THE TOWN OF SPEEDWAY DECISION AND
MUNICIPAL ELECTRIC UTILITY RATES AND CHARGES

The Indiana Supreme Court's opinion in Farley Neighborhood Ass'n., et al v. Town of Speedway affirmed the trial court's original determination that the burden was on the customers challenging the Town's proposed sewer rates to prove that the 46-year old 50% surcharge imposed on out-of-town customers was "not reasonably related to either costs or number of users." The Court rejected the customers' arguments and held that requiring municipalities to justify "even across-the-board [sewer] rate increases in advance via full-scale, multi-disciplinary cost studies ignores the presumptions and burdens provided by" Ind. Code § 36-9-23-24, which is the statute granting municipalities operating sewer utilities "reasonable discretion in adopting different schedules of fees." Section 25(b) of the sewer rate statute provides that rates established "after notice and hearing under this chapter are presumed to be just and reasonable." In addition, the statute governing court challenges to sewer rates provides that the "decision appealed from is considered prima facie correct and the burden of proof in all appeals is on the party appealing." (Slip. Opinion at 10, emphasis in original).

The Supreme Court's decision in Farley applies to municipalities operating sewage works. Because the Supreme Court's decision was based on the sewer rate statute, it does not directly impact the manner in which municipal electric utility rates are set or will be reviewed.

By statute, the rates of a municipal electric utility may not differ for out-of-town customers unless the utility "clearly demonstrates significant cost factors that make different charges nondiscriminatory, reasonable, and just." Ind. Code § 8-1.5-3-10. If a utility imposes a surcharge on out-of-town customers, it has the burden to support the surcharge as "non-discriminatory, reasonable, and just." The burden of proof is not on the customer challenging the surcharge. What constitutes "reasonable and just rates and charges for services" is specifically set forth in Ind. Code § 8-1.5-3-8. Rates set by a municipal electric utility which do not comply with Ind. Code § 8-1.5-3-8 are unlawful.

If you have any questions, or would like additional information, call:
Mike Cracraft or
Steve Krohne of
Hackman Hulett & Cracraft, LLP
at (317) 636-5401

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