Office of Consumers' Counsel v. Public Utilities Commission

• Decision Date: 15 July 1981
• Docket Number: 80-1528 and 80-1547,Nos. 80-1480,s. 80-1480
• Citation: 423 N.E.2d 820,67 Ohio St.2d 153,21 O.O.3d 96
• Parties: , 21 O.O.3d 96 OFFICE OF CONSUMERS' COUNSEL, Appellant, v. PUBLIC UTILITIES COMMISSION of Ohio et al., Appellees. SENIOR CITIZENS COALITION et al., Appellants, v. PUBLIC UTILITIES COMMISSION of Ohio et al., Appellees. CITY OF CLEVELAND, Appellant, v. PUBLIC UTILITIES COMMISSION of Ohio et al., Appellees.
• Court: Ohio Supreme Court

Page 153

67 Ohio St.2d 153

423 N.E.2d 820, 21 O.O.3d 96

OFFICE OF CONSUMERS' COUNSEL, Appellant, v. PUBLIC UTILITIES COMMISSION of Ohio et al., Appellees.

SENIOR CITIZENS COALITION et al., Appellants, v. PUBLIC UTILITIES COMMISSION of Ohio et al., Appellees.

CITY OF CLEVELAND, Appellant, v. PUBLIC UTILITIES COMMISSION of Ohio et al., Appellees.

Nos. 80-1480, 80-1528 and 80-1547.

Supreme Court of Ohio.

July 15, 1981.

Syllabus by the Court

The Public Utilities Commission's treatment of a utility's investment in terminated nuclear generating stations as amortizable costs to be recovered from the utility's ratepayers is inconsistent with the ratemaking formula contained in R.C. 4909.15 and is unreasonable and unlawful.

These three cases are appeals taken from an order of appellee, Public Utilities Commission of Ohio (hereinafter "commission"), granting intervening appellee, the Cleveland Electric Illuminating Company (hereinafter "CEI"), a rate increase of approximately $69.6 million. The commission order further provided for the amortization over a ten-year period of CEI's substantial investment in four terminated nuclear power plants. ¹

The commission's order dealt with two cases that had been consolidated. Case No. 79-537-EL-AIR involved CEI's application to increase rates. Case No. 79-744-EL-CMR concerned a complaint and appeal taken by CEI from a 1979 rate setting ordinance passed by the city of Cleveland.

Inasmuch as these three appeals primarily concern issues relating to the nuclear power plant cancellations, we shall briefly reprise the history of these now terminated facilities. In 1967, CEI joined with four other electric companies to form the Central Area Power Coordination Group (CAPCO). ² The CAPCO companies sought to achieve economies of scale and greater service reliability by jointly planning, constructing, and operating electrical generating facilities. In 1973, the CAPCO group committed itself to build the four nuclear plants at issue herein based on forecasts that predicted a substantially increased demand for electricity by the CAPCO companies' customers during the 1970's and 1980's. These forecasts subsequently had to be revised downward when increasing energy costs spurred conservation efforts and significantly softened the demand for electricity. Moreover, the 1979 accident at Three Mile Island prompted the Nuclear Regulatory Commission to issue stringent and costly new standards for nuclear power plants, requiring major design changes in the Babcock and Wilcox units that CAPCO planned to construct and operate. After much study and redesign the CAPCO companies decided to terminate the four units on January 23, 1980. When the decision to cancel the plants was announced, CAPCO had already invested considerable sums in the projects. Preliminary expenses included expenditures for engineering, siting, environmental, geological, and seismic studies, and for obtaining state and federal licenses. Moreover, to comply with detailed regulatory requirements and complete all the necessary documents, certain plant components had to be purchased at a fairly early stage in the planning process. CEI's share of the total CAPCO investments in the four cancelled plants amounted to approximately $56,400,000 as of the date of termination.

The instant CEI rate case was pending before the commission when the plant terminations were announced. ³ The commission had accepted CEI's application for a rate increase as of September 17, 1979, and had established calendar year 1979 as the test year and June 30, 1979, as the date certain. The commission staff conducted an investigation and issued its initial report in March 1980. This report did not make reference to the terminated nuclear plants because CEI did not officially inform the commission of the plant cancellations until February 1980. The commission staff, at appellants' request, then conducted a supplemental investigation to consider the effect of the terminated plant expenditures on CEI's rate application. The staff completed its investigation of the cancelled nuclear facilities and filed revised schedules in mid-April. The staff recommended that the investment in the four nuclear plants should be amortized over a ten-year period as CEI had requested.

Public hearings on the rate increase application began on April 2, 1980, and continued for 32 days. Staff witnesses appeared and testified at the hearings in regard to the cancelled nuclear plants and other matters contained in the application. Appellants were represented at, and participated fully in, these public hearings.

The commission issued its order on July 10, 1980. Appellants timely filed for a rehearing which the commission denied as to the issues raised in the present appeal.

These causes are now before this court upon appeals as of right.

William A. Spratley, Consumers' Counsel, Columbus, Gary M. Petroff, Cleveland, and Gretchen J. Hummel, Columbus, for appellant Consumers' Counsel.

Joseph P. Meissner, Cleveland, for appellants Senior Citizens Coalition et al.

Thomas E. Wagner, Director of Law, and Craig A. Glazer, Cleveland, for appellant city of Cleveland.

William J. Brown, Atty. Gen., Marvin I. Resnik and David M. Neubauer, Columbus, for appellee Public Utilities Commission.

Alan D. Wright, Craig I. Smith, Squire, Sanders & Dempsey, Alan P. Buchmann, Lowell L. Garrett, William C. Donahue and Richard W. McLaren, Jr., Cleveland, for intervenor-appellee The Cleveland Electric Illuminating Co.

SWEENEY, Justice.

The 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, 388 N.E.2d 1237. See, also, Consumers' Counsel v. Pub. Util. Comm. (1979), 58 Ohio St.2d 108, 110, 388 N.E.2d 1370; 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, 384 N.E.2d 264; General Motors Corp. v. Pub. Util. Comm. (1976), 47 Ohio St.2d 58, 351 N.E.2d 183, paragraph two of the syllabus; Cleveland Electric Illuminating Co. v. Pub. Util. Comm. (1975), 42 Ohio St.2d 403, 330 N.E.2d 1, paragraph eight of the syllabus. We assess the appellants' objections with this standard of review in mind.

I A.

In its order the commission allowed approximately $91 million to be included in the rate base for construction work in progress (CWIP) pursuant to R.C. 4909.15(A)(1) and 4909.15(E). R.C. 4909.15(A)(1) states in relevant part:

" * * * The commission may, in its discretion, permit a reasonable allowance for construction work in progress but, in no event, may any allowance for construction work in progress be made by the commission until it has determined, after a physical inspection, that the particular construction project is at least seventy-five per cent complete."

R.C. 4909.15(E) imposes the following limitation on allowable CWIP:

"In no event shall an allowance for construction work in progress under division (A)(1) of this section exceed twenty per cent of the total valuation as stated in such division, not including such allowance."

Some $90 million of the CWIP allowance was directly attributable to the Bruce Mansfield coal-fired generating station, which came on line several months after the new rates became effective. It is unquestioned that Bruce Mansfield met the 75 percent completion criterion for rate base eligibility pursuant to R.C. 4909.15(A)(1). Moreover, it is uncontroverted that inclusion of the Bruce Mansfield-related CWIP did not exceed the 20 percent of total valuation limitation imposed by R.C. 4909.15(E).

I A(i).

Appellants Senior Citizens Coalition et al. (hereinafter "SCC"), in case No. 80-1528, challenge the commission's allowance for CWIP in this case on the basis that the CWIP provisions contained in R.C. 4909.15(A)(1) represent an unconstitutional delegation of legislative power. Specifically, SCC contends that the statute " * * * establishes no definite policy nor provides any standard for the exercise of PUCO discretion in permitting an allowance for construction work in progress and * * * therefore the PUCO should be prohibited from granting any such allowance. * * * "

We find no merit in SCC's constitutional challenge to the CWIP provisions because the commission's discretion is sufficiently circumscribed by the specific eligibility criteria enumerated in the statute. As we stated in Consumers' Counsel v. Pub. Util. Comm., supra (58 Ohio St.2d 108), at page 113, 388 N.E.2d 1370:

" * * * We believe these limitations adequately confine commission discretion. Further restriction would conceivably hinder the flexibility necessary to enable the commission to carry out legislative will. For these reasons, this court holds that the discretion granted the commission under R.C. 4909.15 to authorize a reasonable allowance for construction work in progress in a utility's rate base constitutes a lawful delegation of the state's police power by the General Assembly."

We expressed the same view of the CWIP provisions of R.C. 4909.15(A)(1) in Cleveland v. Pub. Util. Comm. (1980), 63 Ohio St.2d 62, 68, 406 N.E.2d 1370. In the case at bar we decline to strike down the CWIP statute as an unconstitutional delegation of...