Opinion
No. 78-15
Decided December 7, 1978.
Public Utilities Commission — Water utilities — Conditional emergency relief — Not abuse of discretion, when.
APPEAL from the Public Utilities Commission.
In September 1974, Seneca Hills Service Company, appellant herein, signed an agreement to purchase the water utility operations of the Tanglewood Water Company ("Tanglewood"). The transaction between the two public utilities was closed three months later. Seneca Hills began operations in the Tanglewood area in January 1975.
On July 6, 1976, Tanglewood filed an application for an emergency rate increase with the Public Utilities Commission, appellee herein. A month later, Tanglewood applied to the commission for approval of the 1974 transfer of its water utility operations to Seneca Hills. At the subsequent hearing on the rate increase, Tanglewood made a motion for a substitution of parties. The hearing examiner permitted Seneca Hills, as Tanglewood's successor in interest, to proceed with the application for rate relief. The hearing was later rescheduled for October 5, 1976, for a new hearing consolidating the rate and transfer applications. After holding the consolidated hearing, the commission issued an opinion and order on December 8, 1976, approving both the transfer and the emergency rate relief. However, there were conditions attached to that award. Seneca Hills was not allowed to bill at the emergency rate level for services provided from April 1 to October 1, 1977, unless it filed an application for a permanent rate increase prior to October 1, 1977.
Under Seneca Hills' billing practice, services provided from April to October were not billed until October. Therefore, the commission and the utility would have known whether the utility had filed a permanent rate increase application on time before the utility billed its customers.
By letter dated July 22, 1977, three weeks after the deadline for pre-filing notification of a permanent rate increase application, the utility notified the commission that it would not be able to meet the October 1 filing deadline and requested an extension. The commission issued an entry on September 29, 1977, denying that requested extension and directing that service for April 1 to October 1 be billed at the non-emergency rates. On October 11, 1977, Seneca Hills filed an application for rehearing and moved to stay the proceedings. At that time, Seneca Hills acknowledged that, prior to receiving the September 29 entry from the commission, it had billed its customers for the April to October period at the emergency rate level. The commission issued an entry on October 26 directing Seneca Hills to establish a separate account and to account for the difference in charges paid under the emergency rate as opposed to the lower permanent rate. Two weeks later, on November 9, 1977, the commission denied the utility's application for a rehearing and ordered Seneca Hills to refund to customers the amounts collected over the permanent rate in the April to October billing period.
Under the commission rule in effect at the time, Seneca Hills was required, at least 90 days prior to filing an application for a rate increase, to notify the commission and affected municipalities of its intent to file that application. Since the utility's deadline for filing the application was October 1, its deadline for filing a notice of intent, according to the commission, was July 1, 1977.
Indeed, according to the record, no such application has been filed.
The cause is now before this court on an appeal as of right.
Mr. Earl T. Longley and Mr. James H. Callard, for appellant.
Mr. William J. Brown, attorney general, and Mr. Marvin I. Resnik, for appellee.
The sole issue raised by the instant cause is whether the commission abused its discretion when it refused to extend the deadline in which to apply for a permanent rate increase and to allow emergency rate relief beyond March 31, 1977.
The power of the commission to grant emergency rate increases is set forth in R.C. 4909.16. That statute provides:
"When the public utilities commission deems it necessary to prevent injury to the business or interests of the public or of any public utility of this state in case of any emergency to be judged by the commission, it may temporarily alter, amend, or, with the consent of the public utility concerned, suspend any existing rates, schedules, or order relating to or affecting any public utility or part of any public utility in this state. Rates so made by the commission shall apply to one or more of the public utilities in this state, or to any portion thereof, as is directed by the commission, and shall take effect at such time and remain in force for such length of time as the commission prescribes." (Emphasis added.)
R.C. 4909.16 grants the commission the power, whenever it "deems it necessary," to determine both the need for an emergency rate increase and the length of time that increase will be in effect. The power to establish those rates and to place time limitations on them is, therefore, within the sound discretion of the commission. See Manufacturers Light Heat Co. v. Pub. Util. Comm. (1955), 163 Ohio St.2d 78; and Cambridge v. Pub. Util. Comm. (1953), 159 Ohio St. 88, paragraph one of the syllabus.
In its December 1976 order, the commission placed a time limit on Seneca Hills' right to emergency rate relief. Under that order the utility could not bill at the emergency rate for services provided after March 31, 1977, unless it applied for a permanent rate increase by October 1, 1977. The commission originally granted emergency relief and gave the utility time to apply for a permanent rate increase because it wanted to avoid burdening the utility's customers with the expense of multiple rate cases and because it feared that, without the results of certain engineering studies concerning capital improvements, Seneca Hills could not establish an accurate rate base. The commission limited that time, however, because it did not view "emergency rate relief as a substitute for permanent rate relief * * *."
More than nine months later, the commission refused to extend that deadline and to allow emergency relief beyond March 1977, apparently because it felt that the utility's customers would suffer more from the immediate cost of emergency rates applied without benefit of a permanent rate increase hearing than from the possible future expense of multiple rate hearings. (The commission's November 1977 entry explained that emergency rate relief is not a substitute for permanent rates and that the utility failed to complete its capital improvements and to compute that portion of its rate base within the time originally granted. The entry also concluded that the utility's Tanglewood customers were entitled to the benefit of a permanent rate increase hearing before paying additional emergency rates.)
Neither order — the first one placing a deadline on emergency relief or the second one refusing to extend that deadline — constituted an abuse of discretion. Emergency rate relief cannot be a substitute for permanent rate increases. The very language of R.C. 4909.16 makes that clear. Emergency rates are temporary. Moreover, once the utility failed to resolve its capital improvements problem within one deadline, the commission could reasonably determine that it might fail again within a second, and that its customers would suffer more from continuing to pay emergency rates without the benefit of a permanent rate increase hearing than from the future possibility of bearing the expenses of multiple rate cases. It is established law in Ohio that this court will not substitute its judgment for that of the commission unless the commission's order is unreasonable and unlawful. Cleveland Elec. Illuminating Co v. Pub. Util. Comm. (1976), 46 Ohio St.2d 105, 108; Ohio Bus Line v. Pub. Util. Comm. (1972), 29 Ohio St.2d 222; R.C. 4903.13.
The order of the commission being reasonable and lawful, it is hereby affirmed.
Order affirmed.
LEACH, C.J., HERBERT, CELEBREZZE, W. BROWN, P. BROWN, SWEENEY and LOCHER, JJ., concur.