69 Ohio St. 2d 258 | Ohio | 1982
The commission’s Order on Rehearing, which disallowed charitable contributions, was based on the “belief that the court in the Cleveland case, supra, had determined as a matter of law that a company’s charitable donations were not a ‘cost to the utility of rendering the public utility service’ within the meaning of that phrase as employed in Section 4909.15(A)(4) Revised Code.”
Appellants and the amici argue that the utilities have a right to present evidence to the commission on the question of whether charitable contributions provide a direct, primary benefit to their customers. Furthermore, they contend that the language of the syllabus in Cleveland, supra, supports this position and that the commission incorrectly interpreted the law in that case.
Pursuant to R. C. 4903.13, this court shall reverse, vacate or modify an order made by the commission if the order is unlawful or unreasonable. We are mindful of the scope of our review pursuant to this section. See, e.g., Consumers’ Counsel v. Pub. Util. Comm. (1979), 58 Ohio St. 2d 108, 110. Thus, we must determine whether the commission’s order, which proscribed the inclusion of charitable contributions in rate-making, as a matter of law, was unreasonable or unlawful.
Each party argues that our decision in Cleveland, supra, supports its respective position. In that case, the commission granted CEI a rate increase. However, we concluded that charitable contributions and certain types of advertising can not be allowed as operating expenses. The syllabus states that:
“Unless a utility can demonstrate that its institutional and promotional advertising expenditures and its charitable contributions provide a direct, primary benefit to its customers, such expense items are not allowable as operating expenses for rate-making purposes.”
When we previously considered charitable contributions, we stated that “this court finds that this item also cannot be sustained as a proper operating expense.” Id. at page 73.
We specifically acknowledged that this holding deviated from the prior decision in Cincinnati v. Pub. Util. Comm. (1978), 55 Ohio St. 2d 168. Furthermore, we stated that we were persuaded by Justice Locher’s dissent in that case that “such contributions are not a cost of rendering the public utility service.” Cleveland, supra, at page 73.
In Cleveland and in this appeal, sirhilar arguments were made in favor of allowing charitable contributions as an operating expense. The situation has not changed since that decision on July 9, 1980. After’considering those arguments, we concluded that utility contributions become an involuntary levy upon ratepayers. Id. at page 73. This concept was aptly expressed in Pacific Tel. & Tel. Co. v. Public Util. Comm. (1965), 62 Cal. 2d 634, 668, 401 P. 2d 353, as follows: “ * * * contributions if included as an expense for ratemaking purposes, become an involuntary levy on ratepayers, who, because of the monopolistic nature of utility service, are unable to obtain service from another source and thereby avoid such a levy. * * * ”
The decision to make charitable contributions, in terms of amounts and the recipients, is a matter of personal choice.
Charitable contributions assessed against the ratepayer as an operating expense disproportionately benefit the utility and its owners, not the ratepayers. In Cleveland, supra, at page 74, we noted that “ ‘[w]hile it is true that such contributions to local service areas do benefit the communities served, they also tend to upgrade the company’s public image and therefore work more to the benefit of the utility and its shareholders than to the benefit of the subscribers. Such an undertaking
We have previously considered the question of the treatment of charitable contributions as an operating expense for ratemaking purposes and find no change in circumstances. As stated in Cleveland, supra, we are cognizant of the laudable purposes served by such contributions and we hope that utilities will continue to make donations of their own.
We hold that the commission correctly interpreted our decision in Cleveland, supra. Because charitable contributions are not an operating expense, the commission’s Order on Rehearing is not unlawful or unreasonable. For these reasons, the order of the commission is affirmed.
Order affirmed.
The actual dollar amount attributable to each ratepayer is not significant. Although it may not be large, no amount is allowed under the existing statutory framework.
Although not allowed herein as an operating expense, utilities receive favorable| treatment under federal tax laws for their charitable contributions.
