. 55. Of these segments, the parties focus their arguments on the second, system deliverability projects, which are those projects undertaken from the purpose of maintaining adequate capacity to serve current and future customer needs. NIPSCO noted below, however, that the categories cannot be completely separated from one another and that it is customary for it to "combine[ ] projects or project categories for efficiency." Order p. 11.

[4] With respect to the benefits of system deliverability work, NIPSCO Director of Electric T&D Charles Vamos explained generally that this work is a basic requirement of continuing to provide electric service: "not performing [system deliverability] work would prohibit NIPSCO from fulfilling its obligation to serve its customers, which is simply not an option." Order p. 46. Vamos also testified that "the benefit to NIPSCO's customers from [...] System Deliverability investments cannot be easily calculated in an actuarial calculation[,]" Order at 12, because "the value [of] life and property" affected by these projects "is too high to realistically contemplate." NIPSCO's Supp. App. Vol. III p. 88. NIPSCO, however, did present testimony on the costs and qualitative benefits of system deliverability work, both as a general category and with respect to specific projects.

[5] Vamos detailed to the Commission how NIPSCO identifies which system deliverability work is necessary and worth the cost, by applying rigorous "reliability planning criteria and assessment practices." Order p. 16. To clarify for the Commission the scope and nature of the proposed system deliverability work, NIPSCO divided it into two subcategories: "Transmission" work and "Distribution" work. NIPSCO's Supp. App. Vol. III pp. 133–34. For each of these subcategories, NIPSCO uses well-established and detailed planning criteria to identify the highest-priority work.

For the transmission system, NIPSCO's planning criteria [are] aligned with the North American Electric Reliability Corporation ("NERC") Reliability Standards, which [...] help ensure a transmission system that will operate reliably and remain resilient through multiple outages without causing cascading outages or widespread load loss and can accommodate near- and long-term customer load growth.

Order pp. 16–17. NIPSCO's transmission planning models are "[d]eveloped through NERC Eastern Interconnection Reliability Assessment Group," which "develop[s] joint models that [multiple] utilities use in local transmission planning analyses." NIPSCO's Supp. App. Vol. III p. 136.

[6] Similarly, "[f]or the distribution system, changes in electric demand associated with current and future customer growth often[ ]times require investment in the form of expanded, upgraded, or additional facilities[,]" which "ensure sufficient system capacity [...] under peak load conditions[.]" Order p. 17. NIPSCO applies these criteria through "annual system assessments," conducted with "industry recognized power system modeling and analysis software" and using "data collected by NIPSCO on a routine cycle." NIPSCO's Supp. App. Vol. III p. 136. The analysis simulates "scenarios [of] current and future projected conditions including load growth assumptions[,]" considering both "normal and emergency operating conditions[.]" NIPSCO's Supp. App. Vol. III p. 136.

[7] NIPSCO described its system deliverability evaluation criteria to the Commission in great detail. NIPSCO assesses its actual experience with its facilities, and also runs simulations to assess their likely performance, under normal and emergency conditions. The simulated emergencies are not farfetched catastrophes; they are "N-1" simulations that assume only one component of a system has failed. NIPSCO's Supp. App. Vol. II p. 90. When experience or simulations show that system overload is likely in a particular area, NIPSCO then assesses what must be done to continue providing service to that area. NIPSCO's first option is not to build any infrastructure, but instead to use switching to simply transfer some of the excess electrical load to other adjacent substations or circuits. At times, this option just moves the problem elsewhere, meaning that NIPSCO must add some kind of infrastructure to continue providing reliable service, and so it assesses the most cost-effective solution. NIPSCO first explores the option of upgrading existing transformers or power lines to handle additional load but considers the more expensive options of installing new or larger transformers or rebuilding power lines if upgrading would be insufficient. Finally, NIPSCO considers the high-cost options of building new substations or power lines.

[8] In this case, NIPSCO applied these criteria to draw up a specific list of system deliverability work items that it presented to the Commission for approval. For the first two years of the TDSIC Plan, work in the "Transmission" category includes rebuilding two 69 kV power-line circuits and extending another circuit to a new distribution substation. Order p. 17. Work in the "Distribution" category includes building a new distribution substation, adding two new power transformers at existing substations, replacing another transformer with a larger one, installing two new sets of switchgear, rebuilding four 12 kV circuits, and reconfiguring several other 12 kV circuits to accommodate the substation upgrades. Order p. 17. In later years of the TDSIC Plan, NIPSCO anticipates building additional substations and power-line circuits, the details of which will be provided to the Commission in updates and reviewed pursuant to Indiana Code section 8-1-39-9.

[9] NIPSCO presented evidence regarding two specific areas of deliverability work it wishes to conduct, one of which is the Marktown substation project. NIPSCO presented evidence "that the Marktown substation is one of the most important substations in NIPSCO's entire system" because "it provides electricity to several large industrial facilities along the Lake Michigan shoreline, including the BP Whiting Refinery, which is the the largest refinery in the Midwest[.]" Order p. 48. The refinery's daily production is "around 10 million gallons of gasoline, 4 million gallons of diesel, and 2 million gallons of jet fuel[.]" NIPSCO's Supp. App. Vol. III pp. 233–34. Moreover, NIPSCO presented evidence of the urgent need for...