The Indiana Court of Appeals has upheld a ruling by state regulators denying permission to Indiana Gas Co. to recover costs associated with the cleanup of environmental contamination at former gas manufacturing sites.
The court could find no direct connection between coal tar cleanup and the current provision of gas distribution service, which it described as a necessary condition for cost recovery, even if the property is currently in use by the utility.
The company had purchased the sites after gas manufacturing had ceased and had used the properties for utility purposes such as office space, parking and storage. It said that the cleanup was required under state and federal laws and in 1995 had won approval from the Indiana Utility Regulatory Commission to set up a special recovery mechanism for the cleanup costs. See, Re Indiana Gas Co., Inc., 162 PUR4th 283 (Ind.U.R.C. 1995).
To allow recovery of costs related only to the ownership of land, with no connection to provision of service, would put the ratepayers in the position of being insurers of any purchase made by the utility. Such a result is "untenable," the court concluded. It noted, however, that had the company owned the sites at the time they were used to manufacture gas, the result might have been different, because the cleanup expenses could be directly related to property formerly "used and useful." Indiana Gas Co., Inc. v. Office of the Utility Consumer Counselor, No. 93A0209505-EX-288, Jan. 21, 1997 (Ind.Ct App.).