Case Title: In re Application of Ohio Power Co.

Citation: 2015-Ohio-2056

Docket Number: 2012-2008

State: ohio

Court: Ohio Supreme Court

Date: 2015-06-02T00:00:00Z

Document:
[Until this opinion appears in the Ohio Official Reports advance sheets, it may be cited as In 
re Application of Ohio Power Co., Slip Opinion No. 2015-Ohio-2056.] 
 
 
 
NOTICE 
This slip opinion is subject to formal revision before it is published in 
an advance sheet of the Ohio Official Reports.  Readers are requested 
to promptly notify the Reporter of Decisions, Supreme Court of Ohio, 
65 South Front Street, Columbus, Ohio 43215, of any typographical or 
other formal errors in the opinion, in order that corrections may be 
made before the opinion is published. 
 
 
SLIP OPINION NO. 2015-OHIO-2056 
IN RE APPLICATION OF OHIO POWER COMPANY FOR APPROVAL OF A 
MECHANISM TO RECOVER DEFERRED FUEL COSTS ORDERED UNDER R.C. 
4928.144; OHIO POWER COMPANY, APPELLANT AND CROSS-APPELLEE; 
INDUSTRIAL ENERGY USERS-OHIO, APPELLEE AND CROSS-APPELLANT; PUBLIC 
UTILITIES COMMISSION, APPELLEE AND CROSS-APPELLEE. 
[Until this opinion appears in the Ohio Official Reports advance sheets, it 
may be cited as In re Application of Ohio Power Co., Slip Opinion  
No. 2015-Ohio-2056.] 
Public utilities—Commission’s order modifying electric-security plan after the 
plan expired violates R.C. 4928.143(C)(2)(a) by depriving the utility of its 
right to withdraw the modified electric-security plan—Orders affirmed in 
part and reversed in part. 
(No. 2012-2008—Submitted February 3, 2015—Decided June 2, 2015.) 
APPEAL and CROSS-APPEAL from the Public Utilities Commission, Nos. 11-4920-
EL-RDR and 11-4921-EL-RDR. 
____________ 
SUPREME COURT OF OHIO 
 
2
 
KENNEDY, J. 
I.  SUMMARY 
{¶ 1} In the orders on appeal, appellee and cross-appellee, Public Utilities 
Commission of Ohio (“PUCO” or “the commission”), approved a mechanism, 
called a phase-in recovery rider (“PIRR”), for appellant and cross-appellee, Ohio 
Power Company, to recover fuel costs that were incurred under the company’s 
first electric-security plan (“ESP”) but were deferred for future collection.  See In 
re Application of Columbus S. Power Co. & Ohio Power Co. for Approval of a 
Mechanism to Recover Deferred Fuel Costs Ordered Under R.C. 4928.144, Pub. 
Util. Comm. Nos. 11-4920-EL-RDR and 11-4921-EL-RDR (Aug. 1, 2012) (the 
“PIRR 
Order”), 
available 
at 
http://dis.puc.state.oh.us/
DocumentRecord.aspx?DocID=c3ec26df-e5b8-4e2a-9e8c-f1825680fef8, 
last 
accessed March 25, 2015.  In the order approving Ohio Power’s first ESP, the 
commission (1) authorized the recovery of “carrying charges”—a type of finance 
charge—on the deferred fuel costs until the costs were fully recovered, (2) set the 
rate to calculate carrying charges on the deferred fuel costs, and (3) authorized 
Ohio Power to recover the deferred fuel costs plus carrying charges from 2012 to 
2018.  See In re Application of Columbus S. Power Co. & Ohio Power Co. for 
Approval of an Elec. Sec. Plan, Pub. Util. Comm. Nos. 08-917-EL-SSO and 08-
918-EL-SSO (Mar. 18, 2009) (“ESP Order”), at 20-23, available at 
http://dis.puc.state.oh.us/DocumentRecord.aspx?DocID=b125aec6-ded7-4f5c-
b908-6520f2e0cb3f, last accessed March 25, 2015; PIRR Order at 17-20. 
{¶ 2} The commission’s PIRR Order modified the carrying-charge rate 
established in the ESP Order, cutting it by more than half.  This reduced Ohio 
Power’s recovery of carrying charges by over $130 million.  PIRR Order at 17-
19; April 3, 2012 Revised Staff Comments and Recommendations (“Revised Staff 
Report”) at 5-6, available at http://dis.puc.state.oh.us/DocumentRecord.aspx?
[Until this opinion appears in the Ohio Official Reports advance sheets, it may be cited as In 
re Application of Ohio Power Co., Slip Opinion No. 2015-Ohio-2056.] 
 
DocID=9203c7aa-348b-4d94-a961-efd24a568bb4 (last accessed March 25, 
2015). 
{¶ 3} On appeal, Ohio Power challenges the commission’s decision to 
reduce its carrying-charge recovery.  Ohio Power’s appeal raises one argument 
that has merit: the commission’s order violates R.C. 4928.143(C)(2)(a) by 
depriving the company of its right to withdraw the modified ESP.  Therefore, we 
reverse the commission’s order insofar as it reduces the carrying-charge rate. 
{¶ 4} Appellee and cross-appellant, Industrial Energy Users-Ohio 
(“IEU”), filed a cross-appeal,1 raising one issue for our consideration: the 
commission erred when it refused to reduce the PIRR to account for Ohio 
Power’s accumulated deferred income taxes.2  We hold that IEU’s cross-appeal is 
barred by collateral estoppel. 
II.  FACTS AND PROCEDURAL BACKGROUND 
{¶ 5} On March 18, 2009, the commission issued an opinion and order 
approving Ohio Power’s first ESP, to be in effect from 2009 to 2011.  The ESP 
Order established caps on how much Ohio Power could increase rates during each 
year of the plan in order to ensure rate stability and to mitigate the effect of rate 
increases on customers.  ESP Order at 22.  It did so under R.C. 4928.144, which 
authorizes “any just and reasonable phase-in of any electric distribution utility 
rate * * * as the commission considers necessary to ensure rate or price stability 
for consumers.”  To ensure that Ohio Power stayed under the rate caps, the 
commission directed it to phase in the rate increases approved in the ESP by 
deferring for future collection the portion of the fuel costs that exceeded the rate 
caps. 
                                                 
1 The Office of the Ohio Consumers’ Counsel also filed a cross-appeal, but we granted its 
application for dismissal of its appeal on January 20, 2015.  141 Ohio St.3d 1432, 2015-Ohio-130, 
23 N.E.3d 1177. 
2 IEU’s notice of cross-appeal raised three assignments of error.  IEU, however, failed to brief its 
second assignment of error.  And on December 18, 2014, we granted IEU’s motion to withdraw its 
third assignment of error.  141 Ohio St.3d 1414, 2014-Ohio-5543, 21 N.E.3d 1109. 
SUPREME COURT OF OHIO 
 
4
{¶ 6} R.C. 4928.144 also authorized the commission to allow Ohio Power 
to recover carrying charges on the fuel costs earned but not collected in each year 
of the ESP.  In its ESP application, Ohio Power proposed that carrying charges be 
calculated using the company’s Weighted Average Cost of Capital (“WACC”).  
IEU did not object to using the WACC for the calculation during the ESP 
proceedings, but other parties did.  Despite the objections, the commission 
accepted Ohio Power’s proposal and set the carrying-charge rate at the WACC.  
ESP Order at 20-21, 23. 
{¶ 7} As required by R.C. 4928.144, the ESP Order also provided that the 
deferred fuel costs would be collected through an unavoidable surcharge, meaning 
a charge imposed on both shopping and nonshopping customers.  And the 
commission established a recovery period of 2012 through 2018 for Ohio Power 
to recover the deferred fuel costs and carrying charges by increasing its rates.  
ESP Order at 22-23. 
{¶ 8} Various parties appealed from the ESP Order.  Yet no party 
challenged the commission’s decision to calculate carrying charges using the 
WACC.  In re Application of Columbus S. Power Co., 128 Ohio St.3d 512, 2011-
Ohio-1788, 947 N.E.2d 655. 
{¶ 9} This case began when Ohio Power filed an application with the 
commission to approve a mechanism to recover the accumulated deferred fuel 
costs from the first ESP period and the carrying charges.  As noted earlier, 
consistent with the ESP Order, Ohio Power sought to implement a mechanism in 
the form of a nonbypassable PIRR to be in effect from January 2012 through 
December 2018.  PIRR Order at 2; Application for Approval of Recovery 
Mechanism 
(Sept. 
1, 
2011) 
at 
¶ 
3-4, 
available 
at 
http://dis.puc.state.oh.us/DocumentRecord.aspx?DocID=fd450fd8-c987-4d1b-
b56e-3efddb0c14d1 (last accessed March 25, 2015). 
January Term, 2015 
 
5
{¶ 10} The commission approved, in part, Ohio Power’s PIRR application.  
The commission, however, deemed it necessary to modify the part of the ESP 
Order that established the WACC as the carrying-charge rate.  Specifically, the 
commission determined that the WACC rate would apply only during the ESP 
period (2009 to 2011).  But once Ohio Power began to recover deferred fuel costs 
from customers in 2012, the commission ordered, the company was to calculate 
carrying charges at the company’s long-term-cost-of-debt rate.  PIRR Order at 17-
19.  The commission’s decision to apply the long-term-cost-of-debt rate of 5.34 
percent, which was less than half the commission-approved WACC rate of 11.15 
percent, reduced Ohio Power’s recovery of carrying charges during the recovery 
period by over $130 million.  Id. at 7, 17; Revised Staff Report at 4-6.  The 
commission also rejected IEU’s request to reduce the deferred-fuel-cost balance 
to account for savings to Ohio Power from accumulated deferred income taxes 
(“ADIT”) during the ESP period.  PIRR Order at 19-20, 9-10. 
{¶ 11} Ohio Power and IEU filed timely applications for rehearing at the 
commission.  Each was denied.  Fifth Entry on Rehearing (Oct. 3, 2012), 
available at http://dis.puc.state.oh.us/DocumentRecord.aspx?DocID=b100f2d4-
6cc5-421c-ae9d-9075cc786a45 (last accessed March 25, 2015). 
{¶ 12} Ohio Power then filed a notice of appeal, challenging the 
commission’s modification of the carrying-charge rate.  IEU filed a notice of 
cross-appeal, arguing that the commission erred when it refused to reduce the 
deferred-fuel-cost balance to account for ADIT.  As will be discussed in detail 
below, Ohio Power has demonstrated one instance of reversible error in the 
commission’s order.  The issue raised by IEU’s cross-appeal, however, is barred 
by collateral estoppel. 
III.  STANDARD OF REVIEW 
{¶ 13} “R.C. 4903.13 provides that a PUCO order shall be reversed, 
vacated, or modified by this court only when, upon consideration of the record, 
SUPREME COURT OF OHIO 
 
6
the court finds the order to be unlawful or unreasonable.”  Constellation 
NewEnergy, Inc. v. Pub. Util. Comm., 104 Ohio St.3d 530, 2004-Ohio-6767, 820 
N.E.2d 885, ¶ 50.  We will not reverse or modify a PUCO decision as to questions 
of fact when the record contains sufficient probative evidence to show that the 
commission’s decision was not 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.  Monongahela Power Co. v. Pub. Util. 
Comm., 104 Ohio St.3d 571, 2004-Ohio-6896, 820 N.E.2d 921, ¶ 29.  The 
appellant bears the burden of demonstrating that the commission’s decision is 
against the manifest weight of the evidence or is clearly unsupported by the 
record.  Id. 
{¶ 14} Although this court has “complete and independent power of 
review as to all questions of law” in appeals from the PUCO, Ohio Edison Co. v. 
Pub. Util. Comm., 78 Ohio St.3d 466, 469, 678 N.E.2d 922 (1997), we may rely 
on the expertise of a state agency in interpreting a law where “highly specialized 
issues” are involved and “where agency expertise would, therefore, be of 
assistance in discerning the presumed intent of our General Assembly,” 
Consumers’ Counsel v. Pub. Util. Comm., 58 Ohio St.2d 108, 110, 388 N.E.2d 
1370 (1979). 
IV.  DISCUSSION 
A.  Ohio Power’s Appeal 
{¶ 15} Ohio Power’s appeal challenges the commission’s authority to 
modify the ESP Order issued in 2009.  According to Ohio Power, the commission 
has only limited authority to modify its prior orders and was prohibited from 
changing the carrying-charge rate established in the ESP Order in this case.  Ohio 
Power attacks the commission’s order on five grounds, but only two were 
properly preserved by being set forth in the notice of appeal: (1) res judicata 
barred the commission from modifying the ESP Order in this case and (2) the 
January Term, 2015 
 
7
commission modified the ESP Order after the plan had expired, depriving the 
company of its right to withdraw a modified ESP in violation of R.C. 
4928.143(C)(2)(a).  We hold that Ohio Power’s res judicata argument lacks merit, 
but we agree with its argument that the commission’s order violates R.C. 
4928.143(C)(2)(a). 
1.  The commission is entitled to modify a prior order, provided that it 
explains the change and the new regulatory course is permissible 
{¶ 16} We have instructed the commission to “respect its own precedents 
in its decisions to assure the predictability which is essential in all areas of the 
law, including administrative law.”  Cleveland Elec. Illum. Co. v. Pub. Util. 
Comm., 42 Ohio St.2d 403, 431, 330 N.E.2d 1 (1975), superseded on other 
grounds by statute as recognized in Babbit v. Pub. Util. Comm., 59 Ohio St.2d 81, 
89, 391 N.E.2d 1376 (1979).  This does not mean, however, that the commission 
may never revisit a particular decision, only that if the commission does change 
course, it must explain why.  In re Application of Columbus S. Power Co., 128 
Ohio St.3d 512, 2011-Ohio-1788, 947 N.E.2d 655, ¶ 52, citing, e.g., Util. Serv. 
Partners, Inc. v. Pub. Util. Comm., 124 Ohio St.3d 284, 2009-Ohio-6764, 921 
N.E.2d 1038, ¶ 18.  “When the commission has made a lawful order, it is bound 
by certain institutional constraints to justify that change before such order may be 
changed or modified.”  Ohio Consumers’ Counsel v. Pub. Util. Comm., 10 Ohio 
St.3d 49, 50-51, 461 N.E.2d 303 (1984).  The court has not set the explanatory 
hurdle very high.  In a case in which the commission did not follow its earlier 
precedent, we said that if the commission had put “[a] few simple sentences” in 
its order to explain why the earlier case was no longer controlling, it would have 
been sufficient.  Consumers’ Counsel, 16 Ohio St.3d 21, 21-22, 475 N.E.2d 786 
(1985). 
{¶ 17} The commission’s modification power, however, is not without 
limits.  “Modifying a regulatory scheme is not problematic in itself.  Agencies 
SUPREME COURT OF OHIO 
 
8
undoubtedly may change course, provided that the new regulatory course is 
permissible.”  Util. Serv. Partners, Inc. v. Pub. Util. Comm., 124 Ohio St.3d 284, 
2009-Ohio-6764, 921 N.E.2d 1038, ¶ 18.  And if the commission does see fit to 
depart from a prior order, the commission “must explain why,” and “the new 
course also must be substantively reasonable and lawful.”  In re Application of 
Columbus S. Power Co., 128 Ohio St.3d 512, 2011-Ohio-1788, 947 N.E.2d 655, 
¶ 52.  See also Fed. Communications Comm. v. Fox Television Stations, Inc., 556 
U.S. 502, 515, 129 S.Ct. 1800, 173 L.Ed.2d 738 (2009) (an agency “need not 
demonstrate to a court’s satisfaction that the reasons for the new policy are better 
than the reasons for the old one; it suffices that the new policy is permissible 
under the statute, that there are good reasons for it, and that the agency believes it 
to be better, which the conscious change of course adequately indicates” 
[emphasis deleted]). 
{¶ 18} In this case, the commission explained why it needed to modify the 
ESP Order.  The issue, then, is whether the commission’s new course is lawful 
and reasonable. 
2.  Ohio Power has not shown that the doctrine of res judicata applies here to 
bar the commission from modifying the ESP Order 
{¶ 19} Ohio Power’s first argument is that res judicata principles apply 
here to bar the commission from modifying the carrying-charge rate set in the 
ESP Order.  Ohio Power, however, has failed to explain why res judicata applies 
in this case. 
{¶ 20} In Ohio, the doctrine of res judicata includes both claim preclusion 
(historically known as estoppel by judgment) and issue preclusion (traditionally 
known as collateral estoppel).  See O’Nesti v. DeBartolo Realty Corp., 113 Ohio 
St.3d 59, 2007-Ohio-1102, 862 N.E.2d 803, ¶ 6, citing Grava v. Parkman Twp., 
73 Ohio St.3d 379, 381, 653 N.E.2d 226 (1995).  “These doctrines operate to 
preclude the relitigation of a point of law or fact that was at issue in a former 
January Term, 2015 
 
9
action between the same parties and was passed upon by a court of competent 
jurisdiction.”  Consumers’ Counsel v. Pub. Util. Comm., 16 Ohio St.3d 9, 10, 475 
N.E.2d 782 (1985).  Res judicata, whether claim preclusion or issue preclusion, 
applies to administrative proceedings that are of a judicial nature.  State ex rel. 
Schachter v. Ohio Pub. Emps. Retirement Bd., 121 Ohio St.3d 526, 2009-Ohio-
1704, 905 N.E.2d 1210, ¶ 29; Consumers’ Counsel at 10. 
{¶ 21} Ohio Power presents a single theory of legal error:  res judicata 
principles apply here to divest the commission of “jurisdiction to change or 
modify an adjudicatory determination made in a prior final order, especially one 
appealed to the Supreme Court of Ohio.”3  According to Ohio Power, the 
commission was estopped from modifying the carrying-charge rate in this case 
because it lost jurisdiction over the matter once it was finally adjudicated in the 
ESP case. 
{¶ 22} This claim need not detain us long.  Res judicata is an affirmative 
defense.  While raising the defense may preclude the commission from 
reconsidering an issue decided in an earlier order, it does not divest the 
commission of jurisdiction over the second proceeding.  State ex rel. Wilson-
Simmons v. Lake Cty. Sheriff’s Dept., 82 Ohio St.3d 37, 40, 693 N.E.2d 789 
(1998). 
{¶ 23} Ohio Power’s reliance on Cleveland Elec. Illum. Co. v. Pub. Util. 
Comm., 42 Ohio St.2d 403, 330 N.E.2d 1 (1975), and Consumers’ Counsel, 16 
Ohio St.3d 9, 475 N.E.2d 782, in this context is equally misplaced.  Cleveland 
Elec. did not involve res judicata or collateral estoppel.  And while we held that 
res judicata/collateral estoppel did apply in Consumers’ Counsel, we did not hold 
                                                 
3 Ohio Power abandons its jurisdiction theory on rebuttal in favor of a new legal theory: collateral 
estoppel must be applied to commission proceedings—without exception—whenever the 
commission seeks to reconsider a finding of fact made in a prior order.  Ohio Power is barred from 
raising new arguments for the first time in reply.  See Util. Serv. Partners, Inc. v. Pub. Util. 
Comm., 124 Ohio St.3d 284, 2009-Ohio-6764, 921 N.E.2d 1038, ¶ 54. 
SUPREME COURT OF OHIO 
 
10
in that case that the commission lacked jurisdiction over the matters under review.  
See id. at 10-11. 
3.  The commission’s order deprived Ohio Power of its right to withdraw its 
ESP application in violation of R.C. 4928.143(C)(2)(a) 
{¶ 24} Ohio Power argues that the commission’s orders in this case 
deprived it of its right under R.C. 4928.143(C)(2)(a) to withdraw its application 
for approval of the ESP after the commission decided to approve only a modified 
version of the ESP.  When considering an ESP application, R.C. 4928.143(C)(1) 
requires the commission to do one of three things: (1) approve, (2) modify and 
approve, or (3) disapprove the application.  Under R.C. 4928.143(C)(2)(a), if the 
commission issues an order that modifies and approves an application, the utility 
“may withdraw the application, thereby terminating it, and may file a new 
standard service offer.”  Ohio Power asserts that the commission deprived the 
company of the statutory right to withdraw the modified ESP, because the plan 
was modified well after it had expired.  We agree. 
{¶ 25} In the ESP Order, the commission determined that carrying charges 
on the deferred fuel costs would be calculated using Ohio Power’s WACC rate 
during the period when the fuel costs were deferred (2009 through 2011) and also 
during the period when Ohio Power would recover the deferred fuel costs (2012 
through 2018).  ESP Order at 20-21, 23.  In this case, the commission found it 
necessary to depart from the WACC rate that had been approved in the ESP 
Order.  The commission determined that the WACC rate would still apply during 
the deferral period, consistent with the ESP Order.  But once the recovery period 
began in 2012, the commission determined, Ohio Power should no longer use the 
WACC, but instead should calculate carrying charges at its long-term-cost-of-debt 
rate until the costs were fully recovered.  PIRR Order at 17-18. 
{¶ 26} Despite arguments to the contrary, the commission’s PIRR Order 
modified a previously approved term of Ohio Power’s first ESP, and thereby 
January Term, 2015 
 
11
reduced the company’s recovery of carrying charges by approximately $130 
million.  If the commission makes a modification to a proposed ESP that the 
utility is unwilling to accept, R.C. 4928.143(C)(2)(a) allows the utility to 
withdraw the ESP application.  The modification made below, however, occurred 
after the ESP had expired, making it impossible for Ohio Power to exercise its 
statutory right to withdraw the modified ESP.  Therefore, we find that the 
commission’s order violates R.C. 4928.143(C)(2)(a). 
a.  The commission’s reading of R.C. 4928.143(C)(2)(a) is unreasonable 
{¶ 27} The commission found that the statutory right to withdraw was not 
implicated in this case, because R.C. 4928.143(C)(2)(a) “specifically pertains to 
the Commission’s approval and modification of an application for an ESP.”  
(Emphasis added.)  Fifth Entry on Rehearing at 15.  Because this case does not 
involve approval of an ESP application, the commission determined that the 
statutory withdrawal provision “ha[d] no bearing on the outcome.”  Id. 
{¶ 28} We generally defer to the commission’s statutory interpretation, but 
only if it is reasonable.  See In re Application of Columbus S. Power Co., 134 
Ohio St.3d 392, 2012-Ohio-5690, 983 N.E.2d 276, ¶ 38.  R.C. 4928.143(C)(2)(a) 
provides that “[i]f the commission modifies and approves an application under 
division (C)(1) of this section, the electric distribution utility may withdraw the 
application  * * * .”  The commission determined that the withdrawal provision 
applies only when the commission modifies and approves an ESP application 
within the context of an ESP proceeding, but does not apply to later proceedings 
in which the commission modifies an order that had previously approved an ESP 
application.  We find the commission’s interpretation unreasonable. 
{¶ 29} What the commission overlooks is that when it modified the ESP 
Order in this case, it effectively modified the application that was approved by 
that order.  R.C. 4928.143(C)(1) requires the commission to issue an order when 
it modifies and approves an ESP application, which the commission did in the 
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12
first ESP proceeding.  The commission’s ESP Order approved the use of the 
WACC rate during the collection period, as proposed by Ohio Power in its ESP 
application.  Thus, when the commission modified the ESP Order in this case to 
prohibit the continued use of the WACC rate, it modified a term that was 
proposed in the company’s ESP application.  And because the modification of 
that term occurred after the ESP had expired, Ohio Power was unable to withdraw 
its ESP. 
{¶ 30} The commission’s interpretation nullifies the clear purpose of R.C. 
4928.143(C)(2)(a), namely, to allow a utility to withdraw its proposed ESP if it 
dislikes the commission’s modifications.  But broader problems exist with the 
commission’s reading.  As read by the commission, R.C. 4928.143(C)(2)(a) 
applies only when the commission is deciding the fate of the ESP application.  On 
this reading, the commission could modify an ESP at any time after the 
application has been approved—even while the ESP is still in effect—and the 
utility would have no recourse but to implement the change.  This would hardly 
be a “just and reasonable result,” R.C. 1.47(C). 
b.  The commission’s “ongoing supervision and jurisdiction” does not allow it 
to violate other statutory provisions 
{¶ 31} The commission also found that its “ongoing supervision and 
jurisdiction” over the rate phase-in allowed it to modify the ESP Order.  PIRR 
Order at 18; Fifth Entry on Rehearing at 15.  See R.C. 4905.04 et seq.; R.C. 
4928.144.  As discussed above, the commission does have authority to revisit and 
modify earlier regulatory decisions.  See generally Util. Serv. Partners, Inc. v. 
Pub. Util. Comm., 124 Ohio St.3d 284, 2009-Ohio-6764, 921 N.E.2d 1038, ¶ 18.  
The commission also has broad discretion under R.C. 4928.144 to authorize 
utilities to phase in rates.  See In re Application of Columbus S. Power Co., 129 
Ohio St.3d 568, 2011-Ohio-4129, 954 N.E.2d 1183, ¶ 10-11; In re Application of 
Ohio Power Co., 140 Ohio St.3d 509, 2014-Ohio-4271, 20 N.E.3d 699, ¶ 27. 
January Term, 2015 
 
13
{¶ 32} This authority, however, is not unlimited; the new regulatory 
course must also be permissible under the statutory scheme.  See In re Application 
of Columbus S. Power Co., 128 Ohio St.3d 512, 2011-Ohio-1788, 947 N.E.2d 
655, ¶ 52.  Fundamentally, “[t]he PUCO, as a creature of statute, has no authority 
to act beyond its statutory powers.”  Discount Cellular, Inc. v. Pub. Util. Comm., 
112 Ohio St.3d 360, 2007-Ohio-53, 859 N.E.2d 957, ¶ 51.  So whatever authority 
the commission has to modify the structure of the phase-in must be exercised in 
compliance with other relevant statutory provisions. 
c.  The commission’s reliance on In re Columbus S. Power Co., 129 Ohio 
St.3d 568, 2011-Ohio-4129, 954 N.E.2d 1183, is misplaced 
{¶ 33} On rehearing, the commission cited In re Columbus S. Power Co., 
129 Ohio St.3d 568, 2011-Ohio-4129, 954 N.E.2d 1183, as authority for 
modifying the ESP Order.  Fifth Entry on Rehearing at 14.  In the order under 
review in that case, the commission had exempted a charge—known as the 
economic-development rider—from the rate caps established in the earlier ESP 
order.  On appeal, we upheld the commission’s decision to modify the ESP order 
to exempt the rider from the rate caps, reasoning that the commission has (1) 
broad discretion to phase in rates under R.C. 4928.144 and (2) inherent authority 
to revisit and modify prior rate orders.  In re Columbus S. Power Co. at ¶ 7-12. 
{¶ 34} While we agree with the commission that similarities exist between 
the economic-development-rider case and this one, we nevertheless find this case 
distinguishable for two reasons.  First, the statutory right to withdraw a modified 
ESP in R.C. 4928.143(C)(2)(a) was not at issue in the economic-development-
rider case.  Second, we stated in the economic-development-rider case that the 
commission has discretion to revisit earlier regulatory orders and modify them 
prospectively, provided the new regulatory course is permissible.  In re Columbus 
S. Power Co. at ¶ 8.  Indeed, we upheld the commission’s order in that case 
because IEU—the appellant in that case—failed to demonstrate that the decision 
SUPREME COURT OF OHIO 
 
14
to modify the ESP order was unlawful or unreasonable.  Id.  In contrast, Ohio 
Power has shown here that the commission’s modification was unlawful. 
4.  Ohio Power has forfeited its remaining propositions of law 
{¶ 35} Ohio Power offers three other propositions of law: (1) the 
commission may not reverse factual findings made in a prior order, (2) the 
precedent and rationale relied on by the commission do not justify changing the 
ESP Order, and (3) the commission failed to consider the financial decisions 
made by Ohio Power in reliance on the ESP Order.  Ohio Power has forfeited the 
ability to challenge these alleged errors. 
{¶ 36} R.C. 4903.13 establishes that the procedure for seeking reversal of 
a commission order is through a notice of appeal “setting forth the order appealed 
from and the errors complained of.”  Ohio Power listed two assignments of error 
in its notice of appeal: (1) the commission’s modification of the ESP Order was 
barred by res judicata and collateral estoppel and (2) the commission deprived the 
company of its right to withdraw the ESP under R.C. 4928.143(C)(2)(a).  We 
therefore lack jurisdiction to consider Ohio Power’s remaining arguments.  
Cincinnati Gas & Elec. Co. v. Pub. Util. Comm., 103 Ohio St.3d 398, 2004-Ohio-
5466, 816 N.E.2d 238, ¶ 21; In re Complaint of Smith v. Ohio Edison Co., 137 
Ohio St.3d 7, 2013-Ohio-4070, 996 N.E.2d 927, ¶ 25-28. 
B.  IEU’s Cross-Appeal 
{¶ 37} IEU argues on cross-appeal that the commission erred when it 
failed to require Ohio Power to account for accumulated deferred income taxes 
(“ADIT”) when calculating the carrying charges.  This argument is barred, but 
understanding the argument requires a brief explanation of ADIT. 
1.  Background on ADIT 
{¶ 38} According to the Revised Staff Report, ADIT results when a fuel 
expense is incurred in a different period from the period in which a company 
collects revenue to pay the expense.  If the revenue and expense occur in the same 
January Term, 2015 
 
15
period, there is no tax impact, as the components will be treated the same for 
financial-reporting and tax-reporting purposes.  But where, as here, costs are 
incurred during one period and collected from ratepayers during another, federal 
tax laws allow the utility to deduct the fuel expense for income-tax purposes when 
it is incurred.  The result here was that Ohio Power was able to lessen its income-
tax burden during the deferral period.  For purposes of regulatory accounting, a 
utility records the deferred fuel costs as an expense for future recovery.  Thus, 
when the deferred fuel costs are recovered in rates, the company’s taxable income 
will increase and taxes then become due.  That is, ADIT represents taxes that are 
payable in the future.  Until then, the company reports ADIT in a separate account 
on its books.  Revised Staff Report at 7-11. 
2.  IEU’s accumulated deferred-income-tax argument is barred by collateral 
estoppel 
{¶ 39} IEU argues that ADIT reflects a temporary tax savings to the 
company and is a source of funds that the company can use until the taxes become 
payable.  According to IEU, the ADIT is a source of cost-free capital that is 
funded by ratepayers and not investors and, thus, Ohio Power should be required 
to reduce the deferred-fuel-costs balance to reflect that capital and thereby reduce 
the carrying charges.  The commission found that no ADIT adjustment was 
required for the purpose of calculating carrying charges.  PIRR Order at 19; Fifth 
Entry on Rehearing at 7-8.  On appeal, IEU argues that the commission’s failure 
to adjust deferral balances for ADIT violated generally accepted accounting 
principles, state policy, sound regulatory practices and principles, and precedent. 
{¶ 40} We hold that IEU’s argument is barred by collateral estoppel.  The 
doctrine of collateral estoppel serves to prevent the relitigation in a second action 
of an issue that was litigated and decided in a prior action involving the same 
parties.  Issue preclusion applies even if the causes of action differ. O’Nesti v. 
DeBartolo, 113 Ohio St.3d 59, 2007-Ohio-1102, 862 N.E.2d 803, at ¶ 7, citing 
SUPREME COURT OF OHIO 
 
16
Fort Frye Teachers Assn., OEA/NEA v. State Emp. Relations Bd., 81 Ohio St.3d 
392, 395, 692 N.E.2d 140 (1998).  See also Consumers’ Counsel v. Pub. Util. 
Comm., 16 Ohio St.3d at 10, 475 N.E.2d 782 (applying collateral estoppel to bar 
litigation of an issue in a second commission proceeding). 
{¶ 41} The requisite identity of parties and issue exists here.  This exact 
issue was litigated in Ohio Power’s first ESP case, and the commission found that 
R.C. 4928.144 barred using ADIT to reduce the deferred-fuel-costs balance.  ESP 
Order, at 21-24.  IEU was a party to the ESP proceedings, and it also raised 
challenges to the ESP Order on appeal.  Yet IEU never raised any objection to the 
commission’s ADIT ruling at the commission or on appeal to this court.  See In re 
Application of Columbus S. Power, 128 Ohio St.3d 512, 2011-Ohio-1788, 947 
N.E.2d 655.  And though there are exceptions to applying collateral estoppel to 
administrative proceedings, IEU offers no compelling reason why the doctrine 
should not be applied to this matter.  See Jacobs v. Teledyne, Inc., 39 Ohio St.3d 
168, 171, 529 N.E.2d 1255 (1988) (lead opinion); Set Prods., Inc. v. Bainbridge 
Twp. Bd. of Zoning Appeals, 31 Ohio St.3d 260, 263, 510 N.E.2d 373 (1987). 
{¶ 42} Therefore, we hold that IEU lost its opportunity to challenge the 
commission’s ADIT determination when it failed to object to that ruling in the 
first ESP case.  See Consumers’ Counsel v. Pub. Util. Comm. at 10.  Based on our 
determination, we do not decide whether the commission properly refused to 
adjust the deferred-fuel-costs balance to account for ADIT. 
V.  CONCLUSION 
{¶ 43} Ohio Power has shown that the commission violated R.C. 
4928.143(C)(2)(a) when it modified the terms of its previously approved ESP.  
Therefore, we reverse the commission’s orders on this issue and remand the cause 
to the commission for reinstatement of the WACC rate. 
January Term, 2015 
 
17
{¶ 44} As to the cross-appeal, we hold that collateral estoppel bars IEU’s 
challenge to the commission’s refusal to adjust the deferred-fuel-costs balance to 
account for ADIT.  Therefore, the cross-appeal is dismissed. 
Orders affirmed in part  
and reversed in part,  
and cause remanded. 
O’CONNOR, C.J., and LANZINGER, and FRENCH, JJ., concur. 
PFEIFER, O’DONNELL, and O’NEILL, JJ., dissent. 
____________ 
PFEIFER, J., dissenting. 
{¶ 45} Ultimately, a majority of this court concludes that the commission 
cannot change the carrying-charge rate on the deferred fuel costs because “the 
plan was modified well after it had expired.”  Majority opinion at ¶ 24.  But at its 
core, the modification does not affect Ohio Power Company’s electric-security 
plan (“ESP”) in any way.  The ESP has expired and cannot be changed.  The 
commission merely, after considering all the factors, determined that the rate of 
return that American Electric Power (“AEP”), the owner of Ohio Power, stands to 
receive during the recovery period is excessive. 
{¶ 46} When the commission approved the ESP, the economy was at its 
nadir and the commission was dealing with an economic environment riddled 
with uncertainty.  Based on what it knew then, it determined that an 11.15 percent 
rate of return, AEP’s weighted average cost of capital, was reasonable.  Several 
years later, after seeing the economy recover somewhat, but also seeing interest 
rates remain mired near zero, the commission has determined that that rate of 
return is excessive.  It is, of course, correct in that assessment.  At this time, it 
considers a rate of return of 5.34 percent, which corresponds with AEP’s historic 
cost-of-debt rate, to be reasonable.  I agree. 
SUPREME COURT OF OHIO 
 
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{¶ 47} The commission is not changing the ESP; nothing in its order 
affects the rate of return that AEP has hitherto received.  Instead, the commission 
has concluded that the rate of return should be adjusted going forward.  AEP 
would not be harmed in any way by a change in the rate of return.  It would 
continue to receive an excellent rate of return during the recovery period, even at 
the “mere” 5.34 percent ordered by the commission.  (It is unlikely that many 
members of the public that AEP serves would be unhappy receiving a guaranteed 
rate of return of 5.34 percent.)  Of course, a majority of this court has determined 
that AEP is entitled to the grossly excessive 11.15 percent, which is absurdly high 
given the current interest-rate environment. 
{¶ 48} My incredulity at the decision of this court is magnified because of 
the windfall that AEP recently received when it was allowed by this court to 
retain $368 million dollars of charges that the commission considered unjustified.  
In re Application of Columbus S. Power Co., 138 Ohio St.3d 448, 2014-Ohio-462, 
8 N.E.3d 863, ¶ 56.  Today, it receives another unwarranted $130 million.  These 
munificent windfalls do not materialize from thin air; they are commandeered 
from hardworking Ohioans.  How many Christmas gifts does this court believe 
AEP is entitled to?   
{¶ 49} I dissent. 
O’DONNELL and O’NEILL, JJ., concur in the foregoing opinion. 
____________ 
 
Matthew J. Satterwhite and Steven T. Nourse; Porter, Wright, Morris & 
Arthur, L.L.P., and Kathleen M. Trafford and Daniel R. Conway, for appellant 
and cross-appellee. 
 
McNees, Wallace & Nurick, L.L.C., Samuel C. Randazzo, Frank P. Darr, 
and Matthew R. Pritchard, for appellee and cross-appellant. 
January Term, 2015 
 
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Michael DeWine, Attorney General, William L. Wright, Section Chief, 
and Thomas W. McNamee and Ryan P. O’Rourke, Assistant Attorneys General, 
for appellee and cross-appellee. 
 
Whitt Sturtevant, L.L.P., Mark A. Whitt, and Andrew J. Campbell, urging 
reversal for amicus curiae, East Ohio Gas Company. 
____________