In Re Application Seeking Approval of Ohio Power Company's Proposal to Enter Into an Affiliate Power Purchase Agreement for Inclusion in the Power Purchase Agreement Rider, 2018 Ohio 4698

Background

Ohio Power Company (AEP Ohio) obtained commission approval of a Power Purchase Agreement Rider (PPA Rider) as part of its third electric-security plan (ESP), but with the rider set at a zero rate pending a later showing of entitlement to recover costs.
The PPA Rider shifts to or from customers the net difference between revenues from sales of certain generation (originally OVEC and later briefly including affiliate plants) and wholesale market revenues, functioning as a potential surcharge or credit.
In a later, separate proceeding Ohio Power sought and the Public Utilities Commission of Ohio (PUCO) approved cost recovery through an OVEC-only PPA Rider based on a joint stipulation; PUCO initially had allowed affiliate PPAs but Ohio Power withdrew them after a FERC decision.
The Office of the Ohio Consumers’ Counsel (OCC) and the Ohio Manufacturers’ Association Energy Group (OMAEG) appealed PUCO’s PPA-order, arguing the rider unlawfully recovers transition revenue, exceeds PUCO’s statutory authority under R.C. 4928.143, and that the stipulation approval and rehearing actions were procedurally defective.
The Ohio Supreme Court affirmed PUCO: it held an ESP may include charges otherwise prohibited by Title 49 under R.C. 4928.143(B) (the statute’s "notwithstanding" clause), that the PPA Rider fits within R.C. 4928.143(B)(2)(d) as a limitation on customer shopping (including financial limitations), and that PUCO’s factual findings and handling of rehearing and the stipulation were lawful and supported by the record.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether the PPA Rider unlawfully recovers transition revenue barred by R.C. 4928.38/4928.141(A)	OCC/OMAEG: Rider effectively recovers generation/transition revenue that Title 49 forbids.	PUCO/Ohio Power: R.C. 4928.143(B)'s "notwithstanding" clause permits ESP charges otherwise barred by Title 49 when they fit §4928.143(B)(2) categories.	Court: Upheld PUCO; §4928.143(B) allows ESP to include such charges (so rider lawful under statute).
Whether R.C. 4928.143(B)(2)(d) allows "financial" limitations on customer shopping	OCC: "Customer shopping" means physical switching; statute shouldn't be read to authorize a financial barrier.	PUCO/Ohio Power: Plain text permits "limitations on customer shopping" broadly; financial limits are a kind of limitation.	Court: Financial limitations are within §4928.143(B)(2)(d); PUCO reasonably found the PPA Rider relates to limitations on shopping.
Whether PUCO properly applied the ESP statutory test (R.C. 4928.143(C)(1)) and considered all costs	OCC: PUCO failed to include certain renewable-project and other stipulation costs and other riders in the ESP vs. market-rate comparison.	PUCO/Ohio Power: PUCO considered pricing, quantifiable and nonquantifiable terms; some costs were premature or not being recovered during the ESP and thus rightly excluded.	Court: PUCO’s approach complies with precedent; exclusion of not-yet-recoverable costs was reasonable; some claims were unpreserved.
Whether PUCO lawfully approved the stipulation under the three-part settlement test and adequately explained rehearing changes	OMAEG: Stipulation does not benefit ratepayers/public interest, violates regulatory principles, and PUCO failed to support rehearing modifications (credit reduction, OVEC-only approval).	PUCO/Ohio Power: Stipulation resulted from bargaining, provides package benefits (projected net credit, hedge value, commitments), and rehearing changes were explained and supported by record.	Court: PUCO satisfied the three-part test and R.C. 4903.09 explanation requirement; factual findings supported and not against manifest weight.

Key Cases Cited

Constellation NewEnergy, Inc. v. Pub. Util. Comm., 104 Ohio St.3d 530, 2004-Ohio-6767, 820 N.E.2d 885 (standard for reversing PUCO orders)
Monongahela Power Co. v. Pub. Util. Comm., 104 Ohio St.3d 571, 2004-Ohio-6896, 820 N.E.2d 921 (manifest-weight review of PUCO factual findings)
MCI Telecommunications Corp. v. Pub. Util. Comm., 38 Ohio St.3d 266, 527 N.E.2d 777 (questions of law reviewed de novo; R.C. 4903.09 explanation requirement)
In re Application of Ohio Power Co., 140 Ohio St.3d 509, 2014-Ohio-4271, 20 N.E.3d 699 (statutory interpretation principles; prior ESP jurisprudence)
In re Application of Columbus S. Power Co., 128 Ohio St.3d 402, 2011-Ohio-958, 945 N.E.2d 501 (ESP favorability test and consideration of "pricing and all other terms and conditions")
Consumers’ Counsel v. Pub. Util. Comm., 64 Ohio St.3d 123, 592 N.E.2d 1370 (three-part test for approving stipulations)
Indus. Energy Users-Ohio v. Pub. Util. Comm., 117 Ohio St.3d 486, 2008-Ohio-990, 885 N.E.2d 195 (R.C. 4903.09 explanation requirement)
Elyria Foundry Co. v. Pub. Util. Comm., 114 Ohio St.3d 305, 2007-Ohio-4164, 871 N.E.2d 1176 (weight of evidence standard)
In re Application of Ormet Primary Aluminum Corp., 129 Ohio St.3d 9, 2011-Ohio-2377, 949 N.E.2d 991 (declining reversal on speculation)
In re Complaint of Buckeye Energy Brokers, Inc. v. Palmer Energy Co., 139 Ohio St.3d 284, 2014-Ohio-1532, 11 N.E.3d 1126 (review of ripeness and substantive challenges to riders)