COA upholds Vectren energy efficiency plan that allows nearly $55M in lost revenue recovery

An energy efficiency plan that allows Vectren to recover nearly $55 million in lost revenue was not erroneously approved by the Indiana Utility Regulatory Commission, the Indiana Court of Appeals ruled Tuesday.

In April 2017, Vectren Energy Delivery of Indiana, Inc. filed a petition with the IURC seeking approval of its Electric Demand Side Management Plan, which outlined Vectren’s energy efficiency programs for 2018 through 2020 and their budgets and costs. The plan came with an estimated $28.6 million price tag and included a request for approval to recover, over the life of the measure, lost revenues resulting from reduced demand for electricity due to energy efficiency measures.

Citizens Action Coalition of Indiana, Inc. filed a petition to intervene in May 2017, and during the proceedings Vectren withdrew its original lost revenue proposal that would allow recovery of lost revenues over 12 years. Instead, the company submitted a revised proposal that sought “only about $54.8 million, or $18.8 million” less than the $73.6 million in lost revenue considered in the original plan.  

CAC argued for Vectren’s lost revenue collection to be capped at the lesser of four years or the plan’s measure life. But in a 28-page order, the IURC approved Vectren’s 2018-2020 plan, finding the modified lost revenue recovery proposal would “allow the recovery of reasonable lost revenues.”

CAC then appealed to the Indiana Court of Appeals, arguing, among other thing, that the IURC’s order was contrary to law and impermissibly deviated from precedent. The appellate court, however, found the commission did not act contrary to law in determining that Vectren South’s Plan was reasonable.

The court determined that Indiana Code § 8-1- 8.5-10 (2015) did not require the commission to consider a utility’s overall financial condition in determining whether lost revenues sought to be recovered were reasonable, or whether recovery of the requested lost revenue dissuaded Vectren South from filing general rate cases. The panel additionally found that the IURC’s approval of the revised lost revenue proposal was not inconsistent with the statute, noting CAC pointed to “no relevant authority indicating that the Commission was required to consider or apply procedures adopted in connection with general ratemaking cases when considering a petition filed in accordance with Section 10.”

The appellate court further found the IURC did not impermissibly deviate from precedent.

“By its own acknowledgement, the Commission has previously approved the recovery of lost revenues over a measure’s life or until the utility’s next base rate case, whichever is shorter. The Commission has also previously approved a four-year cap on a utility’s lost revenue recovery,” Judge Elaine Brown wrote for the panel. “An agency may change its course and is not forever bound by prior policy or precedent as long as it explains its reasons for doing so.”

The case is Citizens Action Coalition of Indiana, Inc. v. Southern Indiana Gas & Electric Company d/b/a Vectren Energy Delivery of Indiana, Inc., 18A-EX-140.