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Court Upholds PUCO Ruling that Dayton Power May Recover Billing Changeover Costs from All Customers
2005-0945. Ohio Consumers' Counsel v. Pub. Util. Comm., 2006-Ohio-4706.
Public Utilities Commission, Nos. 03-2405-EL-CSS, 04-85-EL-CSS, and 03-2341-EL-ATA. Order affirmed.
Moyer, C.J., Resnick, Pfeifer, Lundberg Stratton, O'Connor, O'Donnell and Lanzinger, JJ., concur.
Opinion: http://www.supremecourtofohio.gov/rod/newpdf/0/2006/2006-Ohio-4706.pdf
(Sept. 27, 2006) The Supreme Court of Ohio held today that the Public Utilities Commission of Ohio (PUCO) acted lawfully and within its authority when it approved a 2005 agreement between Dayton Power & Light Co., several independent power generating companies and a group of Dayton-area communities. In that agreement, the parties stipulated that DP&L would recover most of its cost (approximately $18.8 million) of changing over to a new billing system by adding monthly charges to the electric bills of all DP&L customers beginning Jan. 1, 2006.
In today's 7-0 decision, authored by Justice Terrence O'Donnell, the Court rejected arguments advanced by the state's Office of Consumers' Counsel (OCC) that in approving the billing cost recovery agreement, the PUCO had exceeded its authority, allowed DP&L to violate a “side agreement” with the OCC, and failed to follow statutory procedures for approving a utility rate increase.
In 1999, the General Assembly adopted R.C. Chapter 4928, legislation setting terms and conditions for a staged transition of Ohio's electric power industry from a regulated monopoly environment to market competition. In the competitive retail market for electricity developed under the new law, customers have the option to continue paying their traditional electricity utility company for generation service or select a new “competitive retail electric service” (CRES) provider. Regardless of which provider the customer selects, the electricity generated by the provider is still delivered over wires owned and maintained by the electric utility, and the utility company continues to charge for the delivery service.
This change required electric utilities such as DP&L to “unbundle” or separate the costs of electricity generation from the costs of electricity distribution, and to provide their customers who chose CRES providers with “consolidated billing” breaking out the monthly amounts they owed the CRES provider for power generation and the amount owed to DP&L for power transmission. To change over from its old billing system to consolidated billing, DP&L incurred significant one-time costs between 1999 and 2001, primarily for development of new computer programs. The dispute in this case involved the mechanism by which DP&L should be allowed to recover these billing transition costs.
In 2000, the PUCO approved DP&L's initial plan to charge CRES providers for all costs associated with the billing-system changes. When the company proposed a monthly billing surcharge of $1.90 per bill for a one-year contract or $1.56 per bill for a two-year contract, however, a number of CRES providers and a group of municipalities in the DP&L service area filed objections with the PUCO, asserting that the proposed charges were excessive and would discourage the competition that R.C. 4928 was intended to promote. After participating in several hearings before the PUCO, the CRES providers and local government coalition entered into an agreement with DP&L stipulating that CRES providers would pay a surcharge of 20 cents per customer bill and that DP&L would recover the remainder of its billing transition costs by means of a monthly charge added to the bills of all DP&L customers, whether or not they had opted to purchase power transmission service from a CRES provider.
The OCC refused to join the stipulation and filed formal objections. The PUCO approved the agreement in February 2005. The OCC subsequently exercised its right to appeal the commission's ruling to the Supreme Court.
Writing for a unanimous Court in today's decision, Justice O'Donnell held that the PUCO had not breached its duty by declining to enforce a June 2000 “sidebar agreement” between the OCC and DP&L that billing costs would be recovered exclusively from CRES providers and not from residential power customers. He noted that the sidebar agreement “was never filed with or approved by the PUCO, and for that reason the PUCO refused to consider it when weighing the reasonableness of the 2004 agreement, explaining that ‘[u]nderstandings among parties that are important enough that the parties wish to have a means to bring them to the Commission's attention at a later time' should be brought ‘to the Commission for approval' when those understandings are reached.” He added that the Court had approved a similar approach in prior cases, and cited a provision in R.C. 4905.31(E) that “no financial arrangement between a public utility and consumers ‘is lawful unless it is filed with and approved by' the PUCO.”
In weighing the reasonableness of the 2004 agreement disputed by the OCC, Justice O'Donnell said the PUCO properly applied a three-part test set forth in prior Supreme Court decisions. He wrote that “(a)mple evidence in the record supports the PUCO's conclusion that the agreement would be a ‘benefit to ratepayers and the public interest' and would ‘limit[ ] any negative impact on competition in DP&L's territory' by doing away with DP&L's initial plan to charge CRES providers up to $1.90 for each consolidated electric bill prepared by the utility company.”
With regard to the OCC's claim that the PUCO erred when it ratified the 2004 billing cost recovery agreement without following statutory procedures for reviewing and approving a “rate increase,” Justice O'Donnell wrote that the 2004 cost-recovery agreement entered into DP&L, the CRES providers and local government entities was the product of a complaint case brought to the commission under R.C. 4905.26, not as part of an application for a rate increase under R.C. 4909.18. Pointing to several similar cases dating back to 1979, Justice O'Donnell wrote that the Court “(has) repeatedly held that utility rates may be changed by the PUCO in an R.C. 4905.26 complaint proceeding such as this, without compelling the affected utility to apply for a rate increase under R.C. 4909.18.
Contacts
Jeffrey Small, 614.466.8574, for the
Office of Consumers' Counsel.
Steven Nourse, 614.644.8762, for the Public Utilities Commission of Ohio.
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