The Supreme Court of Ohio today rejected a claim that consumers overpaid $115 million for electricity generated in 2020 by two coal-fired power plants, partially owned by three Ohio utilities.

In a unanimous opinion, the Supreme Court affirmed the audit findings for the “legacy generation rider” (LGR), which allowed Duke Energy, AES Ohio, and AEP Ohio to be reimbursed for their share of the operating expenses of the Ohio Valley Electric Corporation (OVEC).

Writing for the Court, Justice Megan E. Shanahan noted that state lawmakers created the LGR in 2019 to replace a varying set of riders used by the different utilities to recover the costs of operating the two 1950s-era plants. The law directed the Public Utilities Commission of Ohio (PUCO) to conduct regular audits of the rider to ensure that companies passed on only “prudent and reasonable” charges to customers.

Justice Shanahan explained the dominant issue in the challenge to the 2020 audit findings was the PUCO’s approval of the use of a “must-run strategy” by the plants, even when the costs of generating electricity exceeded the market rate price that electric utilities were paying. Challengers to the rider argued the plan was imprudent and the OVEC operators, not consumers, should bear the costs.

The Court disagreed, finding that witnesses explained that during 2020, the COVID-19 pandemic created operational challenges, and the OVEC operators shut down the plants between April and June when faced with economic uncertainty.

“The auditor found that because of the ‘unforeseeable market conditions’ stemming from the COVID-19 pandemic in 2020, OVEC prudently shifted from a must-run strategy to an economic-commitment status for part of the audit period and scheduled additional maintenance outages during that time to avoid as many losses as possible,” the opinion stated.

Chief Justice Sharon L. Kennedy and Justices Patrick F. Fischer, R. Patrick DeWine, Jennifer Brunner, and Daniel R. Hawkins joined Justice Shanahan’s opinion. Tenth District Court of Appeals Judge Laurel Beatty Blunt, sitting for Justice Joseph T. Deters, also joined the opinion.

Audit Examines Operation Costs
OVEC originally constructed power plants in the 1950s to supply electricity to federal uranium enrichment facilities in southern Ohio. It is now jointly owned by utilities and controlled by a board of directors. The investor-owned utilities receive a share of the electricity generated by OVEC that is sold on the open market. They also split the cost of operating it. OVEC operates two plants: one in Ohio and one in Indiana. AEP, AES, and Duke receive a percentage of the OVEC plants’ output, and each utility has one vote on the committee that makes operational decisions.

The PUCO selected London Economics International to audit the companies for 2020 to determine if only prudent and reasonable costs were passed on to customers. The audits of the three companies affirmed that the costs met the requirements imposed by the commission. The Ohio Environmental Council and the Ohio Manufacturers’ Association Energy Group objected to the audit findings. The PUCO rejected the opponents’ arguments and approved the audits in August 2024.

The groups appealed the PUCO decisions to the Supreme Court.

Supreme Court Analyzed Commission Finding
Justice Shanahan explained that electricity is sold by power generators through a regional market. Power generators deploy one of two strategies to sell electricity. Under a “must-run” strategy, the generation plant operates continuously without regard to whether the market rate price for electricity is enough to cover the plant’s fuel and other costs to produce energy. Operators using an “economic commitment” strategy will generate power only if the price of energy covers the costs of producing it.

The audit opponents claimed that the OVEC operators should have used an economic commitment strategy and limited the amount of electricity produced by the older plants at a loss. They claimed the cost overruns passed on to the customers were not prudent and reasonable.

The opinion noted that three witnesses testified before the PUCO regarding the audits. The experts explained that the OVEC plants use the must-run strategy because there are high costs in starting up and shutting down the coal-fired facilities. The plants were not designed to be cycled on and off frequently, the witnesses testified. The audit found the plants operated reliably, and the decision to continuously operate them was prudent.

The Court found the opponents failed to prove that PUCO committed any errors in adopting the audit findings.

2024-1733. In re OVEC Generation Purchase Rider Audits Required by R.C. 4928.148, Slip Opinion No. 2026-Ohio-2382.

View oral argument video of this case.

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