NIPSCO v. Northern Indiana Public Service Company, Office of the Utility Consumer Counselor, and Indiana Utility Regulatory Commission, Appellees-Petitioner, Statutory Party, and Administrative Agency (2025)

MEMORANDUM DECISION

Case Summary

[1] In June 2021, Northern Indiana Public Service Company (NIPSCO) petitioned the Indiana Utility Regulatory Commission (the Commission) for approval of a five-year transmission, distribution, and storage system improvement charges plan pursuant to Indiana Code section 8-1-39-10 (2019) (the TDSIC Plan). Following an evidentiary hearing, the Commission granted NIPSCO's petition for approval of the TDSIC Plan in December 2021. Since then, the Commission has approved several plan updates and rate adjustments pursuant to Indiana Code section 8-1-39-9 (2019).

[2] In May 2024, NIPSCO petitioned for its fifth rate adjustment, under Section 9(a), and its third plan update for the TDSIC Plan (Update 3), under Section 9(b). The Office of Utility Consumer Counselor recommended approval of Update 3. However, the NIPSCO Industrial Group (the Industrial Group) successfully petitioned to intervene and opposed approval of increased costs under Update 3. In October 2024, following an evidentiary hearing, the Commission approved the rate adjustment and Update 3 in whole. The Industrial Group timely appealed the approval of Update 3 alleging that, pursuant to Section 9(g), NIPSCO failed to provide “specific justification” for capital expenditure and TDSIC cost increases and the Commission failed to provide “specific approval” for some of those cost increases. Ind. Code § 8-1-39-9(g) (2019). Finding no error in the Commission's findings, we affirm.

Facts and Procedural History

I. Background: TDSIC Plans Generally

[3] Our Supreme Court has previously discussed the processes under which utility rates are set and adjusted. See NIPSCO Indus. Grp. v. N. Ind. Pub. Serv. Co. (NIPSCO 2018), 100 N.E.3d 234, 238-39 (Ind. 2018), modified on reh'g.; see also NIPSCO Indus. Grp. v. N. Ind. Pub. Serv. Co. (NIPSCO 2019), 125 N.E.3d 617, 619-21 (Ind. 2019), reh'g. denied. We briefly reiterate a summary of these processes for context.

[4] “Base utility rates are traditionally set or adjusted through a general ratemaking case (variously referred to as a general rate case or base rate case) before the Commission.” NIPSCO 2019, 125 N.E.3d at 620. Through this comprehensive process, the Commission “examine[s] every aspect of the utility's operations and the economic environment in which the utility functions ․” Id. (quoting NIPSCO 2018, 100 N.E.3d at 238.). This detailed review allows the Commission to ensure fair utility rates for the utility and its consumers. Id.

[5] Traditional ratemaking has been supplemented with various “tracker” or “rider” procedures, wherein utility rates can be adjusted to reflect specific projects or costs. Id. The TDSIC Statute provides one such procedure “related to electric or gas transmission, distribution, and storage system improvement charges a public utility imposes for certain improvement projects.” Id. (emphasis in original); see generally Ind. Code ch. 8-1-39. Under this statute, a utility can seek approval from the Commission of a multi-year plan “for eligible transmission, distribution, and storage improvements.” I.C. § 8-1-39-10(a).

[6] After a TDSIC plan is approved under Section 10, the utility can periodically petition the Commission for “automatic adjustment of the public utility's basic rates and charges to provide for timely recovery of eighty percent (80%) of approved capital expenditures and TDSIC costs.” I.C. § 8-1-39-9(a). The utility is also required to update the plan at least annually and an update “may include a petition for approval of ․ transmission, distribution, and storage system improvements” not described in the utility's most recently Commission-approved TDSIC plan. I.C. § 8-1-39-9(b). For any actual capital and TDSIC costs that exceed previously approved capital expenditures and TDSIC costs, specific justification by the public utility and specific approval by the Commission is required before recovery in customer rates is authorized. I.C. § 8-1-39-9(g). Whether NIPSCO sufficiently provided specific justification and whether the Commission sufficiently provided specific approval for actual costs under Update 3 are at the center of this appeal.

II. The TDSIC Plan and Updates 1 and 2

[7] In December 2021, the Commission approved NIPSCO's TDSIC Plan for the period of June 1, 2021, through December 31, 2026.¹ The TDSIC Plan included three groups of projects: aging infrastructure projects; system deliverability projects; and grid modernization projects. The approved best estimated cost of the TDSIC Plan was about $1.636 billion, inclusive of direct and indirect capital costs and allowance for funds used during construction; the direct capital alone was estimated at $1.396 billion. In re: NIPSCO's Petition, 2021 WL 6135480, IURC Cause no. 45557 (Ind. U.R.C. 2021). The Industrial Group intervened in the TDSIC Plan proceedings and appealed the Commission's approval of the TDSIC Plan.² In September 2022, another panel of this Court affirmed the Commission's order approving the TDSIC Plan. NIPSCO Indus. Grp. v. NIPSCO (NIPSCO 2022), 197 N.E.3d 316 (Ind. Ct. App. 2022), trans. denied.

[8] In January 2023, the Commission approved NIPSCO's first plan update (Update 1) including approval for recovery of increased costs above the best estimate approved in the TDSIC Plan. In September 2023, NIPSCO petitioned for a second plan update (Update 2) including additional increased costs over those approved in Update 1. However, the Commission approved Update 2 only as to the proposed project cost decreases; the Commission denied approval of any cost increases that exceeded project costs approved in Update 1. Relying on Section 9(g), the Commission found that NIPSCO presented insufficient evidence to specifically justify the cost increases it sought in Update 2. Approval of Update 2 rendered the total TDSIC direct capital costs at about $1.351 billion, which was an overall decrease from the TDSIC Plan's approved best estimate. App. Vol. II p. 135.

III. Update 3 and This Appeal

[9] In May 2024, NIPSCO petitioned the Commission for approval of its fifth periodic rate adjustment and Update 3 pursuant to Sections 9(a) and (b). The parties focus their arguments on the Commission's approval of Update 3, wherein NIPSCO sought approval of updated “actual and proposed estimated capital expenditures and TDSIC costs that exceed the amounts previously approved.” Id. at 7. NIPSCO's proposed Update 3 included actual costs incurred in 2022, 2023 and the first quarter of 2024 and updated estimated costs for the remainder of 2024. Accounting for cost increases and decreases since approval of Update 2, Update 3 purported to decrease the total estimated direct capital costs to $1.256 billion. Id. at 135.

A. NIPSCO's Position

[10] In support of the increased costs in Update 3, NIPSCO explained the purpose of contingencies and an escalation factor. Contingency amounts, which account for known or potential risks associated with a project, are added because projects are not fully engineered when cost estimates for initial TDSIC approval are developed. However, contingencies are not intended to address every risk that could impact cost or to eliminate uncertainty. On the other hand, an escalation factor is intended to address anticipated annual inflationary increases in costs for items such as material and labor. For the TDSIC Plan, the Commission approved NIPSCO's 3% escalation factor.

[11] Next, NIPSCO testified about extraordinary cost increases on materials and labor since the TDSIC Plan was approved. For example, costs for major equipment such as breakers and transformers increased by more than 150%; costs for steel increased beyond 3%; and labor associated with substation projects increased by more than 30%. For circuit rebuild projects, total unit cost increases ranged from about 70% to 139%, with some individual unit increases exceeding 380%. In addition, the cost of a seventy-foot wood pole in 2019 was $3,253, but in 2024 the cost was $5,682—a 74% increase in cost. Finally, for each of the fifty-three projects for which costs increased by more than 20% and $100,000 over the cost previously approved, NIPSCO provided specific reasons for the increases. NIPSCO testified that such increases were well beyond what NIPSCO could have anticipated when the TDSIC Plan was developed with a 3% escalation factor. And, NIPSCO said, it would not have been possible for NIPSCO to predict any risk associated with this level of extreme economic pressure and extraordinary cost increases when allocating contingency for the TDSIC Plan projects.

[12] NIPSCO also presented evidence about why the projects remained reasonable and warranted for public convenience and necessity considering the cost increases. NIPSCO testified that its electric customers rely on electricity for “quality of life, economic enhancement, and overall public safety.” Ex. Vol. II p. 73. The improvements in Update 3 largely replace aging infrastructure to ensure safety and reliability: specifically, the replacements protect customers and employees from potential injury, property damage, and sustained electrical outages caused by major failures such as “explosions, fires, [and] downed power lines[.]” Id. at 73, 76. NIPSCO also said these improvements align with the legislative intent of serving the public interest by making “new and replacement transmission and distribution investments for the purposes of safety, reliability, system modernization, and economic development.” Id. at 73. Some improvements also mitigate environmental risks, for example, by removing an aging transformer containing 4,600 gallons of oil; other improvements meet customers’ evolving demands as reliance on the electrical grid continues to grow, especially from expansion of residential areas. See Ex. Vol. I pp. 157, 154. In addition, NIPSCO explained that the improvements within its service territory increase reliability on the electrical grid as a whole.

[13] Further, NIPSCO explained why Update 3 was justified by incremental benefits over time. The TDSIC Plan focuses on replacing the highest risk assets first to reduce overall risk. NIPSCO stated that replacing these assets now prevents extended outages and payment of premium labor costs when assets need replacement on an emergency basis. Premium labor costs are sometimes required in those scenarios to expedite manufacturing of assets, such as transformers and breakers, which have typically long production times. Additionally, the technology in modernized system protection devices included in Update 3 allow system faults to be cleared more quickly. Preventative mitigation of these risks, NIPSCO said, will incrementally benefit customers in a cost-effective manner.

[14] Finally, in its rebuttal testimony, NIPSCO explained that indirect capital costs and allowance for funds used during construction (AFUDC) are included in its actual capital costs as originally approved by the Commission in the TDSIC Plan. NIPSCO recounted that historical trends were used to estimate indirect capital at 13% and AFUDC at 3%, and that NIPSCO would only seek recovery of actual indirect capital and AFUDC incurred. See id. at 213. In the Update 3 filing, actual indirect capital and AFUDC were included in the actual capital expenditures for 2022 through quarter one of 2024, which was provided to the Office of the Utility Consumer Counselor and the Industrial Group. Further, for the updated 2024 estimates, the same rates of 13% for indirect capital and 3% for AFUDC were used.

B. The Industrial Group's Position

[15] The Commission granted the Industrial Group's petition to intervene. The Industrial Group opposed the cost increases within Update 3 and testified that NIPSCO had not demonstrated specific justification. In support of its position, the Industrial Group asserted that NIPSCO offered “largely the same evidence” for cost increases that it provided in Update 2, which was deemed insufficient by the Commission. Ex. Vol. II p. 183. The Industrial Group acknowledged that NIPSCO provided additional evidence about its contingency and escalation factors. However, that was still inadequate to specifically justify the cost increases according to the Industrial Group. The Industrial Group also contended that NIPSCO's requested increases in Update 3 sought to materially alter the cost element approved in the original TDSIC Plan without regard to the original best estimate and cost-justification findings. See id. at 183-84.

[16] In addition, the Industrial Group believed the increases sought in Update 3 should have been reconciled outside of the TDSIC plan. The Industrial Group opined that NIPSCO simply sought retroactive recovery of actual operating costs rather than providing specific justification for increases in preapproved project costs. Finally, the Industrial Group declared that NIPSCO “provided no evidence to support any increases to indirect costs or AFUDC related to those direct costs.” Id. at 189. In sum, the Industrial Group presented testimony that NIPSCO simply provided explanations for the cost increases without providing justification for recovery of those increased costs.

C. The OUCC's Position

[17] The Office of the Utility Consumer Counselor (OUCC), a statutory representative of “ratepayers, consumers, and the public[,]” also participated in the proceeding. Ind. Code § 8-1-1.1-4.1(a) (2025). Two analysts for the OUCC recommended approval of Update 3. The OUCC agreed that “NIPSCO did provide more specific explanations and justifications for TDSIC costs for 2022 and 2023 Project costs and for 2024 Project updated estimates.” Ex. Vol. II p. 216. Additionally, the OUCC noted that projected capital expenditures “encompasses both indirect capital costs as well as [AFUDC].” Id. p. 213.³

D. The Commission's Order

[18] On August 28, 2024, the Commission conducted an evidentiary hearing wherein NIPSCO's, the Industrial Group's, and the OUCC's pre-filed evidence was admitted. On October 23, 2024, the Commission issued its order approving Update 3 in whole. In relevant part, the Commission concluded as follows:

Based on our review of the evidence, we find that NIPSCO identified and supported the changes in the estimated costs, necessity, and associated benefits of its Plan Update-3. NIPSCO provided specific justification explaining and supporting the reasons why its TDSIC costs are higher than its initial best estimates. [NIPSCO's] testimony shows that project costs have increased due to several industry trends, including significant cost increases associated with material and labor, timing of land and material acquisitions, and complex clearance requirements. NIPSCO documented these impacts with detailed examples across the project categories of its Plan. We also find that NIPSCO has adequately explained how it accounted for the project cost estimate variance. This information supports why the project cost increases are reasonable and warranted under the circumstances presented and why the contingency and escalation included in the approved estimate could not have afforded performance within the approved project estimate.

NIPSCO also provided evidence showing that its Plan Update-3, which includes the associated changes in cost estimates, is necessary and provides incremental benefits by cost-effectively replacing aging assets to promote safety and reliability. While NIPSCO's evidence concerning the continued necessity of the eligible improvements and the incremental benefit of Plan Update-3 could have been more robust (and we encourage NIPSCO to improve its filings in the future), no evidence to the contrary was presented that raised sufficient doubt as to the continued reasonableness of the TDSIC Plan as updated when considering the balance of incremental costs and benefits.

Accordingly, the Commission finds that NIPSCO has provided specific justification for its cost variances and approves its Plan Update-3. We also find that NIPSCO's inclusion of actual costs (direct capital, indirect capital, and AFUDC) in its Plan Update-3 for 2022 and 2023 is consistent with the 45557 Order and is approved.

App. Vol. II p. 14.

[19] The Industrial Group now appeals, challenging only the Commission's approval of project cost increases approved in Update 3. The Commission's approval of NIPSCO's fifth rate adjustment is not at issue in this appeal.

Discussion and Decision

[20] The Industrial Group claims that the Commission committed an error of law by misapplying the specific justification standard and requests that we apply a de novo review to determine the meaning of specific justification and specific approval under Section 9(g). Although it alleges that the Commission's approval of Update 3 deviates from its prior rulings, the Industrial Group does not challenge the Commission's longstanding interpretation of specific justification. Rather, the Industrial Group contends that: (1) NIPSCO's explanations for cost increases were generally insufficient and were substantially the same explanations that the Commission found insufficient in Update 2; (2) economic inflation does not constitute specific justification; and (3) NIPSCO did not specifically justify, and the Commission did not specifically approve, increases for indirect capital costs and AFUDC. These arguments are more properly framed as whether NIPSCO presented substantial evidence to support the Commission's findings of basic fact and whether the Commission's findings of ultimate fact were reasonable.

[21] The Industrial Group also argues that the Commission provided “blanket approval” of Update 3's cost increases and NIPSCO failed to show sufficient incremental benefits for those increased costs. Appellant's Br. p. 26. We decline to address this argument for the reasons stated below.

I. Standard of Review

[22] When reviewing the Commission's decision, “we apply three levels of review: ‘one for factual findings; another for mixed questions of law and fact; and a third for questions of law.’ ” NIPSCO 2019, 125 N.E.3d at 623-24 (quoting NIPSCO 2018, 100 N.E.3d at 241).  ⁴ Here, the Industrial Group's arguments involve only the first and second levels of review.

[23] The first level “requires a review of whether there is substantial evidence in light of the whole record to support the Commission's findings of basic fact.” City of Carmel v. Duke Energy Indiana, LLC, 234 N.E.3d 816, 819 (Ind. 2024) (quoting N. Ind. Pub. Serv. Co. v. U.S. Steel Corp. (NIPSCO 2009), 907 N.E.2d 1012, 1016 (Ind. 2009)). Such findings will stand unless no substantial evidence supports them. Id. The appellate court neither reweighs the evidence nor assesses the credibility of witnesses and considers the evidence most favorable to the findings. Id. (citing NIPSCO 2009, 907 N.E.3d at 1016).

[24] The second level requires a review of “conclusions of ultimate facts for reasonableness[.]” Id. (quoting NIPSCO 2009, 907 N.E.3d at 1016). We give the Commission greater deference to areas within its expertise and less deference to subjects outside its expertise. Id. “In either case, courts may examine the logic of inferences drawn and any rule of law that may drive the result.” NIPSCO 2019, 125 N.E.3d at 624 (quoting NIPSCO 2009, 907 N.E.3d at 1016).

II. Specific Justification

A. Substantial Evidence

[25] Section 9(g) provides that “[a]ctual capital expenditures and TDSIC costs that exceed the approved capital expenditures and TDSIC costs require specific justification by the public utility and specific approval by the commission before being authorized for recovery in customer rates.” As the Industrial Group acknowledges, the Commission has previously explained its interpretation of specific justification:

Ind. Code § 8-1-39-9(f) requires “specific justification” by the utility when costs exceed the approved estimate. To “justify” means “to show to be just or right,” “to defend or uphold as warranted or well-grounded,” “to show a satisfactory reason or excuse for something done.” This does not mean that the utility may simply detail the reasons why the increase occurred. Rather, the utility must explain why the increase in best estimated costs (i.e., costs that were considered to be highly reliable) is reasonable or warranted under the circumstances presented. The requirement that a utility present a best estimate of costs, combined with a need for specific justification before excess costs may be recovered in rates, provides balance to the regulatory process, imposes a degree of rigor in the preapproval process, and protects ratepayers from unjustified cost overruns.

In re: NIPSCO's Petition, 2015 WL 429990, IURC Cause no. 44403 (Ind. U.R.C. 2015) (footnote omitted).⁵

[26] The Industrial Group neither challenges this interpretation of specific justification nor advances any alternative interpretations. Instead, it relies on the Commission's longstanding interpretation of specific justification to argue that the Commission erred when it found that NIPSCO presented sufficient evidence. The Industrial Group contends that NIPSCO relied on mere reasons or explanations for cost increases, which it alleges is contrary to the Commission's interpretation of the specific justification standard. In addition, the Industrial Group asserts that the evidence NIPSCO presented was “essentially identical” to the evidence the Commission found insufficient in Update 2. Appellant's Br. p. 24.

[27] At the outset, the Industrial Group's allegation that the Commission's interpretation of specific justification is incorrect is at odds with its simultaneous reliance on that interpretation. The Commission did not deviate from its precedential specific justification standard when it found that NIPSCO presented sufficient evidence to meet that burden in Update 3. Rather, the Commission reviewed the evidence, determined that NIPSCO presented more evidence in Update 3 as compared to Update 2, and found that NIPSCO met the requirement of specific justification based on the circumstances presented.

[28] As for the evidence itself, we cannot agree with the Industrial Group's assertion that NIPSCO presented substantially the same evidence deemed inadequate for Update 2. The Industrial Group does not include the evidence presented in Update 2 as part of the record here, rendering any evidentiary comparison to support that argument impossible. Likewise, we cannot agree that NIPSCO provided only mere explanations for cost increases. The Commission noted the following substantial evidence from the record, which we will not reweigh, to support its conclusion:

• NIPSCO testified about its project management processes for executing the TDSIC Plan;

• NIPSCO provided an exhibit detailing each project's cost and variance;

• NIPSCO testified in detail to every cost increase that exceeded the approved cost by $100,000 and 20%;

• NIPSCO described how the approved direct capital costs changed in Update 3 and how each project goes through multiple stages of estimation as the project goes on;

• NIPSCO testified about its inclusion of a contingency and its purpose, which is to address known or potential risks associated with a project not to address every risk that could impact cost;

• NIPSCO testified that its 3% annual escalation factor is intended to address anticipated inflationary increases in costs for items such as material and labor, which does not align with the unforeseeable inflationary pressures NIPSCO is experiencing today;

• NIPSCO provided multiple examples of significant material and labor cost impacts, including some that increased by up to 74% or 150%;

• NIPSCO provided additional examples of inflationary pressures to address the shortcomings the Commission found regarding Update 2: NIPSCO testified its engineers were tasked with showing the magnitude of inflationary pressures by comparing 2019 or 2020 costs with quotes for 2024 and testified to the findings from those comparisons;

• NIPSCO testified that it has increased its reliance on external vendors to meet TDSIC project demands and that labor costs for those services have also significantly increased due to inflationary pressures and competition for similar services throughout the industry, and that NIPSCO provided detailed examples thereof;

• NIPSCO testified that it could not have anticipated inflationary pressures of this magnitude at the time the TDSIC Plan was developed and that it was not possible for it to conceive of the risks associated with such unexpected, extraordinary cost increases; and

• NIPSCO explained: why public convenience and necessity require the eligible improvements in Update 3; the incremental benefits attributable to the plan; that Update 3 will reduce risk and increase efficiency across the electrical system as a whole to promote safety and reliability in a cost-effective manner.

See App. Vol. II pp. 8-12.

[29] Based on these findings, the Commission concluded that “NIPSCO identified and supported the changes in the estimated costs, necessity, and associated benefits of its Plan Update-3” and that “NIPSCO provided specific justification explaining and supporting the reasons why its TDSIC costs are higher than its initial best estimates.” Id. at 14. The Commission also found that NIPSCO presented adequate evidence and that “information supports why the project cost increases are reasonable and warranted under the circumstances presented and why the contingency and escalation included in the approved estimate could not have afforded performance within the approved project estimate.” Id. In light of the findings in this case and considering the Commission's expertise in this area, the Commission's conclusion that NIPSCO provided specific justification—including promotion of public access, safety, and reliability—for recovery of excess costs was reasonable and supported by substantial evidence.⁶

B. Economic Inflation

[30] The Industrial Group also challenges NIPSCO's reliance upon economic inflation to support its cost increases, contending that “[a]bsent a general rate case, a utility is not entitled to increase its base rates to reflect changes in economic conditions” and “it does not have that option in the TDSIC context[.]” Appellant's Br. p. 32. However, the Industrial Group provides no controlling legal authority to support this declaration. The Commission noted NIPSCO's evidence regarding the contingency and escalation factor that was approved in the TDSIC Plan. It also found that NIPSCO presented testimony about the purposes thereof and sufficiently justified “why the contingency and escalation included in the approved estimate could not have afforded performance within the approved project estimate.” App. Vol. II p. 14. Absent any legal basis barring NIPSCO's reliance upon extreme inflationary pressures to justify cost increases, the Industrial Group's argument amounts to a request to reweigh evidence the Commission relied on to reach its findings of basic fact We will not reweigh this evidence and find no error in the Commission's conclusions to the extent that it relied on NIPSCO's evidence regarding extreme inflationary pressures. See City of Carmel, 234 N.E.3d at 819 (an appellate court will not reweigh the evidence).

C. Indirect Capital Costs and AFUDC

[31] The Industrial Group agrees that indirect capital is, generally, “overhead” costs and that “indirect capital and AFUDC were included in NIPSCO's cost estimates as specified percentages of direct capital.” Appellant's Br. p. 35. However, the Industrial Group claims that NIPSCO was required to show separate specific justification for increases to indirect capital costs and AFUDC but that it failed to do so. We disagree.

[32] In its order, the Commission noted substantial evidence from NIPSCO justifying its actual indirect costs and AFUDC. NIPSCO testified that indirect costs, including AFUDC, “cannot be charged directly to a specific capital project work order as they cannot be directly linked to one particular project[.]” Ex. Vol. II p. 17. NIPSCO also explained that it applied the same percentage of indirect costs and AFUDC in Update 3 as what was approved in the TDISC Plan, namely 13% for indirect costs and 3% for AFUDC. Finally, NIPSCO testified that it only seeks recovery of actual indirect costs and AFUDC once the TDSIC Plan execution begins and that it included indirect costs and AFUDC in its actual expenditures provided in the Update 3 petition. See Ex. Vol. I p. 213.

[33] Ultimately, the Commission found that “NIPSCO has provided specific justification for its cost variances and approves its Plan Update-3” and that “NIPSCO's inclusion of actual costs (direct capital, indirect capital, and AFUDC) in its Plan Update-3 for 2022 and 2023 is consistent with the 45557 Order and is approved.” App. Vol. II p. 14. Given NIPSCO's substantial evidence regarding the inherent inclusion of indirect costs and AFUDC in direct capital costs, the Commission's ultimate finding that the variance in actual costs—which are inclusive of indirect costs and AFUDC—was reasonable.

III. Specific Approval

[34] Throughout its brief, the Industrial Group also challenges whether the Commission specifically approved recovery of cost increases. I.C. § 8-1-39-9(g). The Industrial Group alleges the Commission failed to give specific approval of increases in indirect costs and AFUDC. In addition, the Industrial Group argues the Commission gave “blanket approval” for NIPSCO's cost increases. Appellant's Br. p. 26. We briefly address each argument in turn.

A. Indirect Capital Costs and AFUDC

[35] As we explained above, the Commission's ultimate finding that NIPSCO provided specific justification for increases in actual costs—including direct costs, indirect costs, and AFUDC—was supported by substantial evidence. Included in that evidence was an explanation that indirect costs and AFUDC are inherently intertwined with direct capital costs. The Commission specifically approved that NIPSCO may recover the increased actual costs in Update 3, which necessarily included indirect costs and AFUDC. Therefore, the Commission did not fail to give specific approval of indirect costs and AFUDC.

[36] The Industrial Group also argues the Commission erred by failing to make specific findings on its argument regarding indirect costs and AFUDC. However, the Industrial Group misconstrues our standard of review that “the [Commission's] order must contain specific findings on all the factual determinations material to its ultimate conclusions.” NIPSCO 2009, 907 N.E.2d at 1016. While it is true that our review of ultimate facts requires that they be supported by specific findings, “[s]pecific findings are not required on particular arguments by the parties.” IPL Indus. Grp. v. Indianapolis Power & Light Co., 159 N.E.3d 617, 629 (Ind. Ct. App. 2020). The Industrial Group's argument, therefore, fails.

B. Blanket Approval of Cost Increases

[37] The Industrial Group also argues that “blanket approval” of Update 3's cost increases render meaningless the cost-justification requirements under Indiana Code section 8-1-39-10(b)(3). Appellant's Br. p. 26. In support of this argument, the Industrial Group asserts that “a statute cannot be construed in a way that renders any provision meaningless or superfluous.” Appellant's Br. p. 26 (citing ESPN, Inc. v. University of Notre Dame Police Dept., 62 N.E.3d 1192, 1199 (Ind. 2016)). However, the Industrial Group fails to acknowledge that Indiana Code section 8-1-39-9 contemplates that some costs may exceed those approved under Section 10 and provides a specific method for recovery thereof. If we accepted the Industrial Group's argument that costs exceeding those approved under Section 10 cannot be adjusted, then Section 9 would be rendered meaningless. The Industrial Group's argument on the same premise, therefore, is without merit.

[38] Moreover, the Industrial Group acknowledges that the Commission's approval of NIPSCO's cost-justifications pursuant to Section 10(b)(3) was properly before this court in the Industrial Group's appeal of the TDSIC Plan. See NIPSCO 2022, 197 N.E.3d 316. Initially, the Industrial Group makes “clear” that “this appeal does not seek to revisit the Section 10 cost-justification standard at issue in the prior appeal[.]” Appellant's Br. pp. 17-18. Nevertheless, the Industrial Group proceeds to explain the purpose of Section 10(b)(3) and applies that section to the cost increases approved in Update 3. The Industrial Group goes on to argue that Section 10(b)(3) was misread in approval of the TDSIC Plan and notes that it contested NIPSCO's cost-justifications at that time. Therefore, despite its assertion to the contrary, the crux of the Industrial Group's argument is that the cost-justifications approved under the TDSIC Plan were inadequate and any subsequently approved cost increases are based on those inadequate justifications in the TDSIC Plan. This Court affirmed the Commission's order approving the TDSIC Plan, and we decline the Industrial Group's invitation to revisit that issue.⁷ See NIPSCO 2022, 197 N.E.3d 316.

[39] In addition, the Commission's approval of Update 3 is made under Section 9, not Section 10. Because no party directly raises the question of whether Section 10(b)(3) must also be met for approval of a petition under Section 9, we need not address that issue.⁸ To be sure, Section 9(g) applies to Update 3, and, as we determined above, the Commission's finding that NIPSCO specifically justified Update 3's cost increases was reasonable. What is more, the Commission found that “NIPSCO also provided evidence showing that its Plan Update-3, which includes the associated changes in cost estimates, is necessary and provides incremental benefits by cost-effectively replacing aging assets to promote safety and reliability.” App. Vol. II p. 14. Based on the substantial evidence noted by the Commission, which we summarized above, the Commission's ultimate finding that the increased costs are necessary and provide incremental benefits was reasonable. Supra ¶27.

IV. Conclusion

[40] The Commission's basic findings of fact were supported by substantial evidence and its finding of ultimate fact that NIPSCO provided specific justification to recover the cost increases approved in Update 3 was reasonable. And the Commission gave specific approval where required. We affirm the Commission's order with respect to its approval of Update 3.

Affirmed.

FOOTNOTES

1.   NIPSCO is a public utility that provides gas and electric service in Indiana, serving about 473,000 electric customers. Appellee NIPSCO's Br. p. 9.

2.   The Industrial Group “consist[s] of large manufacturers served by NIPSCO.” Appellant's Br. p. 6.

3.   Although the OUCC ultimately recommended approval of Update 3, it objected to NIPSCO's interpretation of the TDSIC statute “with regards to the expectations of the utility in holding to the Commission approved initial TDSIC plan estimates.” Ex. Vol. II p. 203. Specifically, the OUCC disagreed with NIPSCO's position that its original contingency and escalation factors were “never intended to afford performance within their confines.” Id. at 202. However, the OUCC does not appeal the Commission's order and, therefore, makes no challenge to NIPSCO's assertion for our consideration.

4.   Our Supreme Court recently re-visited the applicable standard of review for the Commission's orders in utility cases. See Ind. Off. Of Util. Consumer Couns. v. Duke Energy Ind., LLC (Duke 2024), 248 N.E.3d 1205 (Ind. 2024). There, the Supreme Court reinforced the longstanding precedent that reviewing courts apply de novo review to pure questions of law, owing no deference to the Commission's interpretations of law. Id. at 1210. The Court further declared that the standard of review it applied in NIPSCO 2018 was consistent with the standard it applied in Duke 2024. Therefore, where the issue on appeal challenges whether the Commission's findings of fact support its conclusions but does not involve a question of statutory interpretation, we continue to apply the standard of review for mixed questions of law and fact.

5.   Indiana Code section 8-1-39-9 was amended in 2019, moving subsection (f) to subsection (g) but the language was not changed.

6.   The Industrial Group also argues that NIPSCO treated its TDSIC capital tracker as an expense tracker, like that under Indiana Code section 8-1-2-42(g). This argument is without merit. Indiana Code section 8-1-39-9 provides a specific method of relief for costs that exceed approved TDSIC costs under Section 8-1-39-10. The increased costs for which NIPSCO sought recovery here stem directly from the actual capital expenditures that exceeded the originally approved expenditures for the TDSIC Plan.

7.   The Industrial Group also argues that the Commission impermissibly shifted the burden to opposing parties to disprove the cost-justifications. Because we decline to revisit the Section 10(b)(3) issue, we do not reach this argument.

8.   In its Reply Brief, the Industrial Group argues for the first time that Sections 9(g) and 10(b)(3) must be read in pari materia. An issue raised for the first time in a reply brief is waived. Felsher v. Univ. of Evansville, 755 N.E.2d 589, 593 n.6 (Ind. 2001); see also Ind. Appellate Rule 46(C) (“No new issues shall be raised in the reply brief.”).

Scheele, Judge.

Judges Foley and Kenworthy concur. Foley, J., and Kenworthy, J., concur