NIPSCO Industrial Group v. Northern Public Service Company

FILED

Jun 20 2018, 11:53 am

IN THE

Indiana Supreme Court

CLERK

Indiana Supreme Court

Court of Appeals

and Tax Court

Supreme Court Case No. 18S-EX-334

NIPSCO Industrial Group

Appellant (Intervenor),

–v–

Northern Indiana Public Service Company

Appellee (Petitioner).

Argued: November 21, 2017 | Decided: June 20, 2018

Appeal from the Indiana Utility Regulatory Commission

No. 44403-TDSIC-4

On Petition to Transfer from the Indiana Court of Appeals

No. 93A02-1607-EX-1644

Opinion by Justice Slaughter

Chief Justice Rush and Justices David, Massa, and Goff concur

Slaughter, Justice.

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. The process for recouping

these costs, sometimes not until years after they were incurred, is an

expensive, onerous ratemaking case, which involves a comprehensive

review of the utility’s entire business operations.

In 2013 the legislature authorized utilities to obtain regulatory

preapproval for “designated” improvements to their infrastructure.

Under the so-called “TDSIC” Statute—which provides for more prompt

reimbursement of specified transmission, distribution and storage system

improvements—a utility can seek regulatory approval of a seven-year

plan that designates eligible improvements, followed by periodic petitions

to adjust rates automatically as approved investments are completed.

At issue here is the Indiana Utility Regulatory Commission’s

preapproval of approximately $20 million in infrastructure investments

for which the Commission authorized increases to NIPSCO’s natural-gas

rates under the TDSIC mechanism. NIPSCO is an energy utility with more

than 800,000 customers in northern Indiana. Some of NIPSCO’s largest

industrial customers—represented here by the NIPSCO Industrial

Group—oppose NIPSCO’s entitlement to favorable rate treatment under

the TDSIC Statute, contending the disputed projects do not comply with

the Statute’s requirements.

The Commission’s holding below, which divided our Court of Appeals,

approved various categories of improvements—referred to variously as

“project categories”, “multiple-unit-project categories”, and “multiple-

unit projects”—that describe broad parameters for identifying future

improvements but do not designate those improvements with specificity.

NIPSCO defends these categorical designations by arguing it does not,

and cannot, know in advance which specific segments of natural-gas pipes

throughout its system will fail each year. But it does know, based on

historical performance, that a certain percentage of its system will need to

be replaced annually. NIPSCO contends the TDSIC Statute permits the

Commission to approve a seven-year plan that describes future

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investments in terms of ascertainable planning criteria, although when its

plan was approved, NIPSCO did not know which specific segments of its

system would need to be replaced.

The Industrial Group, in contrast, interprets the TDSIC Statute more

narrowly. It argues the Statute requires the utility and the Commission to

designate specific projects upfront, rather than to rely on categories of

projects not identified with specificity until later years. For the Industrial

Group, the traditional ratemaking case is still the primary process for

seeking reimbursement, subject to occasional use of the TDSIC procedure

in the limited band of investments to which it applies.

The stakes are much larger than just the roughly $20 million at issue

between NIPSCO and the Industrial Group. The Commission, we are told,

has approved billions of dollars of utility-infrastructure investments

through the TDSIC process. Given the favorable regulatory treatment,

utilities are likely to funnel increasing amounts of infrastructure

investments through this reimbursement mechanism. How we resolve

these competing visions of the TDSIC Statute will likely have enormous

financial consequences for utilities and their customers.

We conclude the TDSIC Statute permits periodic rate increases only for

specific projects a utility designates, and the Commission approves, in the

threshold proceeding and not for multiple-unit projects using

ascertainable planning criteria. In other words, a utility must specifically

identify the projects or improvements at the outset in its seven-year plan

and not in later proceedings involving periodic updates. There is an

appreciable difference between designating specific “projects” and

“improvements” up front, which the Statute requires, and describing the

criteria for selecting them later, which the Commission approved. We

agree with the Court of Appeals’ dissenting opinion that Commission

approval of “broad categories of unspecified projects defeats the purpose

of having a ‘plan’.” NIPSCO Indus. Grp. v. N. Ind. Pub. Serv. Co., 78 N.E.3d

730, 740 (Ind. Ct. App. 2017) (Barnes, J., dissenting).

Because we find that preclusion principles do not bar our consideration

of this important legal issue of first impression, we grant transfer, reverse

the Commission’s order in part, and remand.

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Factual and Procedural History

A. Traditional utility regulation

Utility regulation is premised on a “regulatory compact” in which the

State sanctions a utility’s monopoly within a defined service area and

subjects the utility to various regulatory restrictions and responsibilities.

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.

United States Gypsum, Inc. v. Ind. Gas Co., 735 N.E.2d 790, 797 (Ind. 2000)

(quotation and citations omitted).

The State regulates utilities through the Commission, which is

authorized by statute to act with “technical expertise to administer the

regulatory scheme designed by the legislature … to insure that public

utilities provide constant, reliable, and efficient service to the citizens of

Indiana.” N. Ind. Pub. Serv. Co. v. United States Steel Corp., 907 N.E.2d 1012,

1015 (Ind. 2009) (citation omitted). See Ind. Code §§ 8-1-1-1 to 8-1-1-15.

When exercising this authority, the Commission balances the public’s

need for adequate, efficient, and reasonable service with the public

utility’s need for sufficient revenue to meet the cost of furnishing service

and to earn a reasonable profit. United States Gypsum, 735 N.E.2d at 797-98.

“Proper rates are those which produce a fair and nonconfiscatory return,

and such as will enable the company, under efficient management, to

maintain its utility property and service to the public, and provide a

reasonable return upon the fair value of its used and useful property.”

Pub. Serv. Comm'n of Ind. v. Ind. Bell Tel. Co., 235 Ind. 1, 15, 130 N.E.2d 467,

473 (1955) (citations omitted).

Traditionally, utility rates are adjusted through general ratemaking

cases. General ratemaking is a “comprehensive” process, requiring the

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Commission to “examine every aspect of the utility’s operations and the

economic environment in which the utility functions to ensure that the

data [the Commission] has received are representative of operating

conditions that will, or should, prevail in future years.” United States

Gypsum, 735 N.E.2d at 798 (citation omitted).

B. The TDSIC process

Over the years, the legislature has supplemented traditional

ratemaking with various “tracker” procedures that allow utilities to ask

the Commission to adjust their rates to reflect various costs without

having to undergo a full ratemaking case. The TDSIC Statute, I.C. ch. 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. Eligible

improvements are certain new or replacement utility projects that:

(1) a public utility undertakes for purposes of safety, reliability,

system modernization, or economic development . . . ; (2) were

not included in the public utility’s rate base in its most recent

general rate case; and (3) [were] designated in the public

utility’s seven (7) year plan and approved by the commission

under section 10 of this chapter as eligible for TDSIC

treatment”.

I.C. § 8-1-39-2.

The TDSIC Statute contemplates two distinct types of proceedings.

First, under Section 10, the utility may seek regulatory approval of a

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seven-year plan for designated improvements to transmission,

distribution, and storage systems. See Id. § 8-1-39-10. The Commission

shall then approve the plan and designate the planned improvements as

eligible for TDSIC treatment if it finds the plan is reasonable. Id. § 8-1-39-

10(b). When determining that a plan is reasonable, the Commission’s

order must include (1) “[a] finding of the best estimate of the cost of the

eligible improvements”, (2) “[a] determination whether public

convenience and necessity require or will require the eligible

improvements”, and (3) “[a] determination whether the estimated costs of

the eligible improvements … are justified by the incremental benefits

attributable to the plan”. Id.

Second, under Section 9, once the Commission has approved a seven-

year plan, the utility may petition every few months for periodic rate

adjustments to recover “eighty percent (80%) of approved capital

expenditures and TDSIC costs” for the system improvements designated

as eligible and actually completed. Id. §§ 8-1-39-9(a), (c), (e). The

remaining twenty percent can be recovered only “as part of the next

general rate case that the public utility files with the commission.” Id. § 8-

1-39-9(b). The utility must “update [its] seven (7) year plan under

subdivision (2) with each petition [it] files under this section.” Id. § 8-1-39-

9(a). Before a utility may recover additional costs above approved

estimates, it must specifically justify the additional costs, and the

Commission must specifically approve them. Id. § 8-1-39-9(f).

C. NIPSCO’s TDSIC litigation

1. Designated vs. described

The parties dispute what qualifies as an eligible project under Section 2,

which requires both designation and approval of the project in a seven-

year plan the Commission approves under Section 10. I.C. § 8-1-39-2(3)(A).

The Industrial Group claims the Commission can designate and approve

projects identified only during the initial Section 10 process, and not

during subsequent Section 9 petitions. It also claims that the TDSIC

process is an extraordinary mechanism, applicable only in limited

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circumstances, and that the general ratemaking case remains the

presumptive process for utilities to recover their investment costs.

NIPSCO, in contrast, argues the Commission can properly designate

and approve multiple-unit projects, described using ascertainable

planning criteria, as TDSIC-eligible. NIPSCO characterizes these multiple-

unit projects, generally, as planned undertakings that include component

parts that need to be improved, but without knowing in advance which

specific parts will require replacement. Here, the United States

Department of Transportation mandates that NIPSCO annually inspect

thousands of units of natural-gas pipelines throughout its system.

NIPSCO does not know in advance which specific pipeline segments

within its system it will need to update. But based on historical

performance, NIPSCO expects a certain percentage of its system will fail

each year and require replacement. Depending on the inspection results,

NIPSCO then develops a schedule to replace worn assets. This

information enables NIPSCO to identify the specific units of work

completed within the multiple-unit projects for which it received

Commission approval.

2. Current procedural posture

Shortly after the TDSIC Statute was enacted, NIPSCO filed two Section

10 petitions, seeking approval of separate, but substantially similar, seven-

year plans: one each for its electric system and its gas system. The

Commission approved NIPSCO’s Electric Plan in February 2014 and, in a

separate proceeding, approved its Gas Plan in April 2014. The plans

identified specific projects for the first year and described “project

categories” for years two through seven. NIPSCO subsequently filed

periodic Section 9 tracker petitions, seeking rate increases associated with

completed matters referenced in the approved seven-year plans.

In 2015, the Court of Appeals reversed in part the Commission’s order

approving NIPSCO’s Electric Plan. NIPSCO Indus. Grp. v. N. Ind. Pub. Serv.

Co., 31 N.E.3d 1 (Ind. Ct. App. 2015). The Electric Plan lacked sufficient

detail for the Commission to determine whether the plan was reasonable

and whether it included a best estimate of the cost of improvements under

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Section 10. Id. at 8. By identifying only the first year of improvements, the

Plan presumed that future proposed projects identified in subsequent

Section 9 “update” proceedings would be eligible for TDSIC treatment. Id.

at 8-9. Thus, the Court held, the Plan unlawfully relieved NIPSCO of its

burden to show the proposed projects were TDSIC-eligible. Id. at 9.

When the Electric Plan appeal was decided, NIPSCO had already

completed its first Gas Plan Section 9 tracker petition, TDSIC-1, and the

second, TDSIC-2, was pending. Given the legal problems with its Electric

Plan, NIPSCO voluntarily dismissed its TDSIC-2 Gas Plan petition with

the understanding that its next Section 9 tracker petition, TDSIC-3, would

seek TDSIC-2 reimbursement and modification of its Gas Plan to comply

with the appellate ruling.

In TDSIC-3, NIPSCO again sought approval of an “updated” seven-

year Gas Plan. Although NIPSCO provided additional information for the

proposed projects for all seven years of its revised seven-year Gas Plan, its

TDSIC-3 petition continued to include projects identified with specificity

as well as yet-to-be-identified projects. NIPSCO said it would identify

specific instances of completed improvements within certain project-

group categories in subsequent Section 9 plan updates. The Commission

found that TDSIC-3 presented “a unique situation” because it had already

approved NIPSCO’s initial Section 10 Gas Plan in a final order. And it

generally endorsed NIPSCO’s proposal to establish objective ascertainable

criteria for selecting specific projects within “project group” categories.

The Industrial Group did not challenge the Commission’s TDSIC-3 order

approving NIPSCO’s petition.

In February 2016, NIPSCO filed its fourth Section 9 petition—TDSIC-

4—the subject of this appeal. This filing included another update to the

Gas Plan, seeking an increase of approximately $20 million in the

previously approved “Inspect & Mitigate” category. This category

included both additional distinct projects and an increased number of

projects within previously approved categories. NIPSCO referred to these

Inspect & Mitigate project groups as “multiple-unit projects”.

The Industrial Group intervened at the Commission and opposed this

petition for $20 million in rate relief. Particularly, the Industrial Group

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objected to NIPSCO’s multiple-unit-projects approach, arguing that

project groups described using objective ascertainable-standard criteria

are not permitted under the TDSIC Statute. Despite this challenge, the

Commission approved NIPSCO’s TDSIC-4 petition. Relying on its TDSIC-

3 order, the Commission found NIPSCO’s multiple-unit-project categories

were supported by sufficient ascertainable planning criteria for later

identifying eligible improvements, and the roughly $20 million increase

was based on “further identification of the specific projects or asset

replacements within the approved project groups.”

The Industrial Group appealed the Commission’s TDSIC-4 order, and a

divided Court of Appeals affirmed. The majority held that NIPSCO’s

updated seven-year plan was lawful “because the improvements included

in the update were not new projects as they were chosen by utilizing the

ascertainable planning criteria previously approved by the Commission

and contained in NIPSCO’s 7-year plan.” 78 N.E.3d at 739. The dissent

believed the TDSIC Statute requires that a “specific plan” be established in

the initial Section 10 proceedings, and that merely describing multiple-

unit-project categories does not sufficiently designate which specific

projects are eligible for reimbursement through later Section 9

proceedings. Id. at 740.

Standard of Review

When reviewing Commission decisions, we conduct three levels of

review: one for factual findings; another for mixed questions of law and

fact; and a third for questions of law. At issue here is the last category.

This case does not implicate the Commission’s ratemaking expertise but

presents a pure question of law: Does the TDSIC Statute authorize the

Commission to approve “project categories” or “multiple-unit projects”

described using ascertainable planning criteria?

We review questions of law de novo, Ind. Bell Tel. Co. v. Ind. Util.

Regulatory Comm'n, 715 N.E.2d 351, 354 (Ind. 1999) (citation omitted), and

accord the administrative tribunal below no deference. To do otherwise

would abdicate our duty to say what the law is. See, e.g., Marbury v.

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Madison, 5 U.S. (1 Cranch) 137, 176 (1803). Such plenary review is

“constitutionally preserved” for the judiciary, United States Steel, 907

N.E.2d at 1016, and considers whether the disputed “decision, ruling or

order is contrary to law.” Citizens Action Coal. of Ind., Inc. v. N. Ind. Pub.

Serv. Co., 485 N.E.2d 610, 613 (1985) (citation omitted). Such legal

questions are for the courts to resolve and turn on “whether the

Commission stayed within its jurisdiction and conformed to the statutory

standards and legal principles involved in producing its decision, ruling,

or order.” United States Steel, 907 N.E.2d at 1016.

Separation-of-powers principles do not contemplate a “tie-goes-to-the-

agency” standard for reviewing administrative decisions on questions of

law. In discharging our constitutional duty, we pronounce the statutory

interpretation that is best and do not acquiesce in the interpretations of

others. Deciding the scope of the Commission’s authority under the

TDSIC Statute falls squarely within our institutional charge. Crafting our

State’s utility law is for the legislature; implementing it is for the executive

acting through the Commission; and interpreting it is for the courts.

Discussion and Decision

I. Multiple-unit projects described using

ascertainable criteria are not eligible for TDSIC

treatment.

We conclude the TDSIC Statute does not apply to project categories or

multiple-unit projects described using ascertainable criteria. The Statute

requires the Commission to “designate” eligible projects in a threshold

seven-year plan under Section 10. The only interpretation of “designate”

that satisfies the dual statutory requirements of particularity and cost

justification is one requiring projects to be identified with specificity from

the outset. In addition, Section 9 “update” petitions enable the utility to

obtain rate adjustments as it completes the approved projects and incurs

the additional budgeted costs. The only projects consistent with Section

10’s preapproval requirement are those the utility specified at the

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beginning of the plan, and not “new” projects or those requiring the

passage of time to specify later. The Commission erred when it authorized

multiple-unit-project categories in a Section 10 proceeding and approved

NIPSCO’s later specification of projects under Section 9.

A. The TDSIC Statute requires the Commission to

“designate” eligible projects in a threshold seven-year

plan.

A utility seeking favorable rate treatment under the TDSIC Statute for

eligible infrastructure improvements must file with the Commission a

proposed seven-year plan that designates the planned projects. I.C. §§ 8-1-

39-2(3)(A), 8-1-39-10(a). The Commission must approve the plan if it is

reasonable. Id. § 8-1-39-10(b). What is reasonable turns on three statutory

guideposts: (i) the best-estimated cost of the improvements, (ii) their

public convenience and necessity, and (iii) their cost-justified benefits. Id.

A meaningful cost-benefit analysis requires the Commission to determine

whether the estimated costs of the designated improvements are justified

by their incremental benefits. Id. § 8-1-39-10(b)(3).

If the Commission finds the plan reasonable considering the cost-

benefit analysis, it must designate and approve projects as TDSIC-eligible.

Id. §§ 8-1-39-2(3)(A), 8-1-39-10(b). In this context, TDSIC-eligible projects

are “new or replacement electric or gas transmission, distribution, or

storage utility projects” that:

(1) a “utility undertakes for purposes of safety, reliability, system

modernization, or economic development”;

(2) “were not included in the utility’s rate base in its most recent

general rate case”; and

(3) were “designated” in the utility’s seven-year plan that the

Commission approved under Section 10.

Id. § 8-1-39-2. Thus, both the utility’s proposed plan and the Commission-

approved plan under Section 10 must “designate” the eligible

improvements. A project or improvement not “designated” in the seven-

year plan is not “eligible for TDSIC treatment” under Section 2.

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“Designate” is an undefined statutory term. When interpreting a

statute, we presume the legislature uses undefined terms in their common

and ordinary meaning. In re S.H., 984 N.E.2d 630, 635 (Ind. 2013). As a

verb, “designate” means, among other things, “to appoint and set apart

for a specific purpose” or to “specify”. Designate, MERRIAM-WEBSTER’S

DICTIONARY AND THESAURUS (2007). In TDSIC-3, the Commission

approved a project category reciting ascertainable planning criteria that

NIPSCO later used to select specific improvements identified in TDSIC-4.

For example, NIPSCO’s Section 10 petition identified two project

categories—“storage” and “inspect and mitigate”—that described future

asset replacements with reference to annual inspections mandated by the

United States Department of Transportation. These categories necessarily

were generic descriptions of NIPSCO’s forthcoming projects—and not

specific designations of them—because NIPSCO had not yet performed

the inspections that would reveal which parts of NIPSCO’s system would

require replacement. That isn’t NIPSCO’s fault; it’s not gifted with

prevision. But it does mean that NIPSCO’s Section 10 plan could only

describe the projects it would undertake in the future and could not

specifically identify them at the outset when it first sought and obtained

approval for its plan. It is also why NIPSCO’s specific identification of its

projects did not occur until it later filed plan “updates” under Section 9. In

other words, only after the Commission found the Section 10 plan

reasonable was NIPSCO able to identify and prioritize specific work to be

done based on a preset list of proposed replacement categories.

We conclude that “designate” in Sections 2 and 10 requires both the

utility and the Commission to identify the TDSIC-eligible projects with

particularity in the threshold proceeding and does not allow the approval

of project categories that require a later specification based on

ascertainable planning criteria. This interpretation is consistent with the

further requirement that the Commission meaningfully apply the Statute’s

cost-benefit guideposts during the Section 10 proceeding and approve the

project(s) submitted in the seven-year plan. Because Section 2 requires the

Commission to designate and approve TDSIC-eligible projects only after

finding a plan reasonable under Section 10, the Commission’s

reasonableness determination necessarily sets the budget and defines the

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scope of a seven-year plan to what the Commission considered and

approved in the threshold proceeding. Thus, the Commission order

approving the Section 10 plan must define the plan’s scope with

particularity and establish a best-estimate budget for effectuating the plan.

The Commission’s order does not satisfy these statutory requirements.

Our view of what “designate” means in the TDSIC Statute is illustrated

by Major League Baseball’s designated-hitter rule. The rule, which was

first implemented in the American League in 1973, allows a team to add a

tenth player to the traditional nine-player lineup who will bat for the

pitcher, typically the weakest hitter on the field. Before a game, each

manager’s lineup card must “designate” which player is to serve as the

designated hitter. Major League Baseball, OFFICIAL BASEBALL RULES, Rule

4.03(c) & 5.11 (2018). The rule requires naming a specific player as the DH

from the team’s 25-man roster. Anything less than a player-specific

identification at the outset of the game will not suffice. It is inadequate, for

example, for the lineup card to describe the DH anonymously or

generically as one of the fifteen (or so) remaining players on the roster.

Waiting until the DH’s turn at bat to identify a player doesn’t comport

with the rule. Such “player-to-be-named-later” designations in the lineup

card don’t work in baseball. And neither do “project-to-be-named-later”

designations suffice under the TDSIC Statute.

B. Section 9 update petitions cannot add new projects

beyond those initially approved under Section 10 and

cannot revise the seven-year-plan’s budget.

After the Commission has approved the foundational seven-year plan

under Section 10, the utility may file petitions every few months under

Section 9 to obtain “automatic” rate adjustments for approved costs and

expenditures as it completes these improvements and puts them into

service. I.C. §§ 8-1-39-9(a), (c), (e). These periodic Section 9 petitions allow

the utility to recoup eighty percent of approved cost estimates. Id. § 8-1-39-

9(a). The remaining twenty percent—along with any cost overruns that

are specifically justified by the utility and specifically approved by the

Commission—is recoverable during the general ratemaking case required

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at the end of the plan. Id. § 8-1-39-9(b), (d), (f). The Statute thus fixes the

approved budget recoverable throughout the duration of the seven-year

plan.

With each Section 9 petition a utility files, it must also “update” its

seven-year plan. Id. § 8-1-39-9(a). “Update” also is undefined in the

Statute. The best reading of “update” requires the utility to keep records

and supply progress reports necessary for the lawful administration of the

previously designated and approved TDSIC projects. Considering Section

2’s definition of eligible improvements and Section 10’s reasonableness

inquiry, we conclude that a Section 9 “update” requires the utility to

“identif[y] projected effects of the [seven-year plan] on retail rates and

charges” and to cross-reference that progress with the approved seven-

year plan. Id. § 8-1-39-9(a). Thus, each Section 9 petition enables the

Commission to track when preapproved projects are put into service; to

authorize the “timely recovery of eighty percent (80%) of approved capital

expenditures and TDSIC costs”, id.; and to prepare for the mandated

general ratemaking case at the conclusion. Id. § 8-1-39-9(d). To be clear,

Section 9 updates do not authorize the Commission to designate or

approve new projects at the unit level. Rather, they should merely

document changes to and developments in the administration of the

previously approved Section 10 plan.

Because the Statute neither explicitly nor implicitly authorizes the

Commission to approve multiple-unit projects as eligible for TDSIC

treatment, NIPSCO cannot use the TDSIC mechanism to recover the

multiple-unit-project portions of its Section 10 plan that either were

identified with particularity for the first time in its TDSIC-4 petition or

remain unspecified.

II. Preclusion principles do not bar the Industrial

Group’s appeal.

Finally, we reject NIPSCO’s argument that principles of claim and issue

preclusion bar the Industrial Group from challenging the Commission’s

TDSIC-4 order. Merely because the Industrial Group could have

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challenged the TDSIC-3 order, but did not, does not mean the legal

methodology that order embraced is immune from legal challenge

thereafter.

We look to the Restatement (Second) of Judgments to guide our

preclusion analysis. See Sullivan v. Am. Cas. Co. of Reading, Pa., 605 N.E.2d

134, 138 (Ind. 1992) (discussing Sections 28 & 29’s adoption of the modern

rule that mutuality and identity of parties are no longer required for

defensive use of collateral estoppel); Miller Brewing Co. v. Ind. Dep't of State

Revenue, 903 N.E.2d 64, 68 (Ind. 2009) (citing Section 28 for proposition

that “preclusion may not apply where there are new facts or where a

change in the law or legal climate would dictate a different outcome”). A

noteworthy exception to general preclusion principles applies here and

counsels in favor of our addressing the important legal issues presented.

An issue is not precluded if “[t]he issue is one of law and … a new

determination is warranted … to avoid inequitable administration of the

laws”, RESTATEMENT (SECOND) OF JUDGMENTS § 28(2) (1982). Nor is an issue

precluded if it is “one of law and treating it as conclusively determined

would inappropriately foreclose opportunities for obtaining

reconsideration of the legal rule upon which it was based”. Id. § 29(7).

Our Court will not foreclose review of a legal issue of first impression

“when other litigants are free to urge that the rule should be rejected. Such

preclusion might unduly delay needed changes in the law and might

deprive a litigant of a right that the court was prepared to recognize for

other litigants in the same position.” Id. § 28 cmt. b. If we were to apply

preclusion principles here, that determination would foreclose ”an

opportunity to reconsider the applicable rule, and thus to perform [our]

function of developing the law.” Id. § 29 cmt. i. This consideration is

“especially pertinent ... when the issue is of general interest and has not

been resolved by the highest appellate court that can resolve it.” Id.

To be sure, the Industrial Group’s failure to appeal the TDSIC-3 order

does mean, as the Group acknowledges, that specific projects identified

and approved in TDSIC-3 are beyond challenge. But the Group’s failure to

challenge TDSIC-3 does not bar the Group from challenging previously

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undesignated and unapproved projects for which NIPSCO sought and

obtained rate adjustments from the Commission in TDSIC-4.

The Commission’s legal methodology of approving multiple-unit-

project categories described using ascertainable planning criteria is a pure

issue of law, of general interest, that we have not previously resolved.

And we conclude its methodology remains subject to challenge here.

Indiana courts have long held that agencies remain free to correct their

own erroneous interpretations of statutes in later proceedings. Adkins v.

City of Tell City, 625 N.E.2d 1298, 1302 (Ind. Ct. App. 1993); State ex rel.

ANR Pipeline Co. v. Ind. Dep't of State Revenue, 672 N.E.2d 91, 94 (Ind. Tax

Ct. 1996). We decline to adopt a preclusion theory that prevents litigants

from urging such a course correction.

Conclusion

We hold that periodic rate increases are available only for specific

projects a utility designates in the threshold TDSIC proceeding and not for

multiple-unit-project categories it describes using ascertainable planning

criteria. The Commission thus erred in approving various proposed

categories of unspecified improvements that NIPSCO did not identify

with particularity until it filed subsequent periodic Section 9 petitions. For

these reasons, we grant the Industrial Group’s petition to transfer. We

reverse the portions of the Commission’s TDSIC-4 Order that approved

previously unspecified improvements. And we remand to the

Commission with instructions to identify such project categories that were

not identified with specificity in TDSIC-3. The costs for all multiple-unit

projects as to which particular improvements were identified for the first

time in TDSIC-4 are disallowed for TDSIC recovery to the extent those

projects were not properly designated in the previously approved seven-

year plan.

Rush, C.J., and David, Massa, and Goff, JJ., concur.

Indiana Supreme Court | Case No. 18S-EX-334 | June 20, 2018 Page 16 of 17

ATTORNEYS FOR APPELLANT

Todd A. Richardson

Joseph P. Rompala

Lewis Kappes, P.C.

Indianapolis, Indiana

ATTORNEYS FOR APPELLEE

Brian J. Paul

Daniel E. Pulliam

Faegre Baker Daniels LLP

Indianapolis, Indiana

Claudia J. Earls

Christopher C. Earle

NiSource Corporate Services – Legal

Indianapolis, Indiana

Indiana Supreme Court | Case No. 18S-EX-334 | June 20, 2018 Page 17 of 17