In re Application of Columbus S. Power Co. (Slip Opinion)
147 Ohio St. 3d 439
| Ohio | 2016Background
- AEP (Ohio Power and Columbus Southern Power) sought approval of a modified Electric Security Plan (ESP) including a nonbypassable Retail Stability Rider (RSR) to collect revenues during a multi‑year ESP period. The PUCO approved the ESP and the RSR.
- The RSR had two roles: (1) recover deferred capacity costs from an earlier "Capacity Case" (part deferred, part collected during the ESP); and (2) provide AEP revenue stability and support credit/attraction of capital by guaranteeing roughly $826 million in nonfuel generation revenues per year.
- Appellants (OCC, Kroger, Ohio Energy Group) challenged PUCO’s approval of the RSR as unlawful transition revenue or otherwise beyond statutory authority; AEP cross‑appealed several rulings including the SEET threshold and its right to withdraw the modified ESP.
- Relevant statutory background: S.B. 3 allowed limited recovery of "transition" (stranded) costs with statutory deadlines (general transition revenues barred after Dec. 31, 2010; regulatory-asset-related transition revenue barred after Dec. 31, 2010 for new recovery, with some nuances); R.C. 4928.143(B)(2)(d) authorizes ESP terms/charges that "stabilize or provide certainty" for retail service.
- The Supreme Court found error in PUCO’s treatment of the RSR as not being equivalent to barred transition revenue and in PUCO’s unexplained setting of the SEET threshold; it affirmed other PUCO determinations and remanded for further proceedings to quantify and remedy over‑recovery.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether RSR allows recovery of unlawful "transition" or equivalent revenues | OCC: RSR effectively guarantees recovery of nonfuel generation/capacity revenues that are transition equivalents barred by R.C. 4928.38 | PUCO/AEP: AEP did not seek transition revenues; RSR recovers legitimate costs and promotes stability under R.C. 4928.143(B)(2)(d) | Court: RSR recovers the equivalent of transition revenue; PUCO erred. Remand to quantify offset against deferred capacity balance. |
| Whether PUCO may treat amounts above PJM auction prices as non‑transition capacity costs | PUCO/OCC: AEP entitled to recover actual capacity costs; amounts above market are not "transition" because AEP is sole capacity provider | OCC: revenues above auction prices tied to lost CRES capacity revenue are equivalent to stranded/transition revenues | Court: PUCO erred to conclude "anything over" PJM auction cannot be transition; PUCO allowed overcompensation via the nondeferral RSR portion without record support. |
| Whether RSR is authorized under R.C. 4928.143(B)(2)(d) (stabilization/default-service charge) | AEP/PUCO: RSR relates to default service and stabilizes retail prices, so it fits the statute | OCC/Ohio Energy: statutory definition of default service and scope limit recovery of wholesale/deferred costs; effect must be direct | Court: Most challenges forfeited or unpersuasive; PUCO’s conclusion that RSR fits (B)(2)(d) stands for many arguments, but not where it resulted in equivalent transition recovery. |
| Rate‑design and cost‑causation objections to RSR allocation and charge form | Kroger: PUCO mismatched demand‑based allocation with energy‑based charge, causing discriminatory subsidy | PUCO: broad discretion in rate design; record and rehearing procedures control reviewability | Court: Kroger forfeited some rehearing challenges; substantial‑evidence and deference to PUCO apply — no reversible error on rate design. |
| Whether PUCO violated R.C. 4928.144 or improperly deferred wholesale capacity via RSR | Ohio Energy: PUCO erred by deferring capacity costs approved elsewhere under a different statutory scheme | PUCO: funds collected during ESP were not deferred and R.C. 4928.144 does not bar the RSR structure | Court: Ohio Energy’s challenge to the collected $144M portion lacked merit because those amounts were collected (not deferred) during the ESP. |
| Whether PUCO adequately set the SEET (significantly excessive earnings test) threshold | AEP: PUCO set a 12% SEET threshold without comparing AEP's ROE to comparable companies as R.C. 4928.143(F) requires | PUCO: applied discretion in setting threshold (but did not explain) | Court: PUCO failed to explain and justify its SEET threshold as required; reversal and remand for PUCO to address the issue. |
| Whether AEP’s statutory right to withdraw a modified ESP was impaired | AEP: PUCO’s modifications and deferral of auction‑design issues made withdrawal ineffective | PUCO: AEP could still withdraw; AEP had proposed separate resolution for auction design | Court: AEP’s argument barred because it invited the procedure; no reversible impairment. |
Key Cases Cited
- Constellation NewEnergy, Inc. v. Pub. Util. Comm., 104 Ohio St.3d 530 (2004) (standard for reversing PUCO orders; R.C. 4903.13 review)
- Monongahela Power Co. v. Pub. Util. Comm., 104 Ohio St.3d 571 (2004) (deference and manifest‑weight review of PUCO fact findings)
- Ohio Edison Co. v. Pub. Util. Comm., 78 Ohio St.3d 466 (1997) (court’s plenary review of legal questions but recognition of agency expertise)
- FirstEnergy Corp. v. Pub. Util. Comm., 95 Ohio St.3d 401 (2002) (definition and nature of transition/stranded costs)
- In re Application of Columbus S. Power Co., 128 Ohio St.3d 512 (2011) (agency must support orders with record evidence; remand where record lacking)
- Discount Cellular, Inc. v. Pub. Util. Comm., 112 Ohio St.3d 360 (2007) (preservation requirement: rehearing arguments required for appellate review)