Office of Consumers' Counsel v. Public Utilities Commission of Ohio

• Decision Date: 10 December 1980
• Docket Number: Nos. 80-191,80-349,s. 80-191
• Citation: 413 N.E.2d 799,64 Ohio St.2d 71
• Parties: , 18 O.O.3d 302 OFFICE OF CONSUMERS' COUNSEL, Appellant, v. PUBLIC UTILITIES COMMISSION OF OHIO et al., Appellees. CITY OF COLUMBUS, Appellant, v. PUBLIC UTILITIES COMMISSION OF OHIO et al., Appellees.
• Court: Ohio Supreme Court

Page 71

64 Ohio St.2d 71

413 N.E.2d 799, 18 O.O.3d 302

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

CITY OF COLUMBUS, Appellant, v. PUBLIC UTILITIES COMMISSION OF OHIO et al., Appellees.

Nos. 80-191, 80-349.

Supreme Court of Ohio.

Dec. 10, 1980.

Syllabus by the Court

1. The two-year prohibition of R.C. 4909.39 only applies to rate ordinances, and does not apply to rate adjustments ordered by the Public Utilities Commission.

2. Under R.C. 4909.15, the Public Utilities Commission may grant a utility company an attrition allowance applicable to the cost of its proprietary capital.

The Office of Consumers' Counsel and the city of Columbus (the "city"), appellants herein, separately appeal from a December 12, 1979, order of appellee Public Utilities Commission ("commission"), granting intervening appellee Columbus & Southern Ohio Electric Company ("C&SOE") a rate increase for its entire service territory which includes Columbus as well as a number of surrounding counties.

On November 17, 1978, C&SOE filed notice of intent to apply for a permanent rate increase for its entire service territory. R.C. 4909.43(B). On December 6, 1978, the commission approved a test year beginning September 1, 1978, and ending August 31, 1979, with February 28, 1979, as the date certain.

On January 29, 1979, the Columbus City Council enacted Ordinance No. 105-79, which continued C&SOE's existing rates for electricity service within Columbus for the three-year period beginning March 31, 1980. On February 22, 1979, C& SOE advised the city and the commission that it would not accept Ordinance No. 105-79.

On March 1, 1979, C&SOE filed with the commission a complaint and appeal from Ordinance No. 105-79 together with its application for a permanent rate increase. The commission thereupon consolidated these rate cases and permitted Consumers' Counsel to intervene.

On December 12, 1979, subsequent to the appropriate staff investigation and public hearings, the commission sustained C&SOE's complaint and appeal from Ordinance No. 105-79; granted C&SOE a $71.4 million permanent rate increase applicable to its entire service territory; and authorized C&SOE to file new tariffs which would become effective on the date the commission accepted them for filing.

On December 20, 1979, the commission accepted C&SOE's new tariffs for filing and ordered their immediate effectiveness for C&SOE's entire service territory excluding Columbus. The effectiveness of the new tariffs within Columbus was delayed until January 17, 1980, by reason of this court's issuance of an alternative writ in prohibition.

These causes are now before this court upon appeals by Consumers' Counsel (case No. 80-191) and the city of Columbus (case No. 80-349) as a matter of right, and have been consolidated for purposes of review and final determination.

William A. Spratley, Columbus, consumers' counsel, John P. Hopkins, Gretchen J. Hummel and Orla E. Collier, Columbus, for appellant Consumers' Counsel.

Gregory S. Lashutka, City Atty., Patrick M. McGrath and John W. Bentine, Columbus, for appellant city of Columbus.

William J. Brown, Atty. Gen., Marvin L. Resnik and Harris S. Leven, Asst. Attys. Gen., for appellee.

Porter, Wright, Morris & Arthur, Samuel H. Porter, Curtis A. Loveland and William A. Kelley, Jr., Columbus, for intervening appellee.

WILLIAM B. BROWN, Justice.

For the reasons set forth, we affirm the commission's order in its entirety.

I.

Appellants contend that R.C. 4909.39 renders invalid the permanent rate increases ordered herein within Columbus until March 30, 1980. R.C. 4909.39, in relevant part, provides:

"If the public utilities commission, after the hearing referred to in Sections 4909.34 to 4909.36 of the Revised Code, is of the opinion that the rate * * * so fixed by ordinance is or will be unjust, unreasonable, or insufficient to yield reasonable compensation for the service, the commission shall fix and determine the just and reasonable rate * * * to be charged * * * by such public utilities during the period so fixed by ordinance, which period shall not be less than two years, and order the rate * * * so fixed substituted for the rate * * * fixed by ordinance."

Appellants argue that because existing permanent rates in Columbus were fixed by the commission pursuant to a complaint and appeal under R.C. 4909.34 from an earlier Columbus rate ordinance (No. 881-77), the commission is prohibited from ordering permanent rate adjustments effective during the two-year period included in R.C. 4909.39, i. e., until March 30, 1980. While agreeing with appellants that this two-year period terminated on March 30, 1980, ¹ the commission counters that the two-year prohibition of R.C. 4909.39 should apply only to rate ordinances, and not to rate adjustments ordered by the commission, because it was included in the statute primarily to prevent a municipality from undermining a commission order concerning the unreasonableness of an existing rate ordinance by passing a new rate ordinance to be effective immediately after the issuance of the commission's order. Cf. Ohio Edison Co. v. Pub. Util. Comm. (1977), 52 Ohio St.2d 123, 369 N.E.2d 1209.

In arguing that the two-year prohibition applies equally to permanent rate adjustments ordered by the commission appellants rely on language in State ex rel. Brainard v. McConnaughey (1940), 137 Ohio St. 431, 435-436, 30 N.E.2d 699, and Ohio Edison Co., supra, 52 Ohio St.2d at page 126, 369 N.E.2d 1209, suggesting that rates fixed by the commission pursuant to a complaint and appeal from a rate ordinance are to be effective "for not less than two years." Both Brainard and Ohio Edison Co., however, considered the application of the two-year prohibition to rate ordinances, and not to rate adjustments ordered by the commission.

Appellants argue further that if the two-year prohibition were applied only to rate ordinances (and not applied equally to permanent rate adjustments ordered by the commission), the commission's ability to order permanent rate relief effective during this two-year period would prejudice municipal ratepayers because a municipality would lose its power to enact a rate ordinance, which a utility would be required to confront in an ensuing rate case, in circumstances where a utility filed its application for permanent rate relief during this two-year period. ²

Assuming, arguendo, that in a rate case before the commission the absence of a rate ordinance (and a utility's complaint and appeal therefrom) was necessarily prejudicial to municipal ratepayers, we would still reject appellants' argument. As illustrated by the facts of the instant case, it is not apparent that a municipality would lose its power to enact a rate ordinance, which a utility would be required to confront in an ensuing rate case, in the above-described circumstances. Herein, C&SOE filed its notice of intent to apply for permanent rate relief on November 17, 1978, approximately 16 months prior to March 30, 1980, the assumed termination date of the two-year period. See fn. 1. Shortly thereafter, and during this two-year period, on January 29, 1979, the Columbus City Council enacted Ordinance No. 105-79, to be effective March 31, 1980, i. e., the day after the termination of the above two-year period. In response, on March 1, 1979, C&SOE filed a complaint and appeal from this rate ordinace in addition to an application for permanent rate relief. In the ensuing consolidated rate case, C&SOE was indeed required to confront this rate ordinance.

Appellees, ³ on the other hand, argue, in essence, that if the two-year prohibition of R.C. 4909.39 were applicable to permanent rate adjustments ordered by the commission, the commission's ability to balance the conflicting interests of utility companies and various ratepayers would be undermined. We agree.

First, where existing permanent rates were earlier fixed by the commission pursuant to a complaint and appeal under R.C. 4909.34 (as is the case herein), the commission would be powerless to order permanent rate adjustments for two years, even if existing rates were inadequate to yield a fair and reasonable return under R.C. 4909.15. Such regulatory inflexibility is unsound. Moreover, the fact that the commission would still be competent to order emergency rate relief under R.C. 4909.16 if a utility were sufficiently distressed does not eliminate the unsoundness of freezing inadequate permanent rates in circumstances where a utility's distress is insufficient to support a claim for emergency relief.

Second, assuming that the two-year prohibition were applied to permanent rate adjustments ordered by the commission, the commission would be powerless to order a permanent rate adjustment for two years only if the existing permanent rates were earlier fixed pursuant to a complaint and appeal under R.C. 4909.34, and not pursuant to a utility company's application for permanent rate relief under R.C. 4909.18. There is no apparent justification for this disparity. Additionally, such a disparity would perhaps increase the commission's workload and regulatory expenses generally since municipalities would be encouraged to enact rate ordinances for the sole reason that a two-year rate freeze would result from the ensuing complaint and appeal.

Finally, while ratepayers within a municipality that enacted a rate ordinance (requiring a utility company to complain and appeal) would be insulated by this two-year rate freeze, ratepayers in unincorporated areas or in those municipalities that did not enact rate ordinances would not be so insulated. In a subsequent application for permanent rate relief by a utility pursuant to R.C. 4909.18, or in a subsequent complaint against a utility by any person, firm, corporation or the commission itself pursuant to R.C. 4905.26, the commission would be competent to adjust permanent rates during this...