Office of Consumers' Counsel v. Public Utilities Commission

• Decision Date: 27 June 1979
• Docket Number: No. 78-1238,78-1238
• Citation: 12 O.O.3d 378,391 N.E.2d 311,58 Ohio St.2d 449
• Parties: , 12 O.O.3d 378 OFFICE OF CONSUMERS' COUNSEL, Appellant, v. PUBLIC UTILITIES COMMISSION of Ohio et al., Appellees.
• Court: Ohio Supreme Court

Page 449

58 Ohio St.2d 449

391 N.E.2d 311, 12 O.O.3d 378

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

No. 78-1238.

Supreme Court of Ohio.

June 27, 1979.

This appeal arises from an opinion and order of the Public Utilities Commission of Ohio (commission), in case No. 76-1174-EL-AIR, wherein the commission concluded, upon a review of the application for a $55,797,000 rate increase filed by the intervenor herein, the Toledo Edison Company (Toledo Edison), that the rates in effect were insufficient to provide Toledo Edison with adequate net annual compensation and return on its property used and useful in providing electric service to its jurisdictional customers, and therefore approved the full amount of the applicant's requested rate increase.

On September 1, 1977, Toledo Edison filed an application for a rate increase with the commission. By entry dated September 23, 1977, the commission fixed September 1, 1977, as the date certain for purposes of this cause, and ordered the test period to begin March 1, 1977, and to end February 28, 1978. Subsequent to the commission staff's investigation of the matters contained in the instant rate application, public hearings were commenced on April 6, 1978, with the commission granting appellant, Office of Consumers' Counsel, leave to intervene in the proceedings.

Upon completion of the hearings on May 9, 1978, the commission issued its opinion and order, dated June 9, 1978, which found, Inter alia, that Unit No. 1 of Toledo Edison's Davis-Besse nuclear generating facility was used and useful in rendering the public utility service as of the date certain and, therefore, was included in Toledo Edison's rate base for purposes of fixing the electric rate charges for the company's jurisdictional ratepayers.

The facts pertinent to the commission's determination, as adduced at the hearing on the instant matter, demonstrate that Toledo Edison is a co-owner of the Davis-Besse nuclear generating facility. On April 22, 1977, the federal Nuclear Regulatory Commission (NRC) issued an operating license for the nuclear generating plant, which entitled Toledo Edison to undertake sophisticated system testing which would eventually lead to full operation of the plant without obtaining further licenses. On August 9 1977, the NRC authorized Toledo Edison to engage in Mode 2 testing of the unit, which consists primarily of utilization of a start-up procedure at the unit. Criticality was subsequently achieved on August 12. On August 28, 1977, the unit was synchronized with Toledo Edison's transmission system and began to generate energy. However, the electricity produced was insufficient to offset the quantity of power withdrawn from the system to satisfy the unit's "house power" intake requirements.

On August 30, 1977, the NRC authorized Toledo Edison to proceed with Mode 1 testing of the nuclear plant. At this stage, the company is permitted to bring the unit up to its rated power if the various systems and components have satisfied a complex series of testing criteria. If it does not, the unit is required to be shut down, and the preliminary modes of operation must be again satisfied before Mode 1 can be regained.

The record demonstrates that on the date of Toledo Edison's application, the unit was not synchronized with Toledo Edison's transmission system, but was undergoing testing operations. However, on September 4, 1977, the unit generated net power on an hourly basis, and on September 20, 1977, the unit began, for the first time, to deliver net production to the transmission system on a daily basis.

On November 21, 1977, Toledo Edison declared 25 percent of the unit to be in "commercial operation" for purposes of the production of electric service to its customers. Simultaneously with the declaration of "commercial availability" for the unit, 25 percent of Toledo Edison's investment in the unit was transferred from the company's Construction Work in Progress Account (CWIP) to its Plant in Service Account. Additionally, Toledo Edison began to book depreciation on the unit, and terminated its Allowance for Funds Used During Construction (AFUDC) credit to income. Thereafter, start-up testing continued, with the unit reaching commercial operability to the extent of 40 percent of its capacity on December 19, 1977, and then to 75 percent operability on January 23, 1978.

After the commission's order of June 9, 1978, appellant filed a motion for rehearing with the commission, alleging, Inter alia, that the unit was improperly included in Toledo Edison's rate base. On July 26, 1978, the commission denied appellant's request.

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

William A. Spratley, Columbus, consumers' counsel, John Parks Hopkins and Edward A. Harter, Columbus, for appellant.

William J. Brown, Atty. Gen., Marvin I. Resnik and Mark C. Sholander, Columbus, for appellee Public Utilities Commission of Ohio.

Fuller, Henry, Hodge & Snyder, Paul M. Smart and Fred J. Lange, Jr., Toledo, for intervenor-appellee Toledo Edison Co.

PER CURIAM.

The threshold question posed for resolution in this cause is whether the determination of the commission, which found Unit No. 1 of the Davis-Besse nuclear generating facility used and useful, as of the date certain, in rendering the utility service for which rates are to be charged, was unlawful or unreasonable. R.C. 4903.13.

Appellant contends that the commission improperly included Unit No. 1 in the valuation of Toledo Edison's rate base when the evidence demonstrates that the unit, as of the date certain, was not "used or useful" in providing service to the jurisdictional ratepayers of Toledo Edison within the intended meaning of R.C. 4909.15(A)(1). Appellant avers that as of the date certain, Unit No. 1 did not contribute to Toledo Edison's overall electric demand requirements, and did not render "useful" service to its ratepayers. Appellant argues further that the unit, as of the date certain, was involved in extensive start-up testing, designed primarily to determine whether the unit would provide safe, dependable, and reliable service in the proximate future. Appellant urges this court to reverse the commission, and points out that the premature inclusion in the rate base of a generating unit may result in a rate increase for Toledo Edison's consumers when the rendition of service by the unit may ultimately prove not to be feasible for an extended period of time.

In R.C. 4909.15, the General Assembly has provided a legislative formula for the commission to follow in determining the value of property to be included in a public utility's rate base for purposes of determining just and reasonable rates. R.C. 4909.15(A)(1) expressly provides that, in determining the extent to which property of a utility may be included in its rate base, the commission shall determine "(t)he valuation as of the date certain of the property of the public utility used and useful in rendering the public utility service" to the utility's ratepayers. Incorporated in this statutory language is the generally accepted principle that a utility is not entitled to include in the valuation of its rate base property not actually used or useful in providing its public service, no matter how useful the property may have been in the past or may yet be in the future. Denver Union Stock Yard Co. v. United States (1938), 304 U.S. 470, 58 S.Ct. 990, 82 L.Ed. 1469.

Whether property is used and useful in providing service to the customers of a utility is a question which of necessity must be resolved on the basis of a case-by-case analysis. That status cannot be determined through the application of a rigid formula, but should be ascertained by the trier of the facts in light of all the circumstances. Columbus Gas & Fuel Co. v. Pub. Util. Comm. of Ohio (1934), 292 U.S. 398, 54 S.Ct. 763, 78 L.Ed. 1327; Petition of New England Tel. & Tel. Co. (1949), 115 Vt. 494, 66 A.2d 135; Kansas Gas & Electric Co. v. State Corp. Comm. (1976), 218 Kan. 670, 544 P.2d 1396. Upon review of such factual conclusions, a finding of the commission will not be reversed unless it appears from the record that it is manifestly against the weight of the evidence or is so clearly unsupported by the record as to show misapprehension,...