Dayton Power & Light Co. v. Public Utilities Com'n of Ohio, 82-526

• Decision Date: 13 April 1983
• Docket Number: No. 82-526,82-526
• Citation: 4 OBR 341,447 N.E.2d 733,4 Ohio St.3d 91
• Court: Ohio Supreme Court
• Parties: , 4 O.B.R. 341 DAYTON POWER & LIGHT COMPANY, Appellant, v. PUBLIC UTILITIES COMMISSION OF OHIO et al., Appellees.

Page 91

4 Ohio St.3d 91

447 N.E.2d 733, 4 O.B.R. 341

DAYTON POWER & LIGHT COMPANY, Appellant, v. PUBLIC UTILITIES COMMISSION OF OHIO et al., Appellees.

No. 82-526.

Supreme Court of Ohio.

April 13, 1983.

Syllabus by the Court

1. Payment of any type of increased excise tax levy after November 15, 1981 shall be considered to be a normal expense incurred by a public utility in the course of rendering service to the public. (R.C. 4909.161, construed.)

2. The Public Utilities Commission's disallowance of a utility's request to treat its expenditures associated with a cancelled generating plant as amortizable costs pursuant to R.C. 4909.15(A)(4) does not violate the Fifth and Fourteenth Amendments to the Constitution of the United States.

This appeal is taken from an order of the Public Utilities Commission of Ohio (hereinafter "commission") granting appellant, the Dayton Power & Light Company (hereinafter "DP & L"), a rate increase in case No. 81-21-EL-AIR. DP & L filed its application to increase rates for electric service with the commission on April 4, 1981. The commission designated the period beginning October 1, 1980 and ending September 30, 1981 as the statutory test period and set March 31, 1981 as the date certain. After public hearings were held, the commission issued an order on February 3, 1982. The order inter alia denied DP & L's requests (1) to include a post-test-year wage adjustment, (2) to allow recovery for installment payments of a one percent gross receipts tax payable after the test year, and (3) to amortize its investment in a cancelled power plant. DP & L applied for a rehearing on the aforementioned issues, which the commission denied. ¹

On November 20, 1979, DP & L and the Utility Workers of America entered into an agreement providing for a 7.48 percent wage increase effective October 25, 1981, approximately one month after the designated test year ended. Appellant sought to adjust the hourly wage rate to be used in calculating its cost of service to reflect the October 25, 1981 wage increase. The proposed adjustment would have raised the average hourly wage rate from $9.76 to $10.3194. The commission denied this adjustment on authority of Consumers' Counsel v. Pub. Util. Comm. (1981), 67 Ohio St.2d 372, 424 N.E.2d 300 .

Appellant also requested an adjustment to allow the full recovery of tax payments made pursuant to Am.S.B. No. 448, which imposed a temporary one percent gross receipts tax on utility companies effective January 1, 1981. The commission had allowed recognition of the one percent gross receipts tax in DP & L's most recent prior rate case, case No. 80-687-EL-AIR, but the rates established in that case were not in effect long enough to allow DP & L to recover the total amount paid pursuant to Am.S.B. No. 448. In its order the commission overrode its staff's recommendation ² and denied rate recognition for the balance of one percent temporary tax payments, distinguishing the instant case from case No. 80-687-EL-AIR for the following reasons:

"In applicant's prior case, as in those other rate proceedings wherein we approved an allowance for the temporary one percent increase in the gross receipts tax, rate recognition of the increase was clearly required if the rates authorized were to reflect the cost of providing service during the period the rates were to be in effect * * *. However, the same factors are not at work here, for although the temporary increase was in effect during the test period and a payment at the increased rate was made subsequent to the test period, the obligation to pay the tax at the increased rate has now terminated * * *. As we have held on so many occasions as to make citation unnecessary, it is not the Commission's function to provide for dollar-for-dollar recovery of specific past expenses, but to provide a reasonable future earnings opportunity. Accordingly, there should be no allowance in this proceeding for the temporary one percent increase in gross receipts tax imposed by Am. Senate Bill No. 448."

In its application for rehearing DP & L argued that the enactment of R.C. 4909.161, effective November 15, 1981, mandated full recovery of the tax payments in question. The commission declined to modify its order, finding that "the cited statute [R.C. 4909.161] does provide for recovery of certain excise tax increases; but we think it apparent that the legislation cannot logically be interpreted to permit recovery of a tax increase which had expired long before the rates set in this case became effective."

Appellant's application proposed an adjustment providing for the amortization of $4,796,000 in expenditures associated with the cancellation of construction of the Killen Generating Station Unit 1 (hereinafter "Killen"). The commission denied the amortization, citing Consumers' Counsel v. Pub. Util. Comm. (1981), 67 Ohio St.2d 153, 423 N.E.2d 820 .

The Office of Consumer's Counsel (hereinafter "OCC") has been granted leave to intervene as an appellee.

The cause is now before this court upon an appeal as of right.

Stephen F. Koziar, Jr., Smith & Schnacke Co., L.P.A., Charles J. Faruki, Paul L. Horstman and D. Jeffrey Ireland, Dayton, for appellant.

William J. Brown, Atty. Gen., Marvin I. Resnik and Donn D. Rosenblum, Asst. Attys. Gen., for appellee.

William A. Spratley, consumers' counsel, Timothy C. Jochim and Janine L. Migden, Columbus, for intervening appellee.

SWEENEY, Justice.

This appeal presents three issues for review. The first is whether the commission erred in disapproving appellant's proposed post-test-year wage adjustment. The second is whether the commission properly denied recovery of the increased excise tax levy imposed by Am.S.B. No. 448. The third is whether the exclusion of the Killen expenditures pursuant to R.C. 4909.15(A)(4) amounts to the confiscation of appellant's property in violation of the Fifth and Fourteenth Amendments to the Constitution of the United States.

Before proceeding further, we note that "[t]he scope of this court's review of commission orders is set forth in R.C. 4903.13, which states in pertinent part:

" ' "A final order made by the public utilities commission shall be reversed, vacated, or modified by the supreme court on appeal, if, upon consideration of the record, such court is of the opinion that such order was unlawful or unreasonable."

" ' "Under the 'unlawful or unreasonable' standard specified in R.C. 4903.13, this court will not reverse or modify an opinion and order of the Public Utilities Commission where the record contains sufficient probative evidence to show that the commission's determination 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," Columbus v. Pub. Util. Comm. (1979), 58 Ohio St.2d 103, 104 . See, also, Consumers' Counsel v. Pub. Util. Comm. (1979), 58 Ohio St.2d 108, 110 ; Ohio Utilities Co. v. Pub. Util. Comm. (1979), 58 Ohio St.2d 153, 164 [389 N.E.2d 483] ; Duff v. Pub. Util. Comm. (1978), 56 Ohio St.2d 367, 370 ; General Motors Corp. v. Pub. Util. Comm. (1976), 47 Ohio St.2d 58 , paragraph two of the syllabus; Cleveland Electric Illuminating Co. v. Pub. Util. Comm. (1975), 42 Ohio St.2d 403 , paragraph eight of the syllabus. We assess the appellant['s] objections with this standard of review in mind.' Consumers' Counsel v. Pub. Util. Comm. (1981), 67 Ohio St.2d 153, 155-156 ." Armco, Inc. v. Pub. Util. Comm. (1982), 69 Ohio St.2d 401, 404-405, 433 N.E.2d 923 .

I

The issue of post-test-year wage adjustments has twice been before us recently. In Consumers' Counsel v. Pub. Util. Comm. (1981), 67 Ohio St.2d 372, 424 N.E.2d 300 (hereinafter "EOG") this court reversed an order of the commission granting the East Ohio Gas Company a 9.4 percent wage annualization to reflect an increase in wage rates, which increase went into effect after the designated test year had ended. After reprising the applicable statutes, R.C. 4909.15(A)(4), 4909.15(C), and 4909.15(D)(2)(b), we determined in EOG that the labor adjustment granted by the commission did not represent the type of anomalous condition for which inclusion of costs not incurred during the test period would be permissible. ³ As we noted in EOG, supra, at page 374, the General Assembly has expressly endorsed the test-year methodology:

"The language of R.C. 4909.15 is unequivocal. Rate increases are based on costs of rendering utility service during the test period. The dates of the test year follow directly from the date the utility chooses to file for its rate increase. Aware that its employee labor contract was about to be renegotiated, the utility company filed the application with the commission at a time which caused the test year to end prior to the beginning date of the new contract. The adjustment which EOG sought on rehearing to take into account its increased labor costs arising from that contract would violate the test-year concept embodied in R.C. 4909.15." (Emphasis sic.)

Appellant seeks to distinguish EOG on its facts and argues in its first proposition of law that "[a] utility's labor expense, as determined under Rev.Code § 4909.15(A)(4), includes a known and measurable increase in wage rates pursuant to a contract negotiated and executed prior to the end of the test period." The significance that appellant attributes to the fact that it had already committed itself to the subject wage agreement while the new wage package in EOG had not been negotiated prior to the end of the test period is unwarranted. In the second case previously alluded to involving post-test-year wage adjustments, Ohio Water Service Co. v. Pub. Util. Comm. (1983), 3 Ohio St.3d 1, 444 N.E.2d 1025, we were presented with facts virtually identical to those presented herein. Ohio Water Service's wage agreement with its employees had been negotiated and the obligations had become fixed prior to the...