AARP asked a court to hold a utility to its promises that a rate increase would fund pension obligations, after the regulatory commission refused to do so.
In 1995, Indianapolis Power and Light (IPL) obtained a rate increase, part of which was purportedly necessary to fund a trust to pay retiree health benefits. IPL paid into the trust (known as VEBA) for six years, until it was acquired by a holding company. The new holding company stopped funding the trust, causing a reduction in retiree health benefits. However, IPL continued charging the higher rates to customers. The state’s public utilities regulator (the Indiana Utility Regulatory Commission) supported that decision when it found that the terms of the settlement did not require the company to continue paying into the VEBA trust. The International Brotherhood of Electrical Workers and some other IPL retirees sued.
AARP Foundation Litigation attorneys asked for leave to file a friend-of-the-court brief in the dispute on behalf of AARP, arguing that it was unfair to ratepayers and retirees that the company stopped paying for the benefits, but continued to charge the higher rates. The court denied AARP the opportunity to participate and ultimately ruled that the commission had broad authority and discretion in deciding these disputes and that the commission had not exceeded that authority nor abused its discretion in this matter.
Nevertheless, the court agreed with AARP’s position, and took IPL to task in a footnote: “While the highly deferential standard of review requires this result, we do not condone the actions of IPL and its parent company in this proceeding. . . IPL understood the additional rate revenue was to be contributed to the VEBA trust. In addition the record is replete with references to IPL’s promises to its employees that it would not eliminate the benefits in the future.”
What’s at Stake
Utility rates are becoming unaffordable for many consumers throughout the country. Utility commissions must hold utilities to their promises and not allow utilities to collect rates based on a false promise to use the revenue for retirees and then convert those funds to pure profit.
IBEW v. Indianapolis Power and Light was decided by the Court of Appeals of Indiana