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Indiana Supreme Court: IURC Entitled to Deference When Interpreting Regulatory Settlements
Posted in Litigation

In Northern Indiana Public Service Co. v. United States Steel Corporation, the Indiana Supreme Court clarified the standard of review that should apply to Indiana Utility Regulatory Commission (“IURC”) interpretations of a settlement contract falling within the IURC’s regulatory authority.

In 1999, the IURC issued an order approving a settlement agreement between NIPSCO and U.S. Steel over the price U.S. Steel should pay for electricity.  That settlement contract contained a price adjustment provision that became effective six years later.  A dispute arose when NIPSCO asserted that the price adjustment applied both to the Energy Charge (a fixed number of hours of use each month under the agreement) and the Demand Charge (for energy use beyond that fixed number).  U.S. Steel asserted that the adjustment applied only to the Energy Charge.  The dispute wound up back before the IURC to resolve.  The IURC ruled in favor of U.S. Steel, granting its motion for summary judgment on the contract.

On appeal, the threshold question became what standard of review ought to apply to the IURC’s determination.  NIPSCO argued that de novo review should apply, because the IURC was interpreting a contract – ordinarily an issue of law.

The Indiana Supreme Court disagreed, explaining that “[r]egulatory settlements bear important differences from agreements governed by the law of contracts because agencies are not judicial bodies but are executive branch institutions which the General Assembly has empowered with delegated duties. As such, adjudication by an agency deserves a higher level of deference than a summary judgment order by a trial court falling squarely within the judicial branch. The Court found the interpretation of the Contract to be within the Commission’s expertise because “the Commission approved the Contract when the parties entered it, effectively making it an order of the commission.”  It also noted that, in these circumstances, “[w]hen the document is an order … the court or agency that issued it is, sensibly enough, considered to have special insight into its meaning, so review is deferential."

Therefore, the Indiana Supreme Court reviewed the IURC’s decision with a “high level of deference, examining the logic of inferences made and the correctness of legal propositions without replacing [its] own judgment.”  Ultimately, the Court found that the Commission applied utility and contract law consistent with established principles, and affirmed the IURC's finding that the contract unambiguously supported U.S. Steel’s interpretation.

Bingham McHale's Karl Mulvaney and Nana Quay-Smith were co-counsel in this matter on behalf of U.S. Steel.

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