Select Opinion Summaries

| 2007 | 2006 | 2005 | 2004 | 2003 | 2002 | 2001 | 2000 | Search | Upcoming cases | Public Information Home

FirstEnergy Electric Rate 'Stabilization Plan' Remanded to PUCO

2004-1993, 2005-0118, and 2005-0766. Ohio Consumers' Counsel v. Pub. Util. Comm., 2006-Ohio-2110.
Public Utilities Commission, No. 03-2144-EL-ATA. Decision affirmed in part and reversed in part, and cause remanded.
Moyer, C.J., Resnick, Pfeifer, Lundberg Stratton and O'Donnell, JJ., concur.
O'Connor and Lanzinger, JJ., concur in part and dissent in part.
Opinion: http://www.supremecourtofohio.gov/rod/newpdf/0/2006/2006-Ohio-2110.pdf

In a 5-2 decision announced today, the Supreme Court of Ohio remanded to the Public Utilities Commission of Ohio (PUCO) a rate stabilization plan the commission had adopted and approved setting service rates for three Ohio electric companies owned by FirstEnergy Corporation.

The Court directed that the commission revisit the plan, which the power companies had proposed and submitted at the commission's request, and take necessary action to comply with the provisions of R.C. 4928.14(B), legislation adopted in 1999 to guide the transition of Ohio's electric power industry from a regulated monopoly environment to one involving deregulated market-based competition. The Court noted that R.C. 4928.14(B) authorizes the PUCO to dispense with competitive bidding in setting electric service rates, but specifies that if the commission does so, it must ensure that other means are available in the market to accomplish the same option for customers, and that a reasonable means for customer participation is developed.

Today's decision involved two separate appeals filed with the Court by the state Office of Consumers' Counsel (OCC) and by a group of aggregators consisting of northwest Ohio municipalities. Both groups asked the Court to reverse PUCO rulings that approved 2006-08 residential billing rates proposed by Ohio Edison, Toledo Edison and the Cleveland Electric Illuminating Company. All three utilities are owned by FirstEnergy Corporation.

The appellants alleged that, in approving the rate stabilization plan, the PUCO exceeded its authority and failed to comply with R.C. 4928.14. Because the separate appeals both raised the same legal issues and advanced similar arguments, the Court consolidated them for oral argument and decision.

In today's majority opinion, authored by Justice Terrence O'Donnell, the Court held that the FirstEnergy rate stabilization plan approved by the PUCO did not conform to the requirements of R.C. 4928.14(B) because it did not offer utility customers a choice between continuing to purchase power generated by the FirstEnergy companies at a market-based rate or choosing to purchase power from other generation companies at rates determined by competitive bidding.

The opinion recognized that at the end of a market development period that ended Dec. 31, 2005, a competitive energy market had not yet developed in the FirstEnergy service areas as contemplated by the General Assembly, and indicated that the Court understood why the PUCO had asked FirstEnergy to submit a plan to deliver energy to the affected customers. The Court held, however, that in the commission's exercise of its discretion, it acted without the legal authority to impose FirstEnergy as the exclusive provider of electric service, thereby excluding all other rate claims for customers despite the fact that some competitors submitted higher bids than FirstEnergy.

Writing for the majority, Justice O'Donnell distinguished this case from a 2004 Supreme Court decision, Constellation NewEnergy Inc. v. PUCO, in which the Court upheld PUCO approval of an electric rate pricing plan where the Dayton Power & Light Company did not include a competitive bidding process. He noted, however, that a key component in the Constellation case was a stipulation entered into by a broad range of Dayton Power & Light's customers, including industrial, commercial, residential and low-income customers and even competitive retail electric service providers who stipulated that they were willing to accept the market-based rate plan proposed by the utility and waive their statutory right under R.C. 4928.14(B) to a price determined by competitive bid.

“In contrast to the customer groups in Constellation , the customer groups here did not agree to the FirstEnergy rates, and most customer groups, including the OCC, which represents all residential customers, opposed them,” wrote Justice O'Donnell.

“While the PUCO has authority to dispense with a competitive-bidding process pursuant to R.C. 4928.14(B), if it does so, it must also ensure that ‘other means to accomplish generally the same option for customers is readily available in the market and [that] reasonable means for customer participation is developed ,'” Justice O'Donnell wrote. “… (I)n this case the PUCO exceeded its statutory authority by approving a rate-stabilization plan that did not meet these requirements.” Based on that holding, the Court remanded the rate stabilization portion of the FirstEnergy pricing plan to the PUCO for further proceedings consistent with the requirements of R.C. 2928.14(B).

The majority opinion affirmed those portions of the PUCO order implementing a “rate stabilization charge” to offset FirstEnergy's costs as electricity supplier of last resort in its service areas; a sliding scale of “shopping credits” for FirstEnergy customers who switch to other power generation suppliers; allowance of interest on FirstEnergy's deferred shopping credit balance and extension of the time limit for FirstEnergy's power transmission companies to complete their conversion to a competitive market environment by severing remaining financial ties to FirstEnergy-affiliated generating companies. The Court deferred to the factual findings made by the PUCO on these matters.

The majority opinion was joined by Chief Justice Thomas J. Moyer and Justices Alice Robie Resnick, Paul E. Pfeifer and Evelyn Lundberg Stratton.

Justice Judith Ann Lanzinger entered a separate opinion, joined by Justice Maureen O'Connor, partially concurring and partially dissenting from the majority holding. Justice Lanzinger wrote that she would affirm the PUCO's approval of all five of the disputed issues, including the rate stabilization plan rejected by the majority.

Citing the legal reasoning of the Supreme Court's 2004 decision in the Constellation case, and the Court's history of deferring to the judgment of the PUCO in interpreting public utility statutes, Justice Lanzinger wrote that: “In my view, appellants have failed to show that the record lacks probative evidence so as to show misapprehension, mistake, or willful disregard of duty on the part of the commission or that the commission's determinations were against the manifest weight of the evidence. Appellants have failed to convince me that we should substitute our judgment for that of the commission on its approval of the rate-stabilization plan.”

Contacts
Kimberly W. Bojko, 614.466.7967, for the Office of Consumers' Counsel.

Kerry Bruce, 419.245.1829, for the City of Toledo.

William L. Wright, 614.466.4396, for the Public Utilities Commission of Ohio.

Paul Ruxin, 216.586.3939, for FirstEnergy Corporation.

Please note: Opinion summaries are prepared by the Office of Public Information for the general public and news media. Opinion summaries are not prepared for every opinion released by the Court, but only for those cases considered noteworthy or of great public interest. Opinion summaries are not to be considered as official headnotes or syllabi of Court opinions. The full text of this and other Court opinions from 1992 to the present are available online from the Reporter of Decisions: http://www.supremecourtofohio.gov/ROD/newpdf/. In the Full Text search box, enter the eight-digit case number at the top of this summary and click "Submit."