Opinion · Ohio Supreme Court
AK Steel Corp. v. Public Utilities Commission
95 Ohio St. 3d 81
- Type
- Opinion
- Court
- Ohio Supreme Court
- Jurisdiction
- Ohio
- Date
- 2002-04-17
- Topic
- general
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- the appellant bears the “burden of demonstrating * * * that it has been or will be prejudiced by the error”
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[This decision has been published in Ohio Official Reports at95 Ohio St.3d 81
.]
AK STEEL CORPORATION, APPELLANT, v. PUBLIC UTILITIES COMMISSION OF
OHIO ET AL., APPELLEES.
[Cite as AK Steel Corp. v. Pub. Util. Comm., 2002-Ohio-1735
.]
Public Utilities Commission—Electric utilities—Competition in retail electric
market as required by 1999 Am.Sub.S.B. No. 3—R.C. 4928.31—
Commission’s order approving stipulations among parties relating to
CG&E’s transition plan and the plan itself affirmed, when.
(No. 00-2092—Submitted November 14, 2001—Decided April 17, 2002.)
APPEAL from the Public Utilities Commission of Ohio, Nos. 99-1658-EL-ETP,
99-1659-EL-ATA, 99-1660-EL-ATA, 99-1661-EL-AAM, 99-1662-EL-AAM,
and 99-1663-EL-UNC.
__________________
MOYER, C.J.
{¶ 1} In 1999 Am.Sub.S.B. No. 3, the General Assembly adopted a
comprehensive statutory scheme to facilitate and encourage development of
competition in the retail electric market. Most of the provisions of the Act became
effective on October 5, 1999. Enacted as part of S.B. 3, R.C. 4928.31 requires each
electric utility to file with the Public Utilities Commission of Ohio a transition plan
for the company’s provision of competitive electric service in Ohio. Transition
plans are required to contain plans for rate unbundling, corporate separation,
operational support, employee assistance, and consumer education. On December
28, 1999, CG&E filed its proposed transition plan, together with attachments,
supporting testimony, and other information. After CG&E’s filing, numerous
parties intervened, including appellant AK Steel Corporation. AK Steel is a large
industrial customer of CG&E that had purchased electric service under a
commission-approved contract that expired December 31, 2000. Some of the
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parties filed objections to the proposed plan. CG&E and other parties, including
AK Steel, filed written testimony. Evidentiary hearings were held, and briefs were
filed by various parties.
{¶ 2} In May 2000, a stipulation and recommendation on CG&E’s proposed
transition plan was filed. The stipulation represented an agreement among the
many parties to the stipulation of all issues relating to CG&E’s transition plan.
Those parties include residential, commercial, and industrial consumers of CG&E’s
retail electric service or their representatives, energy marketers, organized labor,
business and institutional associations, and local government. AK Steel did not
sign the stipulation. In fact, in the proceedings before the commission, it presented
testimony and filed briefs in opposition to some of the provisions of the stipulation.
The commission’s August 31, 2000 opinion and order approved the stipulation.
After its application for rehearing was denied by the commission, AK Steel filed
this appeal as of right.
{¶ 3} The court allowed intervention by CG&E and OCC, and both have
participated in this appeal as appellees.
I
Adoption of the Stipulation
{¶ 4} In its order approving the stipulation, the commission observed that
Ohio Adm.Code 4901-1-30 authorizes parties to commission proceedings to enter
into stipulations. The commission further observed, “Although not binding on the
Commission, the terms of such agreements are accorded substantial weight. See,
Consumer[s’] Counsel v. Pub. Util. Comm. (1992), 64 Ohio St.3d 123, at 125
[592 N.E.2d 1370
], citing Akron v. Pub. Util. Comm. (1978),55 Ohio St.2d 155
[9 O.O.3d 122
,378 N.E.2d 480
].”
{¶ 5} The commission determined that the ultimate issue for its
consideration was whether the stipulation was reasonable and, thus, should be
approved. The commission applied the following criteria in its determination of
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reasonableness: “(1) Is the settlement a product of serious bargaining among
capable, knowledgeable parties? (2) Does the settlement, as a package, benefit
ratepayers and the public interest? (3) Does the settlement package violate any
important regulatory principle or practice?” The commission noted that this court
has endorsed the commission’s analysis of reasonableness using these three criteria.
See Consumers’ Counsel v. Pub. Util. Comm. (1992), 64 Ohio St.3d 123, 126
,592 N.E.2d 1370
, 1373.
{¶ 6} Based on its conclusion that all three criteria were met, the
commission approved the stipulation and the transition plan as modified by the
stipulation. AK Steel challenges that approval, asserting that the third criterion was
not met, because of errors committed by the commission. The commission argues
to the contrary that it committed no such errors and underscores the fact that it made
an explicit finding in its order that the third criterion had been met.
{¶ 7} We conclude that the commission’s finding has adequate record
support. Therefore, we affirm the commission’s approval of the stipulation and
plan.
II
Unbundled Transmission Rate
{¶ 8} R.C. 4928.31(A)(1) requires that transition plans for competitive
service contain rate-unbundling plans that separate existing bundled utility rates
into their cost-based functional components (including generation, transmission,
and distribution of electricity) in accordance with R.C. 4928.34(A)(1) to (7) and
commission rules. The parties to the stipulation agreed that the unbundled
transmission component of CG&E’s transition plan satisfied the requirements of
R.C. 4928.31(A)(1).
{¶ 9} However, AK Steel objects to CG&E’s unbundling plan on the basis
that CG&E’s functional cost-of-service study that is used to unbundle rates assigns
distribution costs to customers of transmission service (Rate Schedule TS) even
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though they receive electricity directly from the high-voltage transmission system
and do not use the lower-voltage distribution system, because the unbundling plan
is based on the cost-of-service study submitted by CG&E in its most recent rate
case in 1992, commission case No. 92-1464-EL-AIR, in which rates were bundled.
{¶ 10} AK Steel argues that use of this 1992 study without further
breakdown of costs to various functions produces absurd results. For example, AK
Steel says that $473,979 of overhead is attributed to distribution in Rate Schedule
TS (applied to only thirty-four customers) in support of only $15,746 worth of
actual distribution equipment, in the form of meters; that $485,569 of billing
expense is assigned to Rate Schedule TS to serve thirty-four customers, while
$370,077 is assigned to the Secondary Distribution/Small class to support billing
for thirty-one thousand customers; and that just over one-third of a total of $6.2
million in property taxes is attributed to distribution property for the Rate Schedule
TS class, comprising only the $15,746 of meters.
{¶ 11} The commission concedes that the rate-unbundling plan as applied
to the Rate Schedule TS class did not achieve perfection. The commission,
however, argues that it produced acceptable results and equal treatment within the
class. The commission considered all of the arguments made on this appeal and
found that the unbundling plan to which most of the parties agreed was reasonable
and consistent with R.C. 4928.34. It further found that adoption of AK Steel’s
recommendations for further refinement of the 1992 rate case cost-of-service study
could cause rates to exceed the cap set forth in R.C. 4928.34(A)(6) and would shift
costs among rate classes “in a manner not intended by the legislature.” The
commission also found that in the unbundling process, CG&E was required by S.B.
3 to use CG&E’s 1992 cost-of-service study. Moreover, the commission stated in
the order, “Although certain allocations of costs may appear to be incongruous, we
find that CG&E has followed the statutory scheme in unbundling its rates.”
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{¶ 12} The order demonstrates that, as to the issue of the unbundled
transmission rate, the commission considered the same arguments and
acknowledged the same evidentiary matters that AK Steel has urged here. As the
court said recently in Cincinnati Bell Tel. Co. v. Pub. Util. Comm. (2001), 92 Ohio St.3d 177, 179-180
,749 N.E.2d 262
, 264-265:
{¶ 13} “We have consistently refused to substitute our judgment for that of
the commission on evidentiary matters. Cincinnati Gas & Elec. Co. v. Pub. Util.
Comm. (1999), 86 Ohio St.3d 53
,711 N.E.2d 670
; 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. (1959),170 Ohio St. 105
,10 O.O.2d 4
,163 N.E.2d 167
. Traditionally, we have deferred to the judgment of the commission in instances involving the commission’s special expertise and its exercise of discretion, when the record supports either 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
. We have held that we will reverse a commission order only where it is unreasonable, unlawful, or against the manifest weight of the evidence or shows misapprehension, mistake, or willful disregard of duty. Cincinnati Gas & Elec. Co.,86 Ohio St.3d 53
,711 N.E.2d 670
; Ohio Edison Co. v. Pub. Util. Comm. (1992),63 Ohio St.3d 555
,589 N.E.2d 1292
; see R.C. 4903.13.”
{¶ 14} Based on the record below and the commission’s findings of fact and
conclusions of law set forth in its order, the commission’s decision as to CG&E’s
unbundled transmission rate is not unreasonable, unlawful, or against the manifest
weight of the evidence.
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III
Transition Costs and Transition Revenues
{¶ 15} AK Steel claims that under the transition plan CG&E’s transition
revenue may exceed its transition costs. It argues that R.C. 4928.34(A)(12) requires
that to approve the stipulated transition plan, the commission must find that the
transition revenues equal the transition costs. However, the plain language of R.C.
4928.34 requires only that a utility be allowed an opportunity to collect the
transition costs allowed by the commission under R.C. 4928.39 through the
transition charges determined by the commission under R.C. 4928.40.
{¶ 16} The commission in its order observed that CG&E is entitled only to
an opportunity to collect its transition charges and that there is no guarantee under
R.C. 4928.34(A)(12) that transition revenues will equal transition costs. The
commission also observed that many factors will determine whether CG&E will
recover more or less than its approved transition costs, concluding as follows:
“Consequently, we do not believe that the stipulation is unreasonable or in violation
of Section 4928.34(A)(12), Revised Code, because the stipulation does not
guarantee that the Company will recover no more than the projected transition
costs.”
{¶ 17} Our reading of R.C. 4928.34 is consistent with the commission’s
application of the statute to the stipulation, and, therefore, we reject AK Steel’s
argument.
IV
Specific Transition Costs
{¶ 18} AK Steel has attacked the commission-approved determination of
four of CG&E’s transition costs1: (1) the shopping credit cost, (2) the purchased
1. These costs include those deferred and recovered as regulatory assets through a regulatory
transition charge (“RTC”). “Regulatory assets” is defined in R.C. 4928.01(26) as unamortized
expenses that are capitalized or deferred only by virtue of commission action.
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power cost, (3) the attorney fees of CG&E and other parties to the stipulation, and
(4) costs of transferring its generating units to an affiliated exempt wholesale
generator.
{¶ 19} The commission’s order contains a thorough discussion of AK
Steel’s objections to the determinations of these four transition costs, referring to
relevant testimony and other evidence. In its conclusion of that discussion, the
commission found that the challenged transition costs satisfied the criteria of R.C.
4928.39 and were fully supported by the evidence.
{¶ 20} The court will not reverse or modify a decision of the commission
as to a question of fact where there is sufficient probative evidence to show that the
commission’s decision is not against the manifest weight of the evidence and is not
so clearly unsupported by the record as to show misapprehension, mistake, or
willful disregard of duty. E.g., AT&T Communications of Ohio, Inc. v. Pub. Util.
Comm. (2000), 88 Ohio St.3d 549
, 555,728 N.E.2d 371
, 376. The burden is on the
appellant to show that the commission’s decision is against the manifest weight of
the evidence or is clearly unsupported by the evidence. Our review of the record
causes us to conclude that AK Steel has failed to meet this heavy burden.
{¶ 21} Therefore, we affirm the commission’s allowance of the transition
costs challenged by AK Steel.
V
Alleged Illegal Discrimination or Preference
{¶ 22} The commission acknowledges in its order the following: Shopping
incentives provided in the stipulation in the form of shopping credits are higher in
each customer class for the first twenty percent of the load of that class that switches
to an electric marketer. The regulatory transition charge (“RTC”; see fn. 1) for
residential customers will end December 31, 2008, two years earlier than for other
classes of customers. The stipulation guarantees to residential customers a five-
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year market development period (“MDP”), while the MDP for other classes of
customers could end sooner.
{¶ 23} AK Steel contends that these differences are unreasonable and in
violation of R.C. 4905.33 and 4905.35. Those statutes prohibit certain
discriminatory practices:
{¶ 24} “No public utility shall directly or indirectly, or by any special rate,
rebate, drawback, or other device or method, charge, demand, collect or receive
from any person, firm, or corporation a greater or lesser compensation for any
services rendered, or to be rendered, * * * than it charges, demands, collects, or
receives from any other person, firm, or corporation for doing a like and
contemporaneous service under substantially the same circumstances and
conditions.” (Emphasis added.) R.C. 4905.33(A).
{¶ 25} “No public utility shall make or give any undue or unreasonable
preference or advantage to any person, firm, corporation, or locality or subject any
person, firm, corporation, or locality to any undue or unreasonable prejudice.”
(Emphasis added.) R.C. 4905.35(A).
{¶ 26} As we have held, R.C. 4905.33 “does not prohibit rate discrimination
per se; rather, it prohibits charging different rates when the utility is performing ‘*
* * a like and contemporaneous service under substantially the same circumstances
and conditions. * * *’ R.C. 4905.35 is to the same effect, and prohibits ‘* * *
unreasonable prejudice or disadvantage * * *.’
{¶ 27} “Absolute uniformity in rates or prices is not required by statute or
case law. A reasonable differential or inequality of rates may occur where such
differential is based upon some actual and measurable differences in the furnishing
of services to the consumer.” Mahoning Cty. Townships v. Pub. Util. Comm.
(1979), 58 Ohio St.2d 40, 43-44
,12 O.O.3d 45, 47
,388 N.E.2d 739, 742
.
{¶ 28} The commission specifically found that the structure of the shopping
credits, the MDPs, and the RTC recovery periods do not violate R.C. 4905.33 or
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R.C. 4905.35 and concluded as a matter of law that R.C. 4928.37(B) and R.C.
4928.40(A) authorize the commission to approve the shopping incentives set forth
in the stipulation. The commission further found that although customers who take
the early initiative to shop for an alternate supplier of generation will benefit from
their actions, the benefit does not amount to undue preference or discrimination,
because all customers will have an equal opportunity to take advantage of the
shopping incentives. The commission found that it was not discriminatory to have
two different periods for recovery of the RTC, one for residential and one for
nonresidential customers, inasmuch as the rates, incentives, and shopping credits
vary between these groups. Last, the commission found that R.C. 4928.40
expressly permits the commission to authorize the ending of the MDP prior to
December 1, 2005, based on the switching rate by a particular class of customer,
and that it could do so in advance in its order approving the plan.
{¶ 29} We agree with the commission’s findings of fact and conclusion of
law and will not disturb them. We therefore affirm the commission.
VI
Shopping Credits as Switching Incentives
{¶ 30} CG&E’s commission-approved transition plan includes a shopping
incentive as contemplated by R.C. 4928.40 in the form of shopping credits (against
the RTC) to the first twenty percent of shopped-for residential load. AK Steel raises
several arguments against the shopping credits.
{¶ 31} First, AK Steel asserts that the shopping credit device is an improper
discounting of the RTC in violation of R.C. 4928.37(A)(3). R.C. 4928.37(A)(3)
provides, “The transition charge shall not be discounted by any party.” However,
the shopping credit is not a discount of the RTC by CG&E. It is what it says it is,
a credit against the RTC as established in the transition plan approved by the
commission.
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{¶ 32} AK Steel next argues that the shopping credit bypasses the RTC in
violation of R.C. 4928.37(A)(1)(b). However, there is no bypassing of the RTC.
No shopping customer bypasses the RTC, albeit the first twenty percent of
residential customers (by load) who shop for alternate electric generation will pay
the RTC as reduced by the shopping credit.
{¶ 33} Finally, AK Steel complains that the shopping credit results in an
RTC of less than zero in violation of the last sentence of R.C. 4928.40(A).
However, the record reveals no negative transition charges. Moreover, the
commission explicitly stated in its order that it did “not believe that the
development of a shopping incentive should be viewed as creating an RTC of less
than zero.”
{¶ 34} We find that the commission did not err by approving the shopping
credits of the transition plan, and we hereby affirm the commission’s approval of
them.
Summary and Conclusions
{¶ 35} AK Steel has presented to the court a scattershot appeal. As to
certain claimed errors, AK Steel asserted that the commission’s determinations or
approvals are unsupported by or contrary to the evidence. Yet those determinations
and approvals were in fact supported by sufficient probative evidence, and the court
will not reweigh the evidence or reverse the commission in such circumstances.
{¶ 36} As to other claimed errors, AK Steel asserted that various statutory
provisions required the commission to consider matters other than those considered
by it or to make findings and reach conclusions otherwise than it did. AK Steel
also asserted that certain of the commission’s approvals resulted in violations of
various statutory proscriptions. As to all of its statutory arguments, AK Steel
proved to be unconvincing and, in some instances, in error.
{¶ 37} AK Steel, as appellant, has not carried its burden of demonstrating
that the commission committed reversible error. Moreover, even if AK Steel had
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sustained its burden, it failed to demonstrate that it has been or will be prejudiced
by the error.
{¶ 38} We therefore affirm the commission in all respects.
Order affirmed.
DOUGLAS, RESNICK and F.E. SWEENEY, JJ., concur.
COOK, J., concurs in judgment.
PFEIFER and LUNDBERG STRATTON, JJ., concur in part and dissent in part.
__________________
LUNDBERG STRATTON, J., concurrring in part and dissenting in part.
{¶ 39} I concur with the majority opinion, except I dissent to Part II, which
is entitled “Unbundled Transmission Rate.” I believe that the majority’s approval
of CG&E’s unbundling plan is unreasonable with regard to Rate Schedule TS
customers, which includes AK Steel. For example, AK Steel presented evidence
that CG&E’s unbundled rate plan unreasonably assigns costs to Rate Schedule TS
customers. Specifically, AK Steel showed that although Rate Schedule TS
customers use only $15,746 worth of distribution equipment, $473,979 was
attributed to their overhead distribution costs. In addition, the commission assigned
over $2,000,000 in property taxes to distribution property associated with the Rate
Schedule TS customers, yet the actual distribution property used by that class
consisted of meters worth only $15,746. Finally, the commission assigned a billing
expense of $485,569 to the Rate Schedule TS customers to serve thirty-four
customers, yet assigned only $370,077 to the Secondary Distribution/Small class
customers to support billing thirty-one thousand customers. The commission did
not dispute these numbers.
{¶ 40} As the majority points out, the commission admits that it did not
achieve perfection. Even the commission conceded “certain allocations of costs *
* * appear to be incongruous” but found that to determine a more appropriate
allocation of the costs would violate R.C. 4928.34(A)(6), which required
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unbundling the rate that was in effect the day before the effective date of
deregulation. The commission further defended its position by maintaining that it
provided equal treatment within the class and that further cost shifts among the
classes would cause it to exceed the cap set by R.C. 4928.34(A)(6).
{¶ 41} Admittedly, R.C. 4928.34(A)(6) required the unbundling plan to be
based on the 1992 cost-of-service study from commission case No. 92-1464-EL-
AIR because those were the rates in existence the day before the effective date of
deregulation. However, the commission was also under an obligation to fix
reasonable rates. R.C. 4909.15. The numbers on their very face, as extreme as they
are, defeat any claim of reasonableness.
{¶ 42} The commission argued that AK Steel’s assertion that the unbundled
rate was vastly overinflated when compared to actual costs was flawed because it
was falsely premised on the assumption that rates must be equal to costs. Although
there is no requirement that a rate must be equal to the cost of a service, it is evident
that costs are the major component of a rate. See R.C. 4909.151 and 4928.34.
Reading R.C. 4928.34(A)(6) in pari materia with R.C. 4909.15, I would hold that
if an unbundling plan results in an unbundled rate that is exponentially and
unjustifiably more than the underlying cost of the service, the unbundled rates are
unreasonable and the commission must make a reasonable reallocation. To hold
otherwise would create an unreasonable result. Courts should avoid interpretations
that yield unreasonable results. State ex rel. Besser v. Ohio State Univ. (2000), 87 Ohio St.3d 535
,721 N.E.2d 1044
.
{¶ 43} I would find that CG&E’s unbundling plan resulted in unreasonable
rates for the Rate Schedule TS customers. I would remand the issue to the
commission to re-examine its figures and reallocate the rates in a fair and
reasonable manner. Accordingly, I concur in part and dissent in part.
PFEIFER, J., concurs in the foregoing opinion.
__________________
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Boehm, Kurtz & Lowry and David F. Boehm, for appellant.
Betty D. Montgomery, Attorney General, Duane W. Luckey, Steven T.
Nourse and Thomas W. McNamee, Assistant Attorneys General, for appellee Public
Utilities Commission of Ohio.
James B. Gainer and Paul A. Colbert, for intervening appellee Cincinnati
Gas & Electric Company.
Robert S. Tongren, Ohio Consumers’ Counsel, and Ann M. Hotz, Assistant
Consumers’ Counsel, for intervening appellee Ohio Consumers’ Counsel.
__________________
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