Summary
In Consumers' Counsel v. Pub. Util. Comm. (1979), 57 Ohio St.2d 78, 11 O.O.3d 245, 386 N.E.2d 1343, the commission included demand charges attributable to purchased power in the EFC rate, despite its rule which explicitly provided for their disallowance.
Summary of this case from Consumers' Counsel v. Pub. Util. CommOpinion
No. 78-415
Decided March 21, 1979.
Public Utilities Commission — Fuel cost adjustment charge — Hearing — Failure to comply with data-filing deadline not fatal — Demand costs need not be refunded, when — Reconciliation adjustment in rates unnecessary, when.
APPEAL from the Public Utilities Commission.
This appeal arises from an opinion and order of the Public Utilities Commission of Ohio (commission) wherein the commission concluded, subsequent to its semi-annual review of the fuel cost adjustment clause of intervenor herein, the Columbus Southern Ohio Electric Company (C SOE), that C SOE sustained its burden of demonstrating that its fuel cost adjustment charges were fair, just and reasonable for the audit period.
C SOE, an electric light company within the meaning of R.C. 4905.03(A)(4), billed its customers, during the fiscal year beginning April 1, 1976, and ending March 31, 1977, $87,855,077 in costs through its fuel cost adjustment clause. As part of the statutory procedure empowering the commission to regulate fuel cost adjustment charges, R.C. 4905.301(B) provides that the fuel cost adjustment clause of each electric utility must be reviewed at a hearing by the commission every six months to determine if such charges were "fair, just, and reasonable." See R.C. 4909.191(C). In addition, R.C. 4905.66 requires the submission of data and reports regarding these charges, and specifically orders the utility to conduct, or cause to be conducted, an annual audit of its fuel related policies and practices.
By entry dated April 20, 1977, the commission notified C SOE that a semi-annual hearing would be conducted on October 31, 1977, regarding the latter's fuel cost adjustment charges and its fuel related procedures. C SOE was requested to select an independent auditor 30 days subsequent to the entry, and to have the completed audit report submitted to the commission 30 days prior to the scheduled hearing date. In accordance with R.C. 4909.191(C), the entry further stated that C SOE had the burden of proving the fairness, justness and reasonableness of the fuel charges for the audited period.
On October 31 and November 3, 1977, the commission commenced its annual audit hearing of C SOE, having previously received the auditor's annual report on September 30, 1977, and C SOE's "facts, data and other information" as required by R.C. 4909.191(B) on October 17, 1977. During the course of the hearings, appellant herein, Office of Consumers' Counsel, objected to the use of the data filed by C SOE, arguing that the data was not filed 30 days prior to the hearing date as mandated by R.C. 4909.191 (B). However, appellant also opposed a continuance of the proceeding which would have brought the filing of the data within the statutory time frame.
A review of the annual audit by the commission demonstrated that C SOE, during the audit period, had purchased power from the Ohio Valley Electric Corporation and included in its fuel cost adjustment charges to its customers, $89,880 in "demand costs" associated with the purchase. These charges were challenged by appellant on the basis that inclusion of demand costs in the fuel cost adjustment billings of C SOE violated Rule 4901:1-11-02(I) of the Ohio Adm. Code, a copy of which rule was included in C SOE's rate tariffs on file with the commission.
The amount originally attributed to the "demand charges" was $302,000. However, a late filed auditor's exhibit entered into the record specified that $89,880 represented the estimated amount recovered.
The auditor's report further revealed that C SOE had purchased power from the Ohio Power Company in June and July of 1976, that it had passed charges relating to this purchase through its fuel cost adjustment clause to its customers, but that it had failed to institute a subsequent rate reduction after receiving a $133,000 refund of these charges from the Ohio Power Company. Of this amount refunded, the audit showed that $125,000 represented fuel costs which had previously been recovered by C SOE through its fuel cost adjustment clause and, therefore, would normally cause a reduction in the fuel cost adjustment rate for the next billing period. No adjustment was recommended by the auditors, however, because it was discovered that C SOE had excluded $119,000 in net energy charges which could have been billed as a result of the purchase.
By an opinion and order dated December 21, 1977, the commission concluded that C SOE had sustained its burden of demonstrating the fairness, justness and reasonableness of its fuel cost adjustment charges. With regard to C SOE's non-compliance with the filing deadline, the commission concluded that "[t]he company's failure to comply * * * has not delayed the proceedings nor prejudiced the parties." With reference to the demand charges billed C SOE customers, in an apparent contradiction of the company's filed tariffs, the commission held that these charges were "reasonable" because they "substantially complied" with its prior determination to permit the pass through of such costs in fuel cost adjustment clauses under certain circumstances. Finally, the commission determined that no reconciliation adjustment was necessary in C SOE's rates due to the $125,000 recovered from the purchase of power from the Ohio Power Company, because C SOE's countervailing failure to bill its customers for net energy charges left a refundable difference which was minimal.
The cause is now before this court upon appeal as a matter of right.
Mr. William A. Spratley, consumers' counsel, and Mr. Orla E. Collier, for appellant.
Mr. William J. Brown, attorney general, Mr. Marvin I. Resnik and Mr. Kevin F. Duffy, for appellee.
Messrs. Porter, Wright, Morris Arthur, Mr. Samuel H. Porter, Mr. Curtis A. Loveland and Mr. William J. Kelly, Jr., for intervenor-appellee.
As support for reversal of the commission's order in the first instance, appellant contends that compliance with the 30-day filing deadline is a condition precedent to C SOE's continued use of the fuel cost adjustment clause and, when R.C. 4909.191(F) is read in pari materia with R.C. 4909.191(B), the commission is required to, ipso facto, suspend the fuel adjustment cost clause of a company which does not so comply. We conclude otherwise.
R.C. 4909.191(B) provides:
"Each electric light company shall submit thirty days prior to the hearing on its fuel cost adjustment clause all facts, data, and other information pertinent to its fuel procurement practices and policies to the public utilities commission."
R.C. 4909.191(F) provides:
"Unless otherwise ordered by the public utilities commission, an electric light company that has complied with division (B) of this section may continue to pass through acquisition and delivery costs subject to readjustment or refund."
Neither R.C. 4909.191(B) nor 4909.191(F) contains language requiring the commission to automatically suspend the fuel cost adjustment clause of a company which fails to comply with this 30-day filing requirement. Absent clear statutory language to that effect, such an extreme result should not be imposed. Ohio Power Co. v. Pub. Util. Comm. (1978), 54 Ohio St.2d 342, 376 N.E.2d 1337; see, also, State, ex rel. Jones, v. Farrar (1946), 146 Ohio St. 467, 66 N.E.2d 531.
The purpose of the filing requirement of R.C. 4909.191 (B) is to provide advance opportunity for the parties to analyze information submitted by the utility pertinent to its fuel procurement practices and policies. The filing deadline is designed to facilitate an orderly and prompt hearing, State, ex rel. Jones, v. Farrar, supra, and is not jurisdictional in nature. See Pennsylvania Rd. Co. v. Pub. Util. Comm. (1961), 172 Ohio St. 154, 174 N.E.2d 102; Dover v. Pub. Util. Comm. (1933), 126 Ohio St. 438, 185 N.E. 833. Appellant was afforded an opportunity to review the submitted information prior to the hearings. Moreover, appellant opposed C SOE's offer to continue the hearings so that additional time would have been available to analyze the submitted data. Thereafter, the commission in its order of December 21, 1977, stated that C SOE's late filing neither delayed the proceedings nor prejudiced appellant's cause. This conclusion is not disputed by appellant.
We do not reach the issue of whether R.C. 4909.191(F) requires the commission to suspend the fuel adjustment clause of a company in the event the data required by R.C. 4909.191(B) is not filed at any time prior to the scheduled hearing.
Appellant contends further that C SOE passed demand costs through its fuel cost adjustment clause, in violation of R.C. 4905.32, and that the commission's order, which refused to refund these demand costs to C SOE customers, is unreasonable and unlawful.
At the outset, a distinction must be recognized between the statutory rate-making process involved in establishing fixed rate schedules, and the statutory procedure governing variable rate schedules under the fuel cost adjustment procedure. In the normal instance, a utility desiring to establish a rate, or change an existing one, must file a written application with the commission pursuant to R.C. 4909.18. The function of the commission is to determine the justness and reasonableness of the proposed rates before they become effective, and to fix lawful rates in accordance with the statutory rate plan. Cleveland Elec. Illuminating Co. v. Pub. Util. Comm. (1976), 46 Ohio St.2d 105, 346 N.E.2d 778. Once computed, a schedule of the rates approved by the commission must be filed with the commission under R.C. 4905.30. The utility is admonished, by the provisions of R.C. 4905.32, that it may not charge rates which differ from those previously approved and filed with the commission.
In contrast, the fuel cost adjustment provisions of R.C. Chapters 4905 and 4909 represent a statutory plan which authorizes a utility to pass variable fuel costs directly to consumers. Rates are thereby varied without prior approval of the commission, and independently from the formal rate-making process incorporated in R.C. 4909.18 and 4909.19. See R.C. 4905.01(G); Rule 4901:1-11-02(H), Ohio Adm. Code; R.C. 4905.302; Ford Motor Co. v. Pub. Util.Comm. (1977), 52 Ohio St.2d 142, 370 N.E.2d 468. R.C. 4905.301 sets forth a procedure by which, "[n]ot withstanding any other provision of law," the utilization of the fuel cost adjustment procedure is governed by the commission through an after-the-fact, periodic review of a company's rate adjustment practices, policies and charges. Therefore, appellant's proposition that R.C. 4905.32 limits the fuel cost adjustment procedure to prior approved rates is without merit.
We find further that the commission's refusal to refund the demand costs is a valid exercise of its broad authority to promulgate rules designed to foster utility fuel procurement incentives. R.C. 4905.69(C); see, also, R. 4905.301(C). Initially, the commission promulgated Rule 4901:1-11-02(I), Ohio Adm. Code, which, in pertinent part, provides that: "* * * No amounts billed as capacity or demand charges may be included as cost of fuel" in a fuel cost adjustment clause. In accordance with commission requirements stated in Rule 4901:1-11-02(B)(1), Ohio Adm. code, a copy of Rule 4901:1-11-02 was incorporated into the tariff provisions of C SOE on file with the commission. It is this tariff provision that appellant contends precluded the recovery of demand costs through the fuel cost adjustment clause.
R.C. 4905.69(C) authorizes the commission to promulgate a rule that:
"Establishes incentives, in terms of costs that may be recovered by electric light companies pursuant to a fuel cost adjustment clause for the implementation and employment by such companies of efficient fuel procurement and utilization practices."
Rule 4901:1-11-02(I), Ohio Adm. Code, provides:
"`Fuel cost attributable to purchased power' means the actual identifiable fuel costs attributable to energy purchased, except for energy purchased on an economic dispatch basis for which the energy charge may be fully included to the extent that at the time the purchase decision is made the expected purchase energy cost per kilowatt-hour does not exceed the expected incremental fuel cost per kilowatt-hour for the purchaser's own generation which could substitute for the purchased power. The term `economic dispatch' as applied herein shall include all purchases of economy energy, that is, purchases for which the total energy charge is less than that for the purchaser's own generation, as a substitute for the purchaser's own higher cost energy. No amounts billed as capacity or demand charges may be included as cost of fuel. * * *"
Appellant's argument in this regard is not well taken. In Consumers' Counsel v. Pub. Util. Comm. (1978), 56 Ohio St.2d 319, 384 N.E.2d 245, this court upheld an order of the commission which authorized the inclusion of the entire cost of energy purchased on an economic dispatch basis in the fuel cost adjustment clause. Furthermore, the commission has previously determined, in case No. 76-166-ELFAC, dated August 11, 1976, that Rule 4901:1-11-02(I), formerly Section 26.02(I) of the commission's Code of Rules and Regulations, as applied to the demand costs associated with purchased energy, was not feasible because "it would discourage economic transactions which would lower the overall cost of electricity and thus benefit both the utility and the consumer." The commission stated further that it has been "clearly demonstrated that the effect of excluding all demand charges * * * would be to discourage, if not eliminate certain economic purchases of power, to the detriment of the consumer." Accordingly, the commission held the application of Rule 4901:1-11-02(I) unreasonable in those circumstances and authorized the inclusion of demand costs in the fuel cost adjustment clause. Thus the commission order in the instant cause, which results in a reduction of energy costs for the consumer and the utility is both reasonable and lawful. R.C. 4909.13.
In its final proposition of law, appellant urges that the commission's determination not to order a refund of $125,000 in fuel costs passed through the company's fuel cost adjustment clause (which was subsequently refunded to C SOE by the selling utility) was unreasonable and unlawful. The commission, however, refused the refund because the evidence adduced at the audit hearing demonstrated that C SOE erroneously neglected to charge $119,000 for net energy costs, which it could have passed through its fuel cost adjustment clause. The commission determined that the overcharge and the undercharge "results in a $6,000 difference, which is so minimal that the cost of administering the adjustment could exceed the refund."
A finding and order of the commission will not be disturbed by this court unless it appears from the record that the commission's determination is manifestly against the weight of the evidence and so clearly unsupported as to show misapprehension or mistake or willful disregard of duty. Cleveland Elec. Illuminating Co. v. Pub. Util. Comm. (1975), 42 Ohio St.2d 403, 330 N.E.2d 1 (paragraph eight of the syllabus); certiorari denied, 423 U.S. 986; Reynoldsburg Trucking, Inc. v. Pub. Util. Comm. (1978), 53 Ohio St.2d 201, 373 N.E.2d 1250. Under R.C. 4905.66(F), the commission is empowered to readjust utility rates when it determines that an error or inaccuracy has occurred and it is equitable to do so. In our opinion, the commission's finding and order in this regard is neither unreasonable nor unlawful.
R.C. 4905.66(F) provides:
"(1) Where the public utilities commission determines, under division (E) of this section, that an error or inaccuracy exists, the commission shall immediately order the company to readjust equitably the rates charged all its customers accordingly or order a refund. The commission shall set a reasonable period for the company to comply with its order.
"(2) Where the public utilities commission determines, as a result of the examination conducted under division (E) of this section, that an inaccuracy exists, the effect of which is that customers of an electric light company have been undercharged, the commission shall order the company to equitably adjust the rates charged to all its customers."
The order of the commission is affirmed.
Order affirmed.
CELEBREZZE, C.J., HERBERT, W. BROWN, P. BROWN, SWEENEY and WHITESIDE, JJ., concur.
HOLMES, J., not participating.
WHITESIDE, J., of the Tenth Appellate District, sitting for LOCHER, J.