In re Ohio Power Co.
40 N.E.3d 1060
Ohio
2015

Background

  • PUCO approved a phase-in recovery rider (PIRR) to let Ohio Power recover fuel costs deferred under its first electric-security plan (ESP) and allowed carrying charges on those deferred costs through 2018.
  • The ESP Order (2009) set the carrying-charge rate at Ohio Power’s WACC (11.15%) for both the deferral (2009–2011) and recovery (2012–2018) periods; no party appealed that WACC determination.
  • In the PIRR Order (2012), PUCO changed the carrying-charge rate prospectively for the recovery period to Ohio Power’s long-term cost-of-debt (5.34%), decreasing carrying-charge recovery by about $130 million.
  • Ohio Power appealed, arguing (among other things) that PUCO’s post-ESP modification deprived it of the statutory right to withdraw a modified ESP under R.C. 4928.143(C)(2)(a); IEU cross-appealed, arguing PUCO should have reduced the deferred balance for accumulated deferred income taxes (ADIT).
  • The Supreme Court of Ohio held PUCO’s post-expiration modification violated R.C. 4928.143(C)(2)(a) because it eliminated Ohio Power’s ability to withdraw a modified ESP, and therefore reversed the PIRR adjustment to the carrying-charge rate; IEU’s ADIT claim was barred by collateral estoppel.

Issues

Issue Plaintiff's Argument (Ohio Power) Defendant's Argument (PUCO / IEU) Held
Whether res judicata/collateral estoppel barred PUCO from modifying the carrying-charge rate set in the ESP Order Res judicata/issue preclusion prevents PUCO from changing a final adjudication, divesting PUCO of authority to modify the ESP term PUCO retains jurisdiction to modify prior orders; res judicata is an affirmative defense and does not deprive PUCO of jurisdiction Res judicata argument rejected — no bar to PUCO jurisdiction to revisit order
Whether PUCO’s post-expiration change to the carrying-charge rate deprived Ohio Power of the right to withdraw a modified ESP under R.C. 4928.143(C)(2)(a) Modification occurred after ESP expired, so Ohio Power could not exercise statutory withdrawal right; PUCO therefore violated the statute PUCO argued the withdrawal provision applies only to orders that modify and approve an ESP application within the ESP proceeding, not later recovery proceedings Court held PUCO’s modification violated R.C. 4928.143(C)(2)(a); reversed the rate change and remanded to reinstate WACC
Whether PUCO permissibly relied on its ongoing supervision/jurisdiction and precedent (including In re Columbus S. Power) to justify the change (implicit) PUCO’s supervisory power allowed prospective modification of recovery mechanics PUCO asserted broad supervisory authority and cited precedent justifying modifications to phase-in terms Court held supervisory authority cannot be used to contravene statutory withdrawal right; cited distinction from cited precedent
Whether IEU’s claim that PUCO should reduce deferred balance for ADIT is reviewable IEU argued ADIT yields cost-free capital and should reduce deferred balance and carrying charges PUCO refused the ADIT reduction; argued prior ESP decision already addressed ADIT Court held IEU’s ADIT challenge barred by collateral estoppel because issue was litigated in the first ESP case and IEU did not preserve it there

Key Cases Cited

  • Constellation NewEnergy, Inc. v. Pub. Util. Comm., 104 Ohio St.3d 530, 820 N.E.2d 885 (2004) (standard for reversing PUCO orders)
  • Monongahela Power Co. v. Pub. Util. Comm., 104 Ohio St.3d 571, 820 N.E.2d 921 (2004) (deference on fact issues; appellant bears burden to show order is against manifest weight)
  • Consumers’ Counsel v. Pub. Util. Comm., 58 Ohio St.2d 108, 388 N.E.2d 1370 (1979) (agency expertise in statute interpretation and limits on modifying prior orders)
  • Cleveland Elec. Illuminating Co. v. Pub. Util. Comm., 42 Ohio St.2d 403, 330 N.E.2d 1 (1975) (agency should respect its own precedents; predictability)
  • Util. Serv. Partners, Inc. v. Pub. Util. Comm., 124 Ohio St.3d 284, 921 N.E.2d 1038 (2009) (agency may change course if new course is permissible and explained)
  • In re Application of Columbus S. Power Co., 128 Ohio St.3d 512, 947 N.E.2d 655 (2011) (prior ESP litigation; limits and standards for modifying ESP-related orders)
  • Discount Cellular, Inc. v. Pub. Util. Comm., 112 Ohio St.3d 360, 859 N.E.2d 957 (2007) (PUCO is a creature of statute and has no authority beyond statutory powers)
  • Fed. Communications Comm. v. Fox Television Stations, Inc., 556 U.S. 502 (2009) (an agency need not show new policy is superior; must show new policy is permissible and reasoned)
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