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Court News Ohio

Court Rejects as Moot a Challenge to Power Company’s Prior Rate Plan

The Ohio Supreme Court today ended a legal challenge to Dayton Power & Light’s (DP&L) prior electricity rate plan because a new rate plan is now in effect. Challengers to the rate plan claimed the Public Utilities Commission of Ohio (PUCO) allowed the company to retain $285 million in payments that the Supreme Court ordered to be returned.

In the Court’s lead opinion, Chief Justice Maureen O’Connor wrote that the appeal is moot because DP&L’s challenged electric security plan (ESP) no longer is in effect because a new ESP has been adopted.

In a dissenting opinion, Justice Terrence O’Donnell wrote the PUCO “plainly ignored” instructions from the Court to adjust future DP&L rates to offset the overcompensation the company received. He stated the commission failed to do so and the legal challenge brought by consumer and business ratepayers should continue.

Justices Patrick F. Fischer and R. Patrick DeWine joined Chief Justice O’Connor’s lead opinion.

Justice Judith L. French and Eighth District Court of Appeals Judge Anita Laster Mays joined Justice O’Donnell’s dissent. Judge Laster Mays was sitting for former Justice William M. O’Neill, who resigned.

Justice Sharon L. Kennedy concurred in judgment only, agreeing that the case about the old rate plan is moot, which prevented the case from proceeding.

Ratepayers Successfully Challenge Service Stability Rider
In a prior appeal, the Ohio Consumers’ Counsel, the Kroger Company, and the Ohio Manufacturers’ Association Energy Group challenged the PUCO’s approval of ESP II, particularly because of a charge known as the Service Stability Rider. State law had allowed existing power companies to charge customers for “transition costs” during the early years of the move to a competitive market, but put a deadline on when those charges had to cease. The consumer and business groups claimed DP&L’s stability rider was an unlawful transition charge that was being collected by the company after the deadline for when transition charges could be collected.

In 2016, the Supreme Court had rejected a rider similar to DP&L’s because it allowed AEP Ohio to receive transition revenues beyond the state law’s deadline (See Court Approves AEP’s 2012 Rate Plan and Charge for Ensuring Reliability of Electricity in Competitive Marketplace). Shortly after, the Supreme Court issued a one-sentence decision rejecting DP&L’s ESP II based on the authority of the AEP Ohio case, and remanding to the PUCO for further proceedings.

In July 2016, citing R.C. 4928.143(C)(2)(a), DP&L asked the PUCO to withdraw ESP II. The commission approved the withdrawal and allowed the company to operate under ESP I until it could replace it. In October 2017, the commission approved DP&L’s third plan (ESP III), which took effect in November 2017 and it is scheduled to remain until October 2023.

In this appeal, the Court ordered the parties challenging the withdrawal of ESP II to argue why the case was not moot because ESP II no longer was in effect and was replaced by ESP III. The challengers maintained the one-sentence decision in 2016 implied that the PUCO was to make an adjustment to the company’s rate plan to offset future rates to compensate for the rates it illegally collected under the stability rider. But rather than adjust the rates, the PUCO allowed DP&L to withdraw ESP II. 

Court Finds Challenge Moot
In the lead opinion, the chief justice wrote that the Court held in a 2009 case (Ohio Consumers Counsel v. Pub. Util Comm.) that the expiration of a utility’s rate plan was grounds for dismissing as moot challenges to the rates under that plan.

“Because the rate structure under appeal was no longer in effect, we determined that we could not remand the case to the commission to implement lower prospective rates under the rate-stabilization plan,” the opinion stated.

In addition, the lead opinion challenged the assertion by the dissent that the Court had ordered the PUCO to adjust DP&L’s rate when it rejected ESP II. It stated the Court “gave no instructions to the commission” and the Court’s role is only to ensure the rates approved by the PUCO are not unlawful or unreasonable.

“In the end, the event that renders this appeal moot is not the court’s resolution of In re DP&L. The appeal is moot because of events that occurred since that time; namely the approval of ESP III, in a separate case, which caused the rates at issue in In re DP&L to expire and new rates to be put in effect,” the lead opinion concluded.

Concurrence Points to Differences from Prior Case and Addresses Dissent
In her concurrence, Justice Kennedy wrote that the case is not “on all fours” with the 2009 Ohio Consumers’ Counsel case. Justice Kennedy pointed out that in Ohio Consumers’ Counsel, the Court had provided clear directions to the PUCO about how to address certain disputes among the parties in that case. In this case, however, the Court did not include “any specific instruction for the commission to eliminate overcompensation obtained through an unlawful transition charge.” Further, she wrote that the issues mooted in Ohio Consumers’ Counsel were esoteric, whereas the unresolved issue in this case—“whether utility companies can avoid any negative effects of our orders by withdrawing their rate plans after we issue our orders”—is far-reaching.

Addressing the dissent, Justice Kennedy wrote, “I agree that the result in this case is not ideal.”

The concurrence stated the “the less-than-ideal outcome is the upshot of this court’s vague entry in DP&L I”, which merely stated the commission’s decision was reversed based on the AEP Ohio case.  She also blamed the “long slog of protracted litigation” for preventing a resolution on the issues surrounding ESP II before “the clock [had] run out.”

The opinion also noted that “[e]ven if the court had issued an explicit order to the commission, the amount that could have been offset against future revenue would have been limited.” As the appeal proceeded, DP&L collected the rider in 32 months of the 36 months it was in effect, collecting nearly $294 million. Although the Court cannot order a refund, the opinion indicated the PUCO has the authority under R.C. 4905.32 to include refund orders when approving rate plans. However, ESP II did not have a refund requirement in it.

Dissent Objects to PUCO Actions
In his dissent, Justice O’Donnell noted that after the Court issued the one-page rejection of the DP&L rate plan the PUCO removed the disallowed rate stability rider and ruled its action constituted a “modification” of the company’s ESP and that it allowed ESP II to be withdrawn. Justice O’Donnell’s dissent pointed out that the PUCO was not exercising its discretion to permit a modification, but rather the commission acted pursuant to an order of the Ohio Supreme Court that directed the PUCO to account for the $285 million windfall collected by DP&L. The PUCO allowed DP&L to replace the withdrawn plan but never accounted for the $285 million.

“By issuing its dismissal based on mootness, the majority permits the utility to keep the estimated $285 million it improperly collected and establishes a road map for future similar occurrences,” the dissent stated.

The dissent warned that the decision could make future Supreme Court review of utility overcharges meaningless because based on this precedent, utilities could withdraw their rejected plans, keep the overcharge, and file new plans without ever addressing the basis of the court’s disallowance.

2017-0241. In re Application of Dayton Power & Light Co., Slip Opinion No. 2018-Ohio-4009.

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