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Ohio SC sides with utilities commission

By Jessica M. Karmasek | Mar 17, 2011


COLUMBUS, Ohio (Legal Newsline) - The Ohio Supreme Court says the decision of the state's Public Utilities Commission denying Columbus Southern Power Company's request for authority to sell or transfer two generation facilities was not unreasonable or unlawful.

The state's high court, in its opinion filed March 9, also affirmed the commission's decision to deny any cost recovery associated with the facilities.

The commission had asserted that the Court lacked jurisdiction to consider the matter because the power company failed to preserve the issues for appellate review. However, the Court said it had jurisdiction in the matter because CSP timely applied for rehearing and thereby preserved its right to appeal.

By law, as amended in 2008, an electric distribution utility is required to "obtain prior commission approval" before it may "sell or transfer any generating asset it wholly or partly owns." Before it was amended, the law allowed a utility to "divest itself of any generating asset at any time without commission approval."

On July 31, 2008, CSP, along with Ohio Power Company, filed an application seeking commission approval of an electric security plan. As part of the application, CSP sought "authority to sell or transfer two recently acquired generating facilities."

Although requesting authority to sell, the company made it clear that it had "no immediate plan to sell or transfer those facilities."

The application did not include a request for increased rates to recover the costs of operating these facilities. But later in the proceedings, a CSP witness stated that cost recovery would be appropriate as an alternate remedy.

In its initial order, the commission denied the request for authority to transfer the facilities, finding it "premature." But it granted CSP the alternative relief of cost recovery -- roughly $51 million a year. Apparently satisfied with this resolution, the company did not seek rehearing on this issue.

However, Industrial Energy Users-Ohio sought rehearing of the cost recovery issue and the commission reversed course. The commission agreed that CSP had "not demonstrated that (its) current revenue is inadequate to cover the costs associated with the generating facilities" and directed the company "to modify its (electric security plan) and remove the annual recovery of $51 million."

CSP then sought rehearing, which the commission denied. It again directed CSP to file an application when it "established a plan to exercise (its) authority to sell or transfer the facilities." CSP's appeal to the state's high court followed.

The Ohio Energy Group, Office of the Ohio Consumers' Counsel, and Industrial Energy Users-Ohio intervened in support of the commission.

Chief Justice Maureen O'Connor authored the Court's nine-page opinion.

The Court, having found that it had jurisdiction over the entire appeal, turned to its merits.

In its only proposition of law, the power company argued that in an electric security plan proceeding, "it is unlawful for the Commission to deny the authority to sell or transfer (generation) assets and at the same time refuse to allow an adjustment for costs associated with maintaining and operating those same assets."

The Court disagreed, holding that both decisions -- the denial of CSP's request to sell and the denial of cost recovery -- were reasonable and lawful.

It points out that the power company did not offer any information about the sale price, terms, conditions or public impact -- or even whether there would be a sale.

Therefore, requiring CSP to reapply when it had such information was a reasonable application of R.C. 4928(E), the Court said.

As to the cost recovery, the commission held that CSP had not demonstrated that its rates were inadequate to cover the costs of operating the plants. CSP, the Court said, adduces no evidence suggesting that this conclusion was factually inaccurate.

"Rather than argue that its rates are in fact inadequate, CSP asserts that the commission never should have considered CSP's cost of service," it wrote. "The commission's 'reference to the adequacy of current revenues,' CSP claims, 'is uniquely based in the traditional cost-of-service/rate of return on investment rate making concepts of R.C. Chapter 4909' and 'has no place in evaluating' an electric security plan."

If that is true, the Court said, then why does CSP ask for a rate to "recover the costs" of running these facilities?

"CSP cites no authority that expressly prohibits the commission from considering cost of service or adequacy of revenue when reviewing an electric security plan. On the contrary, numerous subsections of the electric security plan statute implicitly require the commission to consider certain costs," it wrote.

From Legal Newsline: Reach Jessica Karmasek by e-mail at jessica@legalnewsline.com.

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