Ohio Edison Co. v. Pub. Util. Comm.

• Decision Date: 06 May 1992
• Docket Number: No. 90-2406,90-2406
• Citation: 63 Ohio St.3d 555,589 N.E.2d 1292
• Parties: OHIO EDISON COMPANY, Appellant, v. PUBLIC UTILITIES COMMISSION OF OHIO et al., Appellees.
• Court: Ohio Supreme Court

Page 555

63 Ohio St.3d 555

589 N.E.2d 1292

OHIO EDISON COMPANY, Appellant, v. PUBLIC UTILITIES COMMISSION OF OHIO et al., Appellees.

No. 90-2406.

Supreme Court of Ohio.

Submitted Oct. 22, 1991.

Decided May 6, 1992.

On August 1, 1989, Ohio Edison Company, appellant, filed this application with the Public Utilities Commission, appellee, seeking to increase electric rates in its service territory. The commission approved a test year beginning January 1, 1989 and ending December 31, 1989, and established the date certain as June 30, 1989. The commission's staff conducted an investigation of the matters set forth in the application, and filed its written report on February 9, 1990. After holding public hearings, the commission issued its order on August 16, 1990. The commission subsequently denied the company's request for rehearing on several issues addressed in the order. Ohio Edison now appeals six of these issues to this court. The Office of Consumers' Counsel and Industrial Energy Consumers also appealed the commission's order on various other grounds. These appeals were also decided this date by separate decisions.

Michael R. Beiting, Leila L. Vespoli and Kathy J. Kolich; Porter, Wright, Morris & Arthur and Samuel H. Porter, for appellant.

Lee I. Fisher, Atty. Gen., James B. Gainer, Duane W. Luckey, Thomas W. McNamee and William L. Wright, for appellee.

Bell, Royer & Sanders Co., L.P.A., Langdon D. Bell, Barth E. Royer and Judith B. Sanders, for intervening appellee, The Indus. Energy Consumers.

William A. Spratley, Consumers' Counsel, James A. Pepper and Maureen R. Grady, for amicus curiae, Office of Consumers' Counsel.

PER CURIAM.

Appeals arising from orders of the Public Utilities Commission are subject to the standard of review contained in R.C. 4903.13, which provides in 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."

In MCI Telecommunications Corp. v. Pub. Util. Comm. (1988), 38 Ohio St.3d 266, 268, 527 N.E.2d 777, 780, we repeated our interpretation of this standard, stating:

"Under the 'unlawful or unreasonable' standard specified in R.C. 4903.13, this court will not reverse or modify a PUCO decision as to questions of fact where the record contains sufficient probative evidence to show the PUCO'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. Dayton Power & Light Co. v. Pub. Util. Comm. (1983), 4 Ohio St.3d 91, 4 OBR 341, 447 N.E.2d 733; Columbus v. Pub. Util. Comm. (1979), 58 Ohio St.2d 103, 12 O.O.3d 112, 388 N.E.2d 1237. * * * "

We have further recognized that this court has complete and independent power of review as to questions of law, and that legal issues are to be given more intense examination than factual questions. Consumers' Counsel v. Pub. Util. Comm. (1983), 4 Ohio St.3d 111, 4 OBR 358, 447 N.E.2d 749; Consumers' Counsel v. Pub. Util. Comm. (1979), 58 Ohio St.2d 108, 12 O.O.3d 115, 388 N.E.2d 1370. We consider the six errors alleged by Ohio Edison with these standards in mind.

I

As its first proposition of law, Ohio Edison claims that the commission erred in its allocation of deferred costs associated with the Beaver Valley 2 nuclear generating unit. This allocation was necessary to separate costs incurred with respect to retail sales of electricity, which are recoverable from ratepayers in this proceeding ("jurisdictional sales"), from costs incurred with respect to wholesale sales, which are subject to regulation by the Federal Energy Regulatory Commission ("nonjurisdiction sales"). To make this allocation, the level of nonjurisdictional sales to American Municipal Power-Ohio, Inc. ("AMP-Ohio") had to be ascertained.

In its application, Ohio Edison quantified the level of AMP-Ohio sales at one hundred twenty-five megawatts ("MW"), using six months' actual and six months' estimated test-year data. This was the same methodology that the company used in developing the numerous other allocation factors in this proceeding. During its rebuttal testimony, the company presented evidence that the level of nonjurisdictional sales to AMP-Ohio had decreased during the test year to thirty MW. The company proposed that the commission make adjustments for this decrease in calculating the Beaver Valley 2 allocator, as well as all other allocation factors in this proceeding. The commission rejected the company's proposal, finding that, because the thirty MW level was based upon twelve months of actual data, its use would improperly distort the allocation analysis originally submitted by the company based on six months' actual and six months' estimated data.

The company argues that the decreased level of AMP-Ohio sales should have been adopted in this proceeding because it is more representative of test-year operations. Franklin Cty. Welfare Rights Org. v. Pub. Util. Comm. (1978), 55 Ohio St.2d 1, 6, 9 O.O.3d 1, 3, 377 N.E.2d 990, 994. Although there is support in the record for the company's position, the record also supports the commission's finding that the adoption of the decreased sales level would improperly distort the allocation analysis submitted by the company. This court has traditionally deferred to the commission's judgment and expertise in instances where the record supports each of two opposing positions. AT & T Communications of Ohio, Inc. v. Pub. Util. Comm. (1990), 51 Ohio St.3d 150, 555 N.E.2d 288; Dayton Power & Light Co. v. Pub. Util. Comm. (1962), 174 Ohio St. 160, 21 O.O.2d 427, 187 N.E.2d 150. Being supported by the record, the commission's determination to preserve the integrity of the allocation methodology was well within its lawful discretion. In keeping with precedent, we will not interfere with that discretion by substituting our judgment for that of the commission. Accordingly, the company's first proposition of law is overruled.

II

At issue under Ohio Edison's second proposition of law is whether the commission was required to include plant in the rate base which the company had neither included in its application, nor otherwise made available for timely investigation by the commission's staff. At the time Ohio Edison filed its application, this property was classified on the company's books as construction work in progress ("CWIP"). Because the company based its rate filing on the accounts of its property in service, it did not include the property at issue in the application, and the commission's staff did not investigate to verify whether the property was used and useful in providing service to ratepayers. R.C. 4909.15(A)(1) and 4909.19.

At the hearing, Ohio Edison presented testimony that the property was actually completed and in service as of date certain, and urged the commission to include it in the rate base. The company explained that the property had not been recorded in an in-service account at the time the application was filed (and thus was not included in the company's initial rate-base calculation) due to the time it takes to transfer completed construction from the CWIP account to an appropriate in-service account. The commission refused to include the property in the rate base because the company did not provide the commission's staff ample time to independently verify the plant's used and useful nature. ¹

The company argues that the staff's independent verification of this plant is not required, because the property's used and useful nature can be established by its witness's testimony and by the staff's general finding, in its report of investigation, that the company's continuing property records are reliable. In Columbus v. Pub. Util. Comm. (1979), 58 Ohio St.2d 103, 12 O.O.3d 112, 388 N.E.2d 1237, we upheld the commission's inclusion of property in a utility's rate base under similar reasoning. However, Columbus is distinguishable from this case because, here, the company attempted to supplement its application with additional property after the commission had issued its Staff Report of Investigation.

R.C. 4909.19 charges the commission with the duty to investigate "the facts set forth in [the company's rate] application and the exhibits attached thereto * * *." The company's attempt to supplement its application with this additional plant after the issuance of the staff report and its failure to provide timely information with which the commission could verify the plant's status effectively prevented the commission from performing its statutory duty. Under these circumstances, we find the commission's exclusion of this plant to be neither unreasonable nor unlawful. Indeed, if we were to hold otherwise, we would invite the future circumvention of R.C. 4909.19 and the abuses of the ratemaking process which this statute is meant to prevent.

Our holding is consistent with the provision of R.C. 4909.18 which places the burden upon the applicant to prove all issues raised in its application. In this regard, the company appropriately bears the risk that property not included in its application and not made available for timely verification will be excluded from rate base. In Consumers' Counsel v. Pub. Util. Comm. (1979), 58 Ohio St.2d 449, 457, 12 O.O.3d 378, 383, 391 N.E.2d 311, 315, we reversed the commission's inclusion of property in rate base which became used and useful during the test period, but after the date certain, stating:

" * * * The test period, and to some extent the date certain, are determined essentially by the date at which the utility files its application for a rate increase. Any uncertainty which the utility harbors as to the used and useful status of its property, and therefore its includability in the rate base, can be minimized by the careful selection of the date at...