INDUSTRIAL ENERGY CONSUMERS OF OHIO POWER COMPANY ET AL., APPELLANTS, v. PUBLIC UTILITIES COMMISSION OF OHIO ET AL., APPELLEES.
No. 93-505
SUPREME COURT OF OHIO
March 30, 1994
68 Ohio St.3d 547 | 1994-Ohio-15
Submitted December 14, 1993. APPEAL from the Public Utilities Commission of Ohio, No. 92-790-EL-ECP.
{¶ 2}
{¶ 3} Compliance with the CAAA is to occur nationwide in two phases. In “Phase I,” which begins in 1995, certain identified electric utility generating plants (Phase I affected units) must reduce annual emissions of sulfur dioxide to specified levels.
{¶ 5} The CAAA does not specify which of a variety of possible compliance options are to be employed by an electric utility to achieve Phase I emission reductions. That matter is apparently left for the utility to decide. However, in simplest terms, a utility can meet the Phase I requirements of the CAAA at any given Phase I affected unit by reducing the amount of sulfur dioxide emitted (through, for example, a switch to lower-sulfur coal or natural gas, or by installing flue gas desulfurization equipment, i.e., “scrubbers“), by acquiring additional allowances, or by some combination of these compliance strategies. It is also possible for a utility to essentially “overcomply” at one or more of its affected units (by reducing emissions below the level necessary for compliance) and save or “bank” any unused emission allowances for use at other Phase I affected units.
{¶ 8} Ohio Power‘s plan was supported by a number of case studies offered to show that the plan was the least-cost strategy for Phase I compliance when
{¶ 9} At a hearing conducted on Ohio Power‘s plan, appellant Sierra Club offered evidence to show that a least-cost compliance plan would have included, as an additional compliance measure, a Phase I fuel-switch at Cardinal Unit 1. Similarly, the commission‘s staff suggested that a fuel-switch at Cardinal Unit 1 and Muskingum Units 1-4 at the beginning of Phase I may constitute additional cost-effective measures to be included in Ohio Power‘s plan. However, commission staff witness Carl R. Evans concluded that Ohio Power‘s plan to install scrubbers at Gavin and to fuel-switch Muskingum Unit 5 would constitute part of any least-cost compliance plan.
{¶ 10} On rebuttal, Ohio Power offered additional case studies to address the concerns of the commission‘s staff that an accelerated fuel-switch at Cardinal Unit 1 and Muskingum Units 1-4 could result in an even lower-cost compliance plan. Case 1E identified the effects of these additional compliance measures on the Gavin fuel-switch (Case 1) scenario. Case 2E identified the effects of a Phase I fuel-switch at Cardinal Unit 1 and Muskingum Units 1-4 on the Gavin-scrubber (Case 2) scenario. The studies revealed that a fuel-switch at Cardinal Unit 1 and Muskingum Units 1-4 at the beginning of Phase I might, in the long run, moderately reduce AEP revenue requirements under the Gavin fuel-switch and Gavin-scrubber
{¶ 11} Ohio Power‘s witness, Henry W. Fayne, urged that the company‘s compliance strategy should not be changed to include a fuel-switch at Cardinal Unit 1 and Muskingum Units 1-4 in Phase I. Fayne testified that there were increased risks and uncertainties associated with an earlier fuel-switch at these facilities, and that an earlier fuel-switch would necessitate closure of company-affiliated mines, resulting in the loss of a significant number of Ohio jobs. Moreover, Fayne testified that Ohio Power would already be overcomplying with the federal law in Phase I and, therefore, additional Phase I compliance strategies were unnecessary for Ohio Power. Fayne also cautioned that according to company studies, a Phase I fuel-switch at Cardinal Unit 1 and Muskingum Units 1-4 would not necessarily be less costly for Ohio Power customers.
{¶ 12} During the pendency of the case, a stipulation was entered into in a companion electric fuel component case, which stipulation has been challenged on appeal. See Indus. Energy Consumers of Ohio Power Co. v. Pub. Util. Comm. (1994), 68 Ohio St.3d 559, 629 N.E.2d 423. This stipulation, among other things, set a predetermined price for calculating Ohio Power‘s electric fuel component rate for all coal burned at Gavin, Muskingum, Mitchell and Cardinal for a three-year period; set a “station cap” for the cost of coal burned at Gavin; and “capped” the costs for which Ohio Power could seek recovery in connection with the installation of scrubbers at Gavin. As a result of this stipulation, a further case study was generated to show the effect of the stipulation on Ohio Power‘s plan. That study (Case 2CS) showed that the stipulation would further reduce AEP revenue requirements in the Case 2 scenario, making the installation of scrubbers at Gavin an even more cost-effective compliance option. However, Case 2CS was merely a
{¶ 13} In an order dated November 25, 1992, the commission found that Ohio Power‘s environmental compliance plan which incorporated the effects of the stipulation in the electric fuel component proceeding—Case 2CS—was a reasonable and least-cost strategy for compliance with the CAAA. The commission determined that the next least-cost strategy was represented in Case 2, which study also assumed that Gavin would be retrofitted with scrubbers. Additionally, the commission found that a Phase I fuel-switch at Cardinal Unit 1, if carried out, would constitute a further “least-cost measure” to be undertaken by Ohio Power. In this regard, the commission suggested that Ohio Power prepare to fuel-switch Cardinal Unit 1 in Phase I, and that Ohio Power designate Conesville Unit 4 (another AEP Phase I affected unit) and Muskingum Units 1-4 as “transfer units.” The commission found that Ohio Power‘s plan was adequately documented, and specifically determined that all seven factors listed in
{¶ 14} Industrial Energy Consumers of Ohio Power Company (“IEC“) and the Sierra Club, appellants, applied for rehearing. In an entry denying rehearing, the commission stated that Ohio Power‘s plan had been approved as filed, and that the commission had only “strongly suggested” that Ohio Power take steps to have Cardinal available for fuel-switching in Phase I while designating Conesville Unit 4 and Muskingum Units 1-4 as transfer units. The commission also stated that it would expect Ohio Power in subsequent fuel cases “to demonstrate a reduced revenue requirement at least equal to the total revenue requirement benefit identified in this case resulting from a Cardinal fuel switch * * *.”
{¶ 15} The cause is now before this court upon an appeal as of right.
Hahn, Loeser & Parks, Janine L. Migden and Maureen R. Grady, for intervening appellant Sierra Club.
Lee Fisher, Attorney General, James B. Gainer, Thomas W. McNamee and Craig S. Myers, Assistant Attorneys General, for appellee commission.
Edward J. Brady, Kevin F. Duffy and Richard Cohen, for intervening appellee Ohio Power Company.
DOUGLAS, J.
{¶ 16} The primary issue which has been properly raised in this appeal is whether the commission approved an environmental compliance plan that was not least-cost, thereby constituting a violation of {¶ 17} To begin our discussion, we note that this court is ordinarily called upon to review commission decisions involving ratemaking. Although the case before us obviously affects rates (as is true with virtually everything the commission does), we are confronted here with a decision of the commission which ventures into the field of policymaking concerning the best and least-cost way for a utility to comply with the CAAA. While the standard of review remains the same (to wit: the “unlawful or unreasonable” standard specified in {¶ 18} Ohio Power‘s environmental compliance plan was submitted to the commission for review and approval in the context of the overall AEP system-wide compliance plan. While we recognize that this was necessary for purposes of evaluating the Ohio Power plan, it is important to realize that only Ohio Power‘s plan for compliance with the CAAA is at issue in this case. The commission‘s order and the arguments of the parties, both for and against the commission‘s ultimate determination, are less than a model of clarity, but that may be driven by the fact that the information being reviewed, the federal and state laws and the reports, studies and expert testimony, is voluminous and very technical. Nevertheless, it is apparent to us what the commission sought to do in this case, and we find that the commission‘s order is neither unlawful nor unreasonable. {¶ 19} Pursuant to “[T]he public utilities commission shall issue an order approving a proposed environmental compliance plan submitted by an electric light company under “* * * “(2) The plan constitutes a reasonable and least-cost strategy for compliance with the applicable * * * [Phase I acid rain control requirements of the CAAA] that is consistent with providing reliable, efficient, and economical electric service. Least-cost shall be measured over the period of both the Phase I and Phase II acid rain control requirements under * * * [the CAAA].” {¶ 20} By far the most significant issue litigated at the commission level involved the question whether it would be more cost effective to fuel-switch or to install scrubbers at Ohio Power‘s Gavin plant. The Gavin power plant is the single largest emitter of sulfur dioxide in the entire AEP system and represents a significant portion of the AEP system capacity. For this reason, among others, the Phase I compliance action to be taken at Gavin was the cornerstone of the AEP system-wide acid rain compliance plan upon which Ohio Power‘s plan was based. {¶ 21} In a detailed and comprehensive decision, the commission determined that Ohio Power‘s plan to install scrubbers at Gavin was the least-cost alternative for Phase I compliance. Under the applicable standard of review, we will not reverse the commission‘s decision as to questions of fact where sufficient probative evidence is contained in the record to show that the commission‘s decision is not manifestly against the weight of the evidence and is not so clearly unsupported by the record as to show misapprehension, mistake, or willful disregard of duty. See MCI Telecommunications Corp. v. Pub. Util. Comm. (1988), 38 Ohio St.3d 266, 268, 527 N.E.2d 777, 780. {¶ 22} Ohio Power‘s case studies showed that on an eighteen-year net present value basis, AEP‘s revenue requirements under the plan to install scrubbers at Gavin (Case 2) was an estimated $121 million less than the estimated revenue {¶ 23} Nevertheless, appellants contend that the evidence in this case establishes that had Ohio Power‘s plan also included a Phase I fuel-switch at Cardinal Unit 1 and Muskingum Units 1-4, that plan would further reduce compliance costs for the AEP system. On this basis, appellants urge that the commission‘s finding under {¶ 24} First, {¶ 25} Second, we are extremely skeptical of an interpretation of {¶ 26} Third, and finally, even if we were to assume that the commission erred in approving the plan because of the Cardinal/Muskingum fuel-switch controversy, we would nevertheless find that appellants have not been prejudiced by the commission‘s decision. In its order, the commission apparently considered {¶ 27} In its brief, Ohio Power argues, among other things, that since a Phase I fuel-switch at Cardinal Unit 1 and Muskingum Units 1-4 is unnecessary for Ohio Power to meet the Phase I requirements of the CAAA, such compliance measures were arguably beyond the proper scope of the commission‘s inquiry in this case. Thus, Ohio Power apparently agrees that the commission‘s approval of the plan did not extend any protections to Ohio Power with respect to the company‘s proposal to delay compliance action at Cardinal Unit 1 and Muskingum Units 1-4. Ohio Power‘s position on this issue was further clarified at oral argument, where Ohio Power conceded that it will be willing to do whatever the commission requests at the two-year review of the plan which is shown to be prudent and least-cost with respect to the implementation of compliance measures at Cardinal Unit 1 and Muskingum Units 1-4. {¶ 28} Under these circumstances, even if we were to conclude that Ohio Power‘s plan was not least-cost, we would nevertheless find that appellants have not been harmed by the commission‘s approval of the plan. At the {¶ 29} Appellants also challenge the commission‘s finding that Ohio Power‘s plan was adequately documented. However, we find that the record does not support appellants’ contentions. Although the plan may not have been documented to the degree appellants would have preferred, we have no quarrel with the commission in this regard. Appellants also contend that the commission erred in failing to address certain issues raised in their application for rehearing. However, on the basis of the record before us, we are unable to conclude that the commission‘s decision would have been any different had the arguments raised by appellants been addressed. Appellants also suggest that the commission‘s decision must be reversed if the stipulation at issue in Indus. Energy Consumers of Ohio Power Co. v. Pub. Util. Comm. (1994), 68 Ohio St.3d 559, 629 N.E.2d 423, is found to be unlawful. However, in that case, we upheld the validity of the stipulation. {¶ 30} Appellant IEC further challenges the commission‘s decision, claiming that Ohio Power and/or the commission unlawfully modified the proposed plan. We find no support for this proposition in the record. Ohio Power‘s plan called for installing scrubbers at Gavin, switching to lower-sulfur coal at Muskingum Unit 5 and Kammer Units 1-3, and continuing to burn existing fuel supplies at Ohio Power‘s remaining Phase I affected units. The plan proposed by {¶ 31} Finally, appellants raise a number of arguments concerning the constitutionality of Am.Sub.S.B. No. 143, 144 Ohio Laws, Part I, 817, the legislation which enacted, inter alia, {¶ 32} In Palazzi v. Estate of Gardner (1987), 32 Ohio St.3d 169, 512 N.E.2d 971, syllabus, this court held that: “The constitutionality of a state statute may not be brought into question by one who is not within the class against whom the operation of the statute is alleged to have been unconstitutionally applied and who has not been injured by its alleged unconstitutional provision.” {¶ 33} The class against whom Am.Sub.S.B. No. 143 is alleged to be unconstitutionally applied is out-of-state coal suppliers. Appellants are not members of that class. Moreover, appellants have failed to demonstrate, to our satisfaction, that they have been injured by the provisions of the legislation which {¶ 34} For the foregoing reasons, we affirm the commission‘s order approving Ohio Power‘s environmental compliance plan. Order affirmed. MOYER, C.J., A.W. SWEENEY, RESNICK, F.E. SWEENEY and PFEIFER, JJ., concur. FAIN, J., dissents. MIKE FAIN, J., of the Second Appellate District, sitting for WRIGHT, J. {¶ 35} The majority opinion is an admirably practical way of dealing with an admittedly difficult problem, but I cannot read {¶ 36} Although Ohio Power‘s plan called for switching from high-sulfur coal at several locations when Phase I of the federal Act begins in 1995, and also for using scrubbers at the Gavin locations at that time, the plan for several other locations called for no changes until Phase II, in 2000. Ohio Power has never sought to modify its plan. {¶ 38} In view of the commission‘s finding that a strategy of switching to low-sulfur fuels at the other locations in 1995, rather than waiting until 2000 to do so, would cost significantly less, I cannot conclude that the plan actually submitted by Ohio Power is a “reasonable and least-cost strategy” for compliance with applicable acid rain control requirements. It may lie within the universe of all “reasonable” strategies for compliance, but it is not “least-cost,” and the requirement is in the conjunctive. {¶ 39} I would reverse the commission‘s approval of the plan submitted by Ohio Power, and remand this matter to the commission, which could, and should, encourage Ohio Power to modify its plan to provide for earlier fuel switches at Cardinal Unit I and Muskingum Units 1-4.I
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FAIN, J., dissenting.