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Court Upholds PUCO Allowance of Changes In Electric Utilities’ Accounting Procedures
2005-1621 and 2005-1679. Ohio Consumers' Counsel v. Pub. Util. Comm., 2006-Ohio-5853.
Public Utilities Commission, Nos. 04-1931-EL-AAM and 04-1645-EL-AAM. Decisions affirmed.
Moyer, C.J., Resnick, Lundberg Stratton, O'Connor, O'Donnell and Lanzinger, JJ., concur.
Pfeifer, concurs in part and dissents in part.
Opinion: http://www.supremecourtofohio.gov/rod/newpdf/0/2006/2006-Ohio-5853.pdf
(Nov. 29, 2006) The Supreme Court of Ohio today affirmed orders of the Public Utilities Commission of Ohio (PUCO) that permitted four electric utility companies to defer accounting for certain costs they incurred during a 2001-2005 rate-freeze period until after the end of that period.
The 6-1 decision, authored by Justice Maureen O'Connor, held that the PUCO abused its discretion when it denied a motion by the state Office of Consumers' Counsel (OCC) to intervene as a party in the case. The Court ruled, however, that this procedural error was not grounds for reversal or remand of the case for further proceedings because the record showed that the commission had reviewed and considered OCC's arguments opposing the accounting change in arriving at its final order.
The PUCO orders at issue in the case granted changes is accounting procedures that were requested by Dayton Power and Light and three electric utilities owned by FirstEnergy Corporation: the Ohio Edison Company, the Cleveland Electric Illuminating Company and the Toledo Edison Company. The charges the utilities sought to defer were costs they had incurred between October 2003 and Dee. 31, 2005, as a result of participating in regional transmission organizations.
In its petition asking the Supreme Court to vacate the PUCO's orders, the OCC pointed out that S.B. 3, the 1999 legislation setting guidelines for deregulation of Ohio's electric power industry, established a “market development period” during which the state's electric utilities were required to maintain a rate cap under which basic service rates charged to consumers could not be increased through Dec. 31, 2005. The OCC argued that, by allowing the utilities to defer operating expenses they incurred during the rate cap period, then add those costs into the cost base used to calculate their new uncapped rates, the accounting changes approved by the PUCO improperly allowed the power companies to collect a “retroactive” rate increase for service they had actually delivered during the rate cap period.
Justice O'Connor wrote: “We agree with the Consumers' Counsel that open-ended accounting changes allowing electric companies to evade the rate cap by shifting all expenses incurred during the market-development period to a date after that period would circumvent the intent of the General Assembly in capping rates during the market-development period. The charges that the PUCO has allowed these two companies to defer, however, are special ones, unlike most other costs incurred by electric utilities during the market-development period.”
Noting that state law requires Ohio's electric utilities to join regional transmission “grids” that give them access to power generated by utilities in surrounding states, Justice O'Connor wrote that these organizations “impose charges for use of their electricity-transmission services in accordance with FERC (Federal Energy Regulatory Commission) approved tariff schedules. … Those costs … are authorized by federal law, and R.C. 4928.35(A) expressly allows the PUCO, when ‘authorized by federal law,' to adjust electric utilities' rate schedules during the market-development period. Although the PUCO did not in fact adjust any rates in the proceedings below, the statutory provision allowing federally authorized rate adjustments during the market-development period would have entitled the PUCO to do so. In our view, that statutory provision therefore certainly gave the PUCO the authority to take the smaller step of authorizing the kind of accounting changes sought by FirstEnergy and Dayton Power and Light in these cases, even if those deferrals are a prelude to possible rate increases for the companies' customers after the market-development period has ended.”
Justice O'Connor's opinion was joined by Chief Justice Thomas J. Moyer and Justices Alice Robie Resnick, Evelyn Lundberg Stratton, Terrence O'Donnell and Judith Ann Lanzinger.
Justice Paul E. Pfeifer entered an opinion concurring with the majority's holdings that the OCC should have been allowed to intervene as a party in the case and that the PUCO orders granting these accounting changes were “final orders” subject to immediate appeal. He dissented, however, from the majority holding regarding the legality of the commission's orders allowing the utilities to defer accounting of charges until after the statutory rate-freeze period.
“R.C. 4928.35(A) provides the means for electric utilities to seek a rate-schedule adjustment from the commission as ‘authorized by federal law,' i.e., for costs imposed by the Federal Energy Regulatory Commission, during the period that the cap is in place,” wrote Justice Pfeifer. “The commission had the statutory power to make that adjustment during the market-development period, but the utilities did not request it. What the utilities asked for here from the commission, it could not give. Moreover, the commission should not be in the practice of abetting such questionable accounting practices. Since the commission lacked the authority to allow the deferral of the costs at issue, I would reverse.”
Contacts
Kimberly W. Bojko, 614.466.7967, for the
Office of Consumers' Counsel.
Steven T. Nourse, 614.466.8762, for the Public Utilities Commission of Ohio.
Helen L. Liebman, 614.469.3939, for FirstEnergy Corporation.
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