Indiana Utility Regulatory Commission and Regulation and Indianapolis Power & Light and Electric and Energy & Environment and Utilities and Utility rates

IPL retirees lose appeal over retirement benefits

January 29, 2010

The Indiana Court of Appeals has ruled against 16 retirees of Indianapolis Power & Light Co. in a case seeking more than $100 million from the utility to back-fund their retirement plan.

The International Brotherhood of Electrical Workers and the 16 retirees had asked the court to overturn a May 13 decision by the Indiana Utility Regulatory Commission regarding IPALCO Enterprises' Voluntary Employee Beneficiary Association.

IPL stopped funding the trust in 2001 following the acquisition of the local utility by Virginia-based AES Corp., but the retirees said IPL is still recovering costs associated with the plan through its electric rates.

The IURC last year said it could not say a 1995 rate case settlement required a set amount of annual funding for post-retirement benefits.

The Court of Appeals, in a decision published Friday, said it would give deference to the commission as to the accounting treatment of retiree costs and the ratemaking implications of that: “We cannot find unreasonable the Commission’s interpretation of its own order.”

In a footnote, however, the court said “we do not condone the actions of IPL and its parent company (AES) in this proceeding. IPL described VEBA funding as one of the components of its rate case proposal regarding retiree benefit costs.”

Yet it appears IPL continues to recover millions of dollars a year from ratepayers for a retirement plan it no longer funds, the retirees contended.

“It appears IPL obtained a substantial rate increase based in large part on its promises to continue funding the VEBA trust for its retirees’ benefit” of between $12 million and $19 million a year, the court said.

In addition, the court said, “the record is replete with references to IPL’s promises to its employees that it would not eliminate the benefits in the future.” The court also referenced statements made by then-management at IPL that benefits could be removed by IPL only “if it were to go back on a solemn promise to its employees.”

Jack Wickes, an attorney at Lewis & Kappes who represented retirees and the union, said his clients have not yet decided their next move. They have the option of seeking reconsideration before the Court of Appeals or to seek transfer to the Indiana Supreme Court.

The administrator of the VEBA trust spun-off by IPL has in recent years reduced benefits as assets failed to keep pace with expenses.

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