calfee, halter & griswold llp - ohio has also acknowledged, competition did not develop in the...
TRANSCRIPT
^Y Yµ`^ ^^ ?U^G I4)
IN THE SIJPIZEIVI_E (:OIJRT OF OHIO
The Kroger Co., et al.,
Appellants,
CaseNo. 2013-0521
Appeal froiu the Public UtilitiesCommission of Ohio
v
The Public Utilities Commission of ()hio.
Appellee,
and
Ohio Power Company,
Cross-Appellant.
Public Utilities Commission o#`OhioCase No. 11-346-EL-SSO,Case No. 11-348-EL,-SSO,Case No. 11-349-EL-AAM,Case NTo. 11-350-EL-AAM, In theNIattet° of theAI)plication of ColumhusSoutheYn Power Cony)anyx and OhioPower C.onzpany for^Authority toEstablish a Standarcl Service C)f,fer•.l'ztirsiaant to §4928: 143, Ohio Rev.Code,in the I*"orjn of'an Electric SectariXy, Plan,etcrl.
MERI'I' BRIEF OF ^1U1crJS CURIAETHE I)f1YTO:V' POWER. AND LIGHT COMPANY
IN SIJI'I'ORT OF APPELLEET:EIE PUBLIC UTILITIES COMMISSION OF O11IO
Judi L. Sobecki (0067186)THE, DAYTON POWER AND
LIGHT CC?MPANY1065 Woodman DriveDayton, OH 45432Telephone: (937) 259-7171Telecopier: (937) 259-7178Email: judi.sobecki^cz dplinc.com
Charles J. Faruki (0010417)(Counsel of Record)Jeffrey S. Sharkey (0067892)I'ARUKI IRELAND & COX P.L.L.500 Courthouse Plaza, S.W.10 North Ludlow StreetDayton, OI-I 4540?Telephone: (937) 2,27-3705Telecopier: (937) 227-3717Email: cfaruki,.^ficlaw.com
jsharkeyLa;ficlaw.com.
Attorneys for Amicus CuriaeThe Dayton Power and Light Company
,,^: %•3'.;
s ^r}£t
E.tPREi4Yf.. CO O O£+fsf
Mark S.Yrtrick (0039176)(Counsel of Record)Zachary D. Kravitz (0084238)TAFT STE`l'"I~INIUS & HOLLISTER, LLP65 E. State Street, Suite 1000Columbus, OH 43215-3413Telephone: (614) 221-2838Telecopier: (614) 221-2007Email: myurickrtJtaftlaw.com
zkravitz(a^taftl aw. com
Attorneys for Appellants`I'he Kroger Company
Saniuel C. Randazzo (00163186)(Counsel of Record)Frank P. Darr (0025469)Joseph E. Oliker (0086088)IvlatthewPritchard (0088070)MCNEES WALLACE & NORWICK LLC21 East State Street, 17th FloorColumbus, OH 43215Telephone: (614) 469-8000Telecopier: (614) 469-4653Email: samCymwncmh.cozn
fdarr, mwncmh.comj oliker(cvmwncmh. cornrnpritchard @m w racmh. c o m
Attorileys for AppellantIndustrial Energy U sers-Ohio
Michael L. K.u.rtc (0033350)(Counsel of Record)David F. Boehm (0021881)Jody Cohn (0085402)I3OEHM, KURTZ & LOWRY36 East Seventh Street, Ste. 1.510Cincinnati, OH: 45202Telephone: (513) 421-2255Telecopier: (513) 421-2.255Email: dboehm(,d,bkllawfirm.com
dboehmCq;bkllawfirrn. comj kylercohn(ir^bkllawfir m.. com
Attorneys for AppellantThe Ohio Energy Group
Mark A. Hayden, Esq. (0081077)FIRS'I'>;NERGY S.ERVICE C'OMPANY76 South Main StreetAkron, OH 44308Telephone: (330) 761-7735Telecopier: (330) 384-3875I;mail: haydenzn(a%lirstenergycorp.com
James F. Lang, Esq. (0059668)CALFEE, HALTER & GRISWOLD LLP1400 Key Bank Center800 Superior AvemieClevelarid, OH 44114Telephone: (216) 622-8200Telecopier: (216) 241-081.6Email: jlang`c%calfee.eom
N. "Trevor Alexander, Esq. (0080713)CALFEE, HALTER & GRISWOLD LLP1100 Fifth Third Ceiater21 E. State St.Colurnbus, OIT 43215-4243Telephone: (614) 621-7774Telecopier: (614) 621-0010Email: talexanderL calfee.com
David A. Ktztik, Esq. (0006418)JONES DAYNorth Point901 Lakeside AvenueCleveland. OI-1 44114'I'elephone: (216) 5 86-3 93 9Telecopier: (216) 579-0212Email: dakutikCcuj onesday. com
Attorneys for Appel(antFirstEnergy Solutions Corp.
Bruce J. Weston (0016973)Ohio Consumers' CounselMaureen R. Grady (0020847)(Counsel of Record)Terry L. Etter (0067445)Joseph P. Serio (0036959)Assistant Consumers' CounselOFFICE OF THE OHIO CONSUMERS'COUNTSEL10 West Broad Street, Suite 1800Columbus, OH 43215-3485Telephone: (614) 466-9567Telecopier: (614) 466-9475Email: [email protected]
etter@o cc. state . oh. usserio a^occ:.state.oh.us
Attorney s for AppellantOffice of the Ohio Consumers" Counsel
William L. Wright (0018010)Section Chief, Public Utilities SectionThomas McNamee (0017352)Assistant Attorney GeneralJohn H. Jones (0051913)180 East Broad Street, 6th FloorColumbus, OH 43215Telephone: (614) 466-4397Telecopier: (614) 644-8764Email: william.wright @uc.state.oh.us
thomas.mcname@puc. state. oh.usj ohn. j on e [email protected]. oh. us
Steven T. Nourse (0046705)(Counsel of Record)Matthew Satterwhite (0071972)American Electric Power Corporation1 Riverside Plaza, 29th FloorColumbus, OH 43215-2373Telephone: (614) 716-1608Telecopier: (614) 716-2014Email: [email protected]
mjsatterwhite cr aep.com
Daniel R. Conway (0023058)L. Bradfield Hughes (0070997)PORTER, WRIGHT, MORRIS &ARTHUR, LLP41 South High StreetColumbus, OH 43215Telephone: (614) 227-2270Telecopier: (614) 227-2100Email: [email protected]
Attorneys for Cross-AppellantOhio Power Company
Attorneys for AppelleePublic Utilities Commission of Ohio
TABLE OF CONTENTS
Page
TABLE OF CON"I'ENTS .................................................................................................... . .... .. i
TABLE OF AUTHORITIES ... ....................................................................... .... ...... ............ ii
INTEREST OF AMICUS CURIAE TFIE DAYTON POWERAND LIGHT COMPANY ...................... ........................................... ........................................ 1
STATEMENT OF FACTS .................................................................................................. ........ I
ARGUMENT..................................................... . ..... .... . ........... .. .... ..................... 6
1. STABILITY CHARGE ............................................................................ 7
A. THE STATUTORY ELEMENTS ....................,..............,................>............. 7
B. RELEVANT TO GENERATION SERVICE ................................................. 9
C. TRANSITION COSTS ...................................................................... ....... 10
II. ESP APPROVAL UNDER THE "MORE FAVORABLE IN THEAGGREGATE" TEST .......................................................................................... 11
CONCLUSION ....................... ..... .... . ..... . .............................. ............................. 14
i
TABL]E OF AUTHf)RITIES
I. CASES Page(s)
In re Application of Coluryebus S. Power Co., 128 Ohio St.3d 402, 2011-Ohio-958,945 N.E.2d 501 . ...... ......... ...............................................................................................2, 13
In reApplication of Coh-rmbus S. Power Co., 128 Ohio St.3d 512, 2011-Ohio-1788,947 N.E.2d 655 ....... ................ .. . ......................... ....................... . ... ... . .....2, 3
In re Cofnplaint of City of ReynUldsburK, 134 Ohio St.3d 29, 2012-Ohio-5270,979 N.E.2d 1229 ...................................................................................................................13
Elyria Foundry Co. v. Pub. Utils. Comtn'n of'Ohio, 114 Ohio St.3d 305, 2007-Ohio-4164,871 N.E.2d 1176 .................. ................ .. ......... ....... . ....... ... ..... .. ........ .3
Ohio Consumers' Counsel v. Pub. CtiIs. Comnz'n of Ohio, 109 Ohio St.3d 328,2006-Ohio-2110, 847 N.E.2d 1184......... ................... ......... ......... .......................................2
Ohio Consumers' Counsel v. Pub. Utils. Carycm'n of Ohio, 114 Ohio St.3d 340,2007-Ohio-4276, 872 N.E.2d 269 ............................................................. ...... ....... .2, 3
Rzepka v. City of Solon, 121 Ohio St.3d 380, 2009-Ohio-1353, 904 N.E.2d 870 .........................7
State ex rel. Asti V. Ohio Dep't of Youth Servs., 107 Ohio St.3d 262, 2005-Ohio-6432, 838N.E.2d 658 ........................... ..................... .. ......................... .. ............ .. ... .............. ..... ...... 7
State ex rel. I-Iamilton County Bd of Comm'rs. v. Hamilton County Court of Conamon Pleas,126 Ohio St.3d 111, 2010-Ohio-2467, 931 N.E.2d 98 ........ ............................ ...................7
Stutzman v. Madison County Bd. of Flections, 93 Ohio St.3d 511, 757 N.E.2d 297 .................
Sumanerville v. City of Forest Park, 128 Ohio St.3d 221, 2010-Ohio-6280, 943 N.E.2d 522 ...11
H. STATUTES
R. C. 1.52(A) ...................................,..................................................................... ....... .......11
R. C. 4903.10 .......................... ........... . ..... ..... 1
R. C. Chapter 4y28..... . ... .... ................. ......... ......... ............... ...................................3, 9
R. C. 4928.01(A)(27) ....................................................................................................... .........9
R. C. 4928.03 ........ ............................................:..................................................... ......... ...2
R. C. 492 8.141(A) .. . . . . . . . . .. .. . . . .. . . . . .. . . .. . ... . . .. .. ... .. . .. .. . . . . . . .. .. .. . . . . . .. . .. .. . . .. . . . 3
ii
R. C. 4928.142 .......................................................................................... .. ......... ........... .3
IZ. C. 4928.142(D) ........ ................. ......... ...... . .. .... .... .. ...............................3
R. C. 4928.142(D)(4) .... ..... .. ....................................................................................................4
R. C. 4928.143 .......... ............................................................................................... .......... .3
R. C. 4928.143(B)(2) ....................... .. ....... ... ... .. ...... ........ ..................... .........3
R. C. 4928.143(B)(2)(d) ......... .......................................................1 9 4, 5, 6, 7, 8, 9, 11, 14
R. C. 4928.143(C)(1) ..... .................................................................................... ..... .1, 6, 11, ].2
R. C. 492 8.34(A)(6) ........ .... .. . .. ................... ............ ......... ..... .............................2
R. C. 4928.38 .... .......... ........ .. ...........................................................................................10, 11
iii
INTEREST OF AMICUS CURIAE THE DAYTON POWER AND LIGHT COMPANY
The Dayton Power and Light Company ("DP&L") has an Electric Security Plan
("ESP") case that is currently pending before the Public Utilities Commission of Ohio, Case
No. 12-426-EL-:SSO. There was a three-week evidentiary hearing in that case in March 2013,
and the Commission issued an Opinion and Order approving DP&L's ESP application (with
modifications) on September 4, 2013. DP&L Appx. 1. Pursuant to R.C. 4903.10, various parties
have filed applications for rehearing, and as of the date of this brief, the Commission has not
decided those applications. Parties to DP&L's pending case have told DP&L that they expect
that case to be appealed to this Court.
DP&L filed this amicus brief for tAvo reasons. First, there are issues raised in this
appeal that are also raised in DP&L's pending case regarding (1) whether a stability charge is
lawful under R.C. 4928.143(B)(2)(d); and (2) whether an ESP "is more favorable in the
aggregate" than a Market Rate Offer under R.C. 4928.143(C)(1). The Commission's decision on
those two points was supported by the record, and the Court should defer to the factual findings
made by the Commission. DP&L thus urges the Court to affirm the Commission on those issues.
Second, the Court should be aware that, given certain distinctions between DP&L's pending ESP
case and this appeal, a decision in this case would not necessarily be applicable in a future appeal
in DP&L's ESP case.
STATEMENT OF FACTS
As the Court knows, the generation market in Ohio was deregulated. Ilowever, it
is important to know that the deregulated generation market has been volatile and unpredictable,
and in 2008, the General Assembly passed Senate Bill 221, which includes provisions that
protect both customers and utilities from the volatile and unpredictable nature of the market.
Specifically, starting January 1, 2001, a customer could acquire its generation
from either its utility or from a competitive provider.' The price that a utility could charge for
generation was frozen (with exceptions not relevant here) during a five-year Market
Development Period.2 After that five-year period expired, the utility's price was to be
deregulated -- a utility was permitted to charge a market-based rate.3
The expectation at the time that the deregulation legislation was passed was that
deregulation would lead to increased competition and lower prices in the generation market.
However, as this Court has acknowledged, "the cost of generating power increased significantly,
due primarily to increases in the costs of the underlying fuel sources."4 As a result, as this Court
has also acknowledged, competition did not develop in the generation market as expected.5
Consumers thus faced the prospect of increased prices when the rate freeze associated with the
Market Development Period expired after 2005, and utilities were free to charge market-based
rates.
' R.C. 4928.03.
2 R.C. 4928.34(A)(6).
3Ohio C'onsumers' Counsel v. Pub. Utils. Cosnm'ia of Ohio, 109 Ohio St.3d 328, 2006-Ohio-2110, 847 N.E.2d 1184,T 15, quoting prior version of R.C. 4928.14(A).
4.In reApplication of ColZClnbus S. Power Co., 128 Ohio St.3d 512, 2011.-Ohio-1788, 947 N.E.2d655, ¶ 3(internal quotation marks and citation omitted).
5Ohio ConsumeYs' Counsel v. Pub. Utils. Comna'n of'Ohio, 114 Ohio St.3d 340, 2007-Ohio-4276, 872 N.E.2d 269, T 14 ("the competitive market in DP&L's service territory had notdeveloped as the commission had expected"); In re Application of Colunabus S. Power Co.,201 1-Ohio-1788 at T 2.
2
To protect customers from the "price volatility and rate shock" that would occur if
customers were required to pay a market-based rate at the expiration of the Market Development
Period, the Commission approved Rate Stabilization Plans for the various Ohio utilities.6
Generally, those Rate Stabilization Plans extended the generation rate freezes for several years.
Although no provision in S.B. 3 expressly authorized the Commission to approve Rate
Stabilization Plans, this Court held that the Commission did have that power.7
In 2008, the General Assembly passed S.B. 221, which substantially amended
R.C. Chapter 4928. Customers retained their right to switch to an alternative generation
provider. However, S.B. 221 eliminated the requirement that utilities charge a market-based
rate.
Instead, S.B. 221 required Ohio utilities to offer generation service to customers
at a price that would be established in a standard service offer ("SSO"). R.C. 4928.141(A). The
SSO could be either a Market Rate Offer ("MRO") or an ESP. R.C. 4928.142; 4928.143. Under
an MRO, a utility would provide generation service at a price that was a blend of the utility's
then-existing rates and rates established through a competitive bidding process.
R.C. 4928.142(D). Elnder an ESP, a utility's rates would be set to allow the utility to implement
charges related to specific listed items. R.C. 4928.143(B)(2). S.B. 221 was thus designed to
6 Ohio Consufners' Counsel, 2007-Ohio-4276 at T, 15. Accord: Elyria Foundry Ca. v. Pub, Utils.Comm`aa of Ohio, 114 Ohio St.3d 305, 2007-Ohio-4164, 871 N.E.2d 1176, T, 3 ("In response tothe commission's concern over market prices at the end of the market-development period,FirstEnergy filed a 'rate-stabilization plan' aimed at preventing the expected rate shock of movingto market rates.").
7 In re Application of CUlurnbzss S. Powef° Co, 2011-Ohio-1788 at ¶ 4.
protect customers from the volatile and unpredictable nature of the generation market by
requiring utilities to provide generation service at a price set through an MRO or ESP.
It is important to understand that S.B. 221 also included provisions that would
protect utilities from the volatile and unpredictable nature of the generation market. For
example, the MRO statute authorizes the Commission to adjust the utility's rates "to address any
emergency that threatens the utility's financial integrity or to ensure that the resulting revenue
available to the utility for providing the standard service offer is not so inadequate as to result ..,
in a taking of property witliout compensation." R.C. 4928,142(D)(4).
Similarly, the ESP statute provides that an ESP may include a charge to allow a
utility to provide stable service:
"The plan may provide for or include, without limitation, any ofthe following:
Terms, conditions, or charges relating to limitations on customershopping for retail electric generation service, bypassability,standby, back-up, or supplemental power service, default service,carrying costs, amortization periods, and accounting or deferrals,including future recovery of such deferrals, as would have theeffect of stabilizing or providing certainty regarding retail electricservice. . . .°' (Emphasis added.)
R.C. 4928.143(B)(2)(d).
It is also important for the Court to understand that competition is currently
developing at a rapid rate that threatens DP&L's financial integrity. Competition has developed
principally because the price of natural gas has fallen significantly in the last several years (due
to the large finds of natural gas in this country), and many generating units use natural gas as a
4
fuel. It is thus much cheaper to operate those units, which has led to substantial decreases in the
market price for electric generation.
The decrease in generation prices has been good news for customers, and
competition and switching are occurring rapidly throughout much of Ohio. However, the
significant decrease in the price of generation now threatens the financial integrity of utilities --
like DP&L -- that rely principally upon coal-fired plants to generate electricity. Indeed, the
evidence in AEP's case and in DP&L`s pending ESP case demonstrated that they could not
maintain their financial integrity and could not provide safe and reliable service to customers
without a stability charge under R.C. 4928143(B)(2)(d).
For example, DP&L's Chief Financial Officer testified at DP&L's hearing that
DP&L's proposed stability charge was "the minimum that DP&L needs to allow it to satisfy its
obligations, operate efficiently so as to provide adequate and reliable service and otherwise
continue operating as an ongoing entity."g DP&.L's Director of R.egulatoiy Operations also
testified that DP&L's proposed stability charge was "important to the company's ability to
provide stable, safe, and reliable electric service."9 An expert in the field of economics and
finance explained further that DP&L's proposed stability charge "permits it to provide quality
service to its customers. Alternatively, removal of the [stability charge] will damage DP&L's
financial. position and integrity substantially, imperiling its ability to provide such quality service
$ Rebuttal Test, of C. Jackson, p. 8, available atIl:r,'dis.puc..state.oh.us/Tiff TaPI3f/A1001001 A13C2813(?2624G20013.pd
9 Rebuttal Test. of D. Seger Lawson, p. 23, available athttp: r!dis.puc. state.oh. uslTiff'I'oPDf/A 1001001 A 13 C26A94042D823 89.pdf
5
to its customers."10 This testimony supporting DP&L's proposed stability charge closely
resembles testimony that AEP filed in support of its request for the RSR.
In its Opinion and Order in DP&L's ESP proceeding, the Commission stated:
"[T]he Commission believes that [DP&L's stability charge] wouldhave the effect of stabilizing or providing certainty regarding retailelectric service. We agree with DP&L that if'itsfinancial integritybecomes further compromised, it may not be able to provide stableor certain retail electric senzice .... Although generation,transmission, and distribution rates have been unbundled, DP&L isnot a structurally separated utility; thus, the financial losses in thegeneration, transmission, or distribution business of DP&L arefinancial losses for the entire utility. Therefore, if one of thebusinesses suffers financial losses, it may impact the entire utility,adversely affecting its ability to provide stable, reliable, or saferetail electric service. The Commission finds that [DP&L'sstability charge] will provide stable revenue to DP&L for thepurpose of maintaining its financial integrity." (Emphasis added.)
DP&L Appx. 21-22.
The Commission made similar factual findings in its Order approving AEPs ESP.
For example, in its decision in AEP's case, the Commission found that the RSR "adequately
ensures AEP-Ohio can keep its base generation rates frozen and maintain its financial health"
and that a revenue target below that level "will be too low to support the certainty and stability
the RSR provides." FES Appx. 42. In addition, the Commission found that "the RSR will
ensure AEP-Ohio has sufficient funds to maintain its operations efficiently." FES Appx. 45-46.
ARGUMENT
As demonstrated below, the Court should affirm the Cvmmission's factual
findings that (i) AEP's stability charge satisfies the elements of R.C. 4328.143(B)(2)(d), and
10 Direct Test. of Dr. W. Chambers, p. 53, filed under seal.
6
(ii) AEP's ESP plan "is more favorable in the aggregate" than an MRO under
R.C. 4928.143(C)(7). The Commission's decisions on those two points were amply supported by
the record, and the Court should affirm those decisions.
In the alternative, the Court should be aware that there are legal and factual issues
presented in the pending DP&L case relating to those two issues that are different than the issues
in this appeal. This Court has repeatedly stated that "the cardinal principle ofjudicial restraint [is
that] if it is not necessary to decide more, it is necessary not to decide more." State ex rel.
Hamilton County Bcit of Conzrnrs v. Hamilton County Court of Comnaon Pleas, 126 Ohio St.3d
111, 2010-Ohio-2467, 931 N.E.2d 98, ¶ 39 (internal quotation marks and citations omitted).
AccoNd: Rzepka v. City ofSolon, 121 Ohio St.3d 380, 2009-Ohio-1353, 904 N.E.2d 870,'j 34
(same); State ex rel. Asti v. Ohio Dep°t ®f Youth Servs., 107 Ohio St.3d 262, 2005-Ohio-6432,
838 N.E.2d 658,34 (same). This Court should thus wait to decide the issues that are present in
DP&L's case but that are not present in this case, until those issues are before the Court.
1. STABILITY CHARGE
A. THE STATUTORY ELEMENTS
A charge under R.C. 4928.143(B)(2)(d) is lawful if it satisfies three criteria: (1) it
must be a"[t]erm[], condition[], or charge[]"; (2) it must "relat[e]" to one of the items listed in
that statute; and (3) it mixst "have the effect of stabilizing or providing certainty regarding retail
electric service." As a factual matter, the Commission found that AEP's stability charge - the
Rate Stability Rider ("RSR") -- met those criteria, and as sho"m below, the Court should affirm
those factual findings.
7
(1) "Term condition or charge": None of the Appellants disputes that AEP's RSR
is a term, condition or charge.
(2) "Relatin g, to": Under R.C. 4928.143(B)(2)(d), the RSR must be a charge:
"relating to Iimitatioiis on customer shopping for retail electricgeneration service, bypassability., standby, back-up, orsupplemental power service, defaztlt service, carrying costs,amortization periods, and accounting or deferrals, including futurerecovery of such deferrals...." (Emphasis added.)
The Commission found that the RSR related to "default service" and thus satisfies
the second criterion. FES Appx. 107. Appellants argue that AEP's RSR does not satisfy that
criterion. FES Brief, Proposition of Law No. 2, p. 17; OCC Brief, Proposition of Law No. 3,
pp. 21-28. The Court should affirm the Commission's factual finding on that issue for the
reasons stated by the Commission in that Entry.
If the Court were to conclude that AEP's RSR did not relate to default service,
then the Court should affirm the Commission's finding that a stability charge relates to
"bypassability," because such a charge is nonbypassable (i.e., both shopping and non-shopping
customers are required to pay it). FES Appx. 40-41, 45. Accoyd: DP&L Appx. 21 (finding that
DP&L's stability charge "related to bypassability" and that therefore "the second criterion of
Section 4928.143(B)(2)(d), Revised Code is satisfied").
(3) "Stabilizing or providing certainty re ag rding retail electric service": In AEP's
ESP proceeding, the Commission held that AEP's RSR satisfied the stabilizing or certainty
criterion. FES Appx. 40-41. Several Appellants argue that the Commission erred in reaching
that decision. FES Brief, Proposition of Law No. 2, pp. 15-18; IEU Brief, Proposition of Law
No. II, pp. 25-29; OCC Brief, Proposition of Law No. 3, pp. 28-30. The Court should affirm the
8
Commission's factual finding that the RSR will stabilize or provide certainty regarding retail
electric service for the reasons stated by the Commission.
In particular, in its decision in AEP's case, the Commission found that the RSR
"adequately ensures AEP-Ohio can keep its base generation rates frozen and maintain its
financial health" and that a revenue target below that level will "be too low to support the
certainty and stability the RSR provides." FES Appx. 42. In addition, the Commission found
that "the RSR will ensure AEP-Ohio has sufficient funds to maintain its operations efficiently."
FES Appx. 45-46. Similarly, in DP&L's case, the Commission found that denying DP&L's
request for a stability charge would affect DP&L's "ability to provide stable, reliable, or safe
retail electric service." DP&L Appx. 22 (emphasis added). These are findings of fact, and the
Court should affirm the Commission's factual finding that a stability charge will permit a utility
to provide stable and certain retail electric service.
B. RELATED TO GENERATION SERVICE
IEU argues that AEP's RSR is not lawful because it relates to generation service.
IEU Brief, Proposition of Law No. II, pp. 32-33. The Court should reject that argument because
R.C. Chapter 4928 expressly authorizes stability charges that are related to generation service.
Specifically, R.C. 4928.143(B)(2)(d) authorizes the Commission to approve a stability charge to
allow a utility to provide stable and certain "retail electric service," The term "retail electric
service" is defined in R.C. 4928.01 to include "generation service." R.C. 4925.01(A)(27).
IEUs' argument that the Commission cannot approve a charge to allow a utility to
provide stable generation service is thus incorrect as a matter of law. R.C. 4928.143(B)(2)(d)
expressly authorizes the Commission to approve charges to allow a utility to provide stable
9
"retail electric service," and "retail electric service" is defined in R.C. 4928>O1(A)(27) to include
"generation service."
In addition, the Court should be aware of the fact that there is evidence in DP&L's
case that DP&L's stability charge relates to distribution, transmission and generation service.
Specifically, DP&L is an integrated utility that owns distribution, transmission and generation
assets. DP&L Appx. 22. The Commission found that "financial losses in the generation,
transmission, or distribution business of DP&L are financial losses for the entire utility.
Therefore, if one of the businesses suffers financial losses, it may impact the entire utility. ....
DP&L Appx. 22. The Commission's findings in DP&L's pending case thus demonstrate that
DP&:L's stability charge relates to distribution, transmission and generation service because the
charge would permit DP&L to provide all of those services. The Commission did not address
that issue in the same way as part of its decision on AEP's stability charge, aiid the Court should
wait to decide that issue until the issue is before it.
C. TRANSITION COSTS
Several Appellants argue that AEP's RSR is unlawful because the RSR is a
transition charge, and R.C. 4928,38 bars the recovery of transition charges. FES Brief,
Proposition of Law No. 2, pp. 18-21; IEU Brief, Proposition of Law No, III, pp. 33-38; OCC
I3rief; Proposition of Law No. 2, pp. 14-19. The Commission correctlv rejected that argument in
its order approving AEP's ESP: "we reject the claim that the RSR allows for the collection of
inappropriate transition revenues or stranded costs that should have been collected prior to
December 2010 pursuant to Senate Bill 3, as AEP-Ohio does not argue its ETP did not provide
sufficient revenues." FES Appx. 41. The Court should affirm the Commission's finding for the
reasons stated by the Commission and by AEP in its brief-.
1a
In the alternative, assuming for the sake of argument that the stability charges
were transition charges, they would still be lawful because SB 221 was enacted after SB 3.
SB 3, wllich was enacted in 1999, provided that "[t]he commission shall not authorize the receipt
of transition revenues or any equivalent revenues by an electric utility except as expressly
authorized in sections 4928.31 to 4928.40 of the Revised Code." R.C. 4928.38. Nine years later,
the General Assembly passed SB 221, which included R.C. 4928.143(B)(2)(d).
If the Court were to conclude that the stability charges were barred by
R.C. 4928.38 (as transition charges) but were authorized under R.C. 4928.143(B)(2)(d) (as
stability charges), then the Court should conclude that R.C. 4928.143(B)(2)(d) controls because
it was enacted after R.C. 4928.38. It is well settled that if two statutes conflict, then the later-
passed statute controls. R.C. 1.52(A) ("If statutes enacted at the same or different sessions of the
legislature are irreconcilable, the statute latest in date of enactment prevails."); Summer-ville v.
City of Forest Park, 128 Ohio St.3d 221, 2010-Ohio-6280, 943 N.E.2d 522, at ¶ 33 (holding that
two statutes conflicted and that "the more recent ... statute... prevails"); Stutzman v. Madison
County Ba' ofElections, 93 Ohio St.3d 511, 517, 757 N.E.2d 297 (2001) ("the statute later in
date of enactment, prevails"). The Court should thus affirm the Commission's finding that AEP's
RSR is not a transition charge.
II. ESP APl'ROVAL UNDER THE "MORE FAVORABLE IN THEAGGREGATE" TEST
R.C. 4928.143(C)(1) provides that the Commission can approve an ESP only if it
"is more favorable in the aggregate" than an MRO. In its AEP Decision, the Commission found
that on a price basis, an MRO for AEP was expected to be $386 million more favorable than an
ESP. FES Appx. 84. The Commission nevertheless found that AEP's ESP passed the "more
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favorable in the aggregate" test because "non-cluantif able" benefits of AEP's ESP exceed the
$386 million price benefit of an MRO. FES Appx. 84-85.
Similarly, in DP&L's case, the Commission found that an MRO was more
favorable than an ESP on a quantitative basis "by approximately $250 million." DP&L
Appx. 50. The Commission nonetheless found that DP&L's ESP was "more favorable in the
aggregate" than an MRO due to non-quantifiable benefits of DP&L's ESP. DP&L Appx. 50-52.
As it did in AEP's case, the Commission found that DP&L's ESP provided numerous non-
quantifiable benefits, and that those non-quantifiable benefits exceeded any quantitative
advantage of an MRO for DP&L. DP&L Appx. 50-52.
Numerous Appellants argue that the Commission erred wlnen it held that AEP's
ESP passed the °rnore favorable in the aggregate" test. FES Brief, Proposition of Law No. 1,
pp. 7-14; IEU Brief, Proposition of Law No. I, pp. 11-23. The Appellants assert that the
Commission should not consider non-quantifiable benefits in conducting the test. DP&L has two
points to make in response.
First, the General Assembly could have drafted R.C. 4928.143(C)(1) so that an
ESP would pass the test only if the ESP was "more favorable on a quantifiable basis" than an
MRO. However, that is not what the General Assembly did. The General Assembly used the
phrase "more favorable in the aggregate," demonstrating that the Commission must consider
qualitative as well as quantitative costs and benefits.
Indeed, this Court has stated:
"[W]hile it is true that the commission must approve an electricsecurity plan if it is 'more favorable in the aggregate' than an
12
expected market-rate offer, that fact does not bind the commissionto a st-r•ict price comparison. On the contrary, in evaluating thefavorability of a plan, the statute instructs the commission toconsider'pricing and all other terms and conditions.' 'Thus, thecomnaission rnust consider more than price in determining whetheran electric security plan should be modified."
In Ye Application of'Columbus S. Power Co., 128 Ohio St.3d 402, 2011-Ohio-958, 945 N.E.2d
501, ¶ 27 (emphasis added; emphasis deleted) (citations omitted). Based on this Court's recent
precedent, it was thus necessary and appropriate for the Commission to consider qualitative
benefits.
Appellants also argue that there -vvas no evidence to support the Commission's
factual finding that the qualitative benefits of AEP's ESP exceeded the quantitative price benefit
of an MRO. The Court should reject that argument because it is, by definition, impossible to
quantify a qualitative benefit. There is simply no way to prove the value in dollars and cents of a
qualitative benefit with any degree of mathematical precision. The General Assembly charged
the Commission with deciding whether an ESP is "more favorable in the aggregate" than an
MRO, and the Commission is thus required to consider qualitative benefits. The Commission
identified the qualitative benefits of AEP's ESP, and explained why it believed that those benefits
exceeded the quantitative price benefit of an MRO. The Commission has man.y years of
experience addressing the deregulated generation market, and the General Assembly charged the
Commission to exercise its judgment to determine whether an ESP was more favorable than an
MRO "in the aggregate." The Court should defer to the Commission's factual findings and
judgment, and should affirm its decision that AEP's ESP is more favorable in the aggregate than
an MRO. In re Complaint of City of xeynoldsburg, 134 Ohio St.3d 29, 2012-Ohio-5270, 979
N.E,2d 1229, ¶ 18 ("We will not reverse or modify a PUCO decision as to questions of fact if the
record contains sufficient probative evidence to show that the commission's decision was not
13
manifestly against the weight of the evidence and was not so clearly unsupported by the record
as to show misapprehension, mistake, or willful disregard of duty. The appellant bears the
burden of demonstrating that the PUCO's decision is against the manifest weight of the evidence
or is clearly unsupported by the record.") (internal citation omitted).
Second, the Court should be aware that there are unique facts and evidence
presented in DP&L's case on this issue that were not presented the same way in the case below.
Of course, the Court should wait until DP&L's case comes before it to determine whether the
Commission's factual finding that DP&L's ESP is "more favorable in the aggregate" than an
MRO was supported by the evidence.
CONCLUSION
The Court should affirm the Commission's factual findings that AEP's RSR
satisfies the criteria list in R.C. 4928.143(B)(2)(d) and that AEP's ESP "is more favorable in the
aggregate" than an MRO. Those findings by the Commission are amply supported by the record,
and this Cotirt should defer to the Commission's factual findings. If the Court were to decide to
reverse the Commission's decision on either issue, then the Court should not decide the various
issues that are raised in DP&L's case but not in this case, until those issues come before the
Court.
14
Respectfully submitted,
4. ` ^Judi L. obecki (0067186)THV-bf1.YTON POWER AND
LIGHT COMPANY1065 Woodman DriveDayton, OH 45432Telephone: (937) 259-7171Telecopier: (937) 259-7178Email: [email protected]
C 15Charles J. Faruki (0010417)(Counsel of Record)Jeffrey S. Sharkey (0067892)FARUKI IRELAND & COX P.L.L.500 Courthouse Plaza, S.W.10 North Ludlow StreetDayton, OH 45402Telephone (937) 227-3705Telecopier: (937) 227-3717Email: cfaruki@,ficlaur.com
Attorneys for Amicus CuriaeThe Dayton Power and Light Company
15
CERTIFICA'TE OF SERVICE
I certify that a copy of the foregoing Merit Brief of Amicus Cuy°iae The Dayton
Power and Light Company in Support of Appellee T'he Public Utilities Commission of Ohio has
been served via electronic mail upon the following counsel of record, this 21st day of October,
2013:
Michael L. Kurtz (0033350)(Counsel of Record)David F. Boehm (002 i 881)Jody Cohn (0085402)BOEIIM, KURTZ & LOWRY36 East Seventh Street, Ste. 1510Cincinnati, OH 45202Telephone: (513) 421-2255Telecopier: (513) 421-2255Email: [email protected]
dboehm @bkll awfirm. [email protected]
Attorneys for AppellantThe Ohio Energy Group
Mark S. Yurick (0039176)(Counsel of Record)Zachary D. Kravitz (0084238)TAFT STETTLNIUS & HOLLISTER, LLP65 E. State Street, Suite 1000Columbus, OH 4321 5-3413Telephone: (614) 221-2838Telecopier: (614) 221-2007myurick@taftla`v.comzkravitz cr^taftlaw.com
Attorneys for AppellantsThe Kroger Company
Samuel C. Randazzo (0016386)(Counsel of Record)Frank P. Darr (0025469)Joseph E. Oliker (0086088)Matthew Pritchard (0088070)MCNEES WALLACE & NORWICK LLC21 East State Street, 17th FloorColumbus, OH 43215Telephone: (614) 469-8000Telecopier: (614) 469-4653Email: sam@mwncmh. com
[email protected] oli ker@inwncmh. commpri tchard @mwncmh. com
Attorneys for AppellantIndustrial Energy Users-Ohio
Mark A. Hayden, Esq. (0081077)FIRSTENERGY SERVICE COMPANY76 South. Main StreetAkron, OH 44308Telephone: (330) 761-7735Telecopier: (330) [email protected]
James F. Lang, Esq. (0059668)CALFEE, HALTER & GRISWOLD LLP1400 Key Bank Center800 Superior AvenueCleveland, O1-I 44114Telephone: (216) 622-8200Telecopier: (216) 241-0816jlang a-calfee.com
Steven T. Nourse (0046705)(Counsel of Record)Matthew Satterwhite(0071972)Anxerican Electric Power Corporation1 Riverside Plaza, 29th FloorColumbus, OH 43215-2373Email: [email protected]
Daniel R. Conway (0023058)L. Bradfield Hughes (0070997)PORTER, WR.IGI-1T, MORRIS &ARTHUR, LLP41 South High StreetColumbus, OH 43215Email: [email protected]
Attor:neys for Cross-AppellantOhio Power Company
Bruce J. Weston (0016973)Ohio Consumers' CounselMaureen R. Grady (0020847)(Counsel of Record)Terry L. Etter (0067445)Joseph P. Serio (0036959)Assistant Consumers' CounselOFFICE OF THE OHIO CONSUMERS'COUNSEL10 West Broad Street, Suite 1800Columbus, OH [email protected]. oh.usetter@occ. state. oh. [email protected]
Attorneys for AppellantOffice of the Ohio Consumers' Counsel
771847.1
N. Trevor Alexander, Esq. (0080713)CALFEE, HALTER & GRISWOLD LLP1100 Fifth Third Center21 E. State St.Columbus, OH 43215-4243Telephone: (614) 621-7774Telecopier: (614) [email protected]
David A. Kutik, Esq. (0006418)JONES DAYNorth Point901 Lakeside AvenueCleveland, OH 44114Telephone: (216) 586-3939Telecopier: (216) 579-0212dakutik@j onesday. cozn
Attorneys for AppellantFirstEnergy Solutions Corp.
William L. Wright (0018010)Section Chief, Public Utilities SectionThomas 11%IcNamee (00173 52)Assistant Attorney GeneralJohn H. Jones (0051913)180 East Broad Street, 6th FloorColumbus, OH 43215Email: [email protected]
thomas. mcnamee(d̂ ;puc. state. oh. usj ohn, j onescCvpuc. state, o h.us
Attorneys for AppelleePublic Utilities Commission of Ohio
2