Ohio Edison Co. v. Public Utilities Com'n

Decision Date21 May 1997
Docket NumberNo. 95-2575,95-2575
Citation678 N.E.2d 922,78 Ohio St.3d 466
Parties, 179 P.U.R.4th 659, Util. L. Rep. P 26,607 OHIO EDISON COMPANY, Appellant, v. PUBLIC UTILITIES COMMISSION OF OHIO et al., Appellees.
CourtOhio Supreme Court

SYLLABUS BY THE COURT

Pursuant to R.C. 4905.34, a public utility's authority to grant reduced-rate utility service to a political subdivision is not subject to the R.C. 4905.33 prohibition against furnishing below-cost utility service for the purpose of destroying competition.

This appeal involves an order by the Public Utilities Commission of Ohio ("commission") resolving a complaint brought by Youngstown Thermal, Limited Partnership ("Thermal") against Ohio Edison Company ("Ohio Edison") for selling electricity below cost in violation of R.C. 4905.33.

Thermal is a limited partnership that owns and operates a district heating system that provides steam-heating service to approximately fifty buildings in downtown Youngstown, Ohio. Thermal's general partner is primarily engaged in acquiring, expanding, and operating district heating and cooling systems in several cities, including Pittsburgh.

Pursuant to the Certified Territory Act, Ohio Edison is the monopoly electric provider for the city of Youngstown and vicinity. Thermal and Ohio Edison presently compete for the heating load in Youngstown.

In the 1980s, Mahoning County proposed construction of a 198,000 square foot jail facility in downtown Youngstown. The jail was to be built across the street from Thermal's existing steam plant. A county building commission was created to determine various aspects of the construction and equipment to be used in the jail facility. Architectural and engineering firms were hired to prepare plans and specifications for the facility.

Ohio Edison, being the monopoly electric provider for the Youngstown area, had no competitors for the general electric load at the jail and agreed to provide the general electric load service to the jail at Ohio Edison's standard commercial rate. Ohio Edison also sought to provide the cooling load at that same commercial rate. However, Thermal wanted to use the jail as the anchor for a district cooling system in Youngstown. Ohio Edison viewed the jail project as critical to protecting its existing downtown cooling-load customer base. Thus, Thermal and Ohio Edison began competing for the jail's cooling load.

Thermal submitted a bid for the cooling load to the building commission. Ohio Edison responded by offering cooling-load service at a reduced rate, a cash incentive to purchase the chillers, and a high efficiency lighting allowance of $30,000-$50,000. Each party then offered several progressively lower bids, including multiple-tiered, usage-based, fixed or capped rates and sizable cash incentives, in an effort to obtain the cooling-load bid at the jail facility.

On September 22, 1993, the building commission met and publicly voted five to two to negotiate exclusively with Thermal for thirty days to finalize a contract. Ohio Edison continued to contact and discuss the project with the building commission members. Ohio Edison also sent a letter to the chairman of the building commission reaffirming that its offer remained on the table.

On October 22, 1993, the building commission members learned that Thermal had negotiated a contract with the county representatives. Apparently, the building commission then deferred a vote on the Thermal contract until later in October, citing a need to review the contract terms. The commission disapproved the contract by a vote of four to three at its October 26 meeting. Ohio Edison next offered to include an interest-free loan with its bid. On December 22, 1993, the Mahoning County Commissioners awarded the final contract ("service agreement"), including the cooling load, to Ohio Edison.

On August 23, 1993, Thermal brought an R.C. 4905.26 complaint before the commission against Ohio Edison alleging that Ohio Edison was proposing to provide a cooling service without authority and that Ohio Edison had priced the cooling service below Ohio Edison's actual cost for the purpose of destroying competition in violation of R.C. 4905.33. Ohio Edison sought to dismiss the complaint because the proposed service agreement did not provide cooling services and was not subject to commission review under R.C. 4905.34. Ohio Edison's motion to dismiss was denied.

At a prehearing conference, the parties agreed to narrow the issues for hearing and to submit briefs on one legal issue:

"[I]s the authority granted a utility by [R.C.] Section 4905.34, * * * to offer free or reduced rate service limited by [R.C.] Section 4905.33, * * * which prohibits a utility from furnishing free service or service for less than actual cost for the purpose of destroying competition[?]"

The commission issued an entry finding that although these sections were not in conflict, the grant of authority in R.C. 4905.34 was limited by the statement in R.C. 4905.33 that a utility cannot provide reduced-rate service for the purpose of destroying competition. The commission stated that this entry was not final or appealable. Ohio Edison sought but was denied rehearing.

The commission then conducted an evidentiary hearing on the issue of Ohio Edison's actual cost to provide the power for the cooling load at the jail project. Thermal presented two witnesses who testified that Ohio Edison was providing electrical energy below its actual cost for the cooling load to the jail project. Ohio Edison presented four witnesses who testified that the estimated total jail revenues would exceed the cost to serve the facility.

The commission reviewed the conflicting evidence and held that Ohio Edison had violated R.C. 4905.33 by agreeing to provide the cooling-load power to the jail at a rate below Ohio Edison's actual cost for the purpose of destroying competition by Thermal. However, the commission assessed no civil forfeiture against Ohio Edison on the basis that this was the first time that the commission had been presented with the question at hand.

Ohio Edison sought rehearing. Thermal did not seek rehearing, but it opposed Ohio Edison's application for rehearing. The commission denied Ohio Edison's application for rehearing.

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

James W. Burk, Michael R. Beiting and Anthony J. Alexander; Roetzel & Andress Co., L.P.A., and George W. Rooney, Jr., Akron, for appellant.

Betty D. Montgomery, Attorney General, Duane W. Luckey, William L. Wright, Thomas W. McNamee and Paul A. Colbert, Assistant Attorneys General, for appellee, Public Utilities Commission of Ohio.

Vorys, Sater, Seymour & Pease and John Winship Read, Cleveland, for intervening appellee, Youngstown Thermal, Limited Partnership.

Kaufman & Cumberland and Frank J. Cumberland, Cleveland, urging affirmance for amicus curiae, AT&T Communications of Ohio, Inc.

Chester, Willcox & Saxbe, John W. Bentine and Jeffrey L. Small, Columbus, urging affirmance for amicus curiae, American Municipal Power-Ohio, Inc.

LUNDBERG STRATTON, Justice.

Appellant poses numerous propositions of law arguing that the commission erred in its interpretation of R.C. 4905.34 and overstepped its authority in finding that Ohio Edison violated R.C. 4905.33. Each party also filed supplemental briefs on the two questions that we raised sua sponte: "Did the commission find that R.C. 4905.34 applies in the case at bar?" and "Does R.C. 4905.34 apply in a case involving a competitive bidding situation?" For the reasons that follow, we find that R.C. 4905.33 and 4905.34 are clear, unambiguous, and not in conflict. We also hold that a public utility's right to enter into a reduced-rate utility service contract with a political subdivision under R.C. 4905.34 is not limited by the last sentence of R.C. 4905.33, which prohibits below-cost utility service contracts that attempt to destroy competition. Accordingly, we reverse the commission's order. 1

We will not reverse a commission order unless it is against the manifest weight of the evidence. R.C. 4903.13. Nor will we reweigh the evidence or substitute our judgment for that of the commission on factual questions where there is sufficient probative evidence in the record to show that the commission's decision 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. Canton Storage & Transfer Co. v. Pub. Util. Comm. (1995), 72 Ohio St.3d 1, 4, 647 N.E.2d 136, 140; MCI Telecommunications Corp. v. Pub. Util. Comm. (1988), 38 Ohio St.3d 266, 268, 527 N.E.2d 777, 780. However, we have complete and independent power of review as to all questions of law. Id.; Indus. Energy Consumers of Ohio Power Co. v. Pub. Util. Comm. (1994), 68 Ohio St.3d 559, 563, 629 N.E.2d 423, 426.

This case involves the interplay between R.C. 4905.33 and 4905.34 and, more specifically, the commission's resolution of that interplay. Determining whether the commission applied the proper legal standard is a question of law. Time Warner AxS v. Pub. Util. Comm. (1996), 75 Ohio St.3d 229, 234, 661 N.E.2d 1097, 1101; Canton Storage & Transfer Co., 72 Ohio St.3d at 5, 647 N.E.2d at 140. Accordingly, we consider this question on a de novo basis. MCI Telecommunications Corp., 38 Ohio St.3d at 268, 527 N.E.2d at 780.

R.C. 4905.34 contracts are exempt from R.C. Chapters 4901, 4903, 4905, 4907, 4909, 4921, 4923, and 4925, including commission review under R.C. 4905.26. However, the commission has limited authority to determine the extent of its jurisdiction and whether a complaint pending before it actually involves an R.C. 4905.34 contract. In re Complaint of Residents of Struthers (1989), 45 Ohio St.3d 227, 543 N.E.2d 794. Once the commission determines that the complaint pending before it involves an R.C. 4905.34 contract, the commission's...

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