Case Title: FirstEnergy Corp. v. Pub. Util. Comm.

Citation: 2002-Ohio-2430

Docket Number: 20010573

State: ohio

Court: Ohio Supreme Court

Date: 2002-06-05T00:00:00Z

Document:
[Cite as FirstEnergy Corp. v. Pub. Util. Comm., 95 Ohio St.3d 401, 2002-Ohio-2430.] 
 
 
 
FIRSTENERGY CORPORATION ET AL., APPELLANTS, v. PUBLIC UTILITIES 
COMMISSION OF OHIO ET AL., APPELLEES. 
[Cite as FirstEnergy Corp. v. Pub. Util. Comm., 95 Ohio St.3d 401, 2002-Ohio-
2430.] 
Public Utilities Commission — Electric companies — R.C. 4928.67 — Contract 
or tariff providing for net energy metering — Commission’s order 
modifying electric company’s net-generator provisions in its transition 
plan regarding the utility’s provision of competitive electric service in 
Ohio unreasonable and unlawful when the net-generator provisions 
complied with applicable statutory requirements and the commission’s 
net-metering rule. 
(No. 2001-0573 — Submitted February 5, 2002 — Decided June 5, 2002.) 
APPEAL from the Public Utilities Commission of Ohio, Nos. 99-1212-EL-ETP, 
99-1213-EL-ATA, and 99-1214-EL-AAM. 
__________________ 
 
ALICE ROBIE RESNICK, J. 
{¶1} 
With the passage of Am.Sub.S.B. No. 3 (“S.B. 3”) in 1999, the 
General Assembly enacted a comprehensive statutory scheme to implement 
competition in Ohio’s retail electricity market.  Most of the provisions of S.B. 3 
are contained in newly enacted R.C. Chapter 4928, and most provisions became 
effective on October 5, 1999.  R.C. 4928.31, part of S.B. 3, requires that each 
electric utility file a transition plan with the Public Utilities Commission of Ohio 
regarding the utility’s provision of competitive electric service in Ohio. 
{¶2} 
In December 1999, FirstEnergy Corp. (“FirstEnergy”), on behalf 
of its Ohio operating companies (Ohio Edison Company, the Cleveland Electric 
Illuminating Company, and the Toledo Edison Company), filed with the 
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commission its proposed transition plan together with applications for tariff 
approval.  Stipulated settlement agreements were entered into among the parties 
and evidentiary hearings and local public hearings were held.  These proceedings 
resulted in an opinion and order, dated July 19, 2000, in which the commission 
approved the settlement agreements and FirstEnergy’s transition plan as modified 
by the settlement agreements and the commission order, subject to final approval 
of FirstEnergy’s compliance tariffs to be filed pursuant to the order, and approved 
FirstEnergy’s proposed tariff amendments. 
{¶3} 
After informal review of FirstEnergy’s proposed compliance tariffs 
by interested parties and after informal comments by the parties, FirstEnergy 
modified its proposed compliance tariffs and made a final submission to the 
commission on August 28, 2000.  One of the compliance tariff provisions is the 
subject of this appeal:  the Net-Energy Metering Rider (the so-called August 
Rider) that FirstEnergy proposed for inclusion in the tariff of each of its Ohio 
operating companies.  By its entry, dated November 21, 2000, the commission 
found that FirstEnergy’s proposed August Rider should be modified as 
recommended by the commission’s staff, and ordered FirstEnergy to make those 
modifications.  The question in this appeal as of right is whether, as claimed by 
FirstEnergy, the commission acted unlawfully and unreasonably in issuing its 
November 21, 2000 entry, which failed to approve FirstEnergy’s proposed August 
Rider and, instead, ordered modifications to it. 
I 
Net-Metering Requirements 
{¶4} 
S.B. 3 included a provision requiring retail electric service 
providers to develop a standard contract or tariff providing for net metering, a 
service introduced in S.B. 3.  R.C. 4928.67.  The term “net metering” is defined as 
“measuring the difference in an applicable billing period between the electricity 
supplied by an electric service provider and the electricity generated by a 
January Term, 2002 
 
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customer-generator which is fed back to the electric service provider.”  R.C. 
4928.01(A)(31).  A customer-generator is a user of a net-metering system.  R.C. 
4928.01(A)(30).  A net-metering system is a facility for the production of 
electrical energy that (a) uses as its power source either solar power, wind, 
biomass, landfill gas, or hydropower, or uses a microturbine or fuel cell; (b) is 
located on a customer-generator’s premises; (c) operates in parallel with the 
electric utility’s transmission and distribution facilities; and (d) is intended 
primarily to offset part or all of the customer-generator’s requirements for 
electricity.  R.C. 4928.01(A)(32).  As FirstEnergy points out, a customer-
generator may consume electricity from an electric service provider during one 
period of time but feed back the electricity that is generated in excess of 
consumption in another period. 
{¶5} 
Under R.C. 4928.67, the charges associated with net metering are 
determined by reference to the charges in the underlying tariff rate schedules 
under which a customer takes electric service.  As a result, for ease of 
administration, FirstEnergy chose to provide for net metering through a tariff 
rider, rather than create a separate tariff or a separate set of tariff schedules 
applicable solely to net metering.  FirstEnergy filed its proposed rider as a part of 
its transition plan filing in December 1999, and supplemented its December filing 
by submitting a revised net-metering rider in April 2000 (the so-called April 
Rider).  On April 6, 2000, pursuant to R.C. 4928.11, the commission adopted a set 
of rules entitled “Electric Service and Safety Standards” to be included as Ohio 
Adm.Code Chapter 4901:1-10. 
{¶6} 
Ohio Adm.Code 4901:1-10-28, the net-metering rule, includes 
requirements for meters:  “Net metering shall be accomplished using a single 
meter capable of registering the flow of electricity in each direction.  A 
customer’s existing single-register meter that is capable of registering the flow of 
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electricity in both directions satisfies this requirement.”  Ohio Adm.Code 4901:1-
10-28(C). 
{¶7} 
As FirstEnergy points out, under the net-metering rule, a customer-
generator could use a meter with a wheel showing electrical usage by movement 
both forward (to show consumption) and backward (to show generation being 
supplied to the electric distribution company).  Such a meter shows the net flow 
of electricity but cannot show separately the amounts of electricity that flowed in 
each direction as would the type of meter that would have been required under 
FirstEnergy’s April Rider, and as FirstEnergy claimed is required by R.C. 
4928.67(A)(2). 
{¶8} 
As a result of the commission’s net-metering rule and in 
consequence of the commission’s July 29, 2000 order, FirstEnergy revised its 
April Rider and submitted its August Rider as a part of its proposed compliance 
tariffs.  The August Rider varied from the April Rider in three relevant respects:  
First, it complies with the commission’s net-metering rule, permitting a customer-
generator to use a single meter that measures the net flow of electricity, so long as 
the meter’s register runs both forward and backward, eliminating the necessity of 
installation of a new meter.  Second, the August Rider eliminates the April 
Rider’s requirement that the customer-generator pay distribution, transmission, 
and ancillary charges to FirstEnergy upon electricity provided to FirstEnergy.  
Third, the August Rider credits customer-generators for all unbundled charges 
contained in the underlying service tariff with respect to the electricity they 
supply, to the extent that it offsets their consumption for a given period. 
II 
August Rider 
Commission-ordered Modifications 
{¶9} 
On November 21, 2000, the commission issued an entry that 
disapproved the August Rider and, instead, ordered FirstEnergy to modify it as set 
January Term, 2002 
 
5 
forth in Attachment B to the entry.  While FirstEnergy disagrees with the 
necessity or desirability of most of the ordered modifications, this appeal deals 
only with modifications respecting the assessment of charges and the allowance 
of credits to net generators, i.e., those customer-generators that generate more 
electricity than they consume. 
{¶10} FirstEnergy’s proffered August Rider credited net generators only 
with the applicable generation charge of the underlying service tariff, based on the 
amount of electricity they supplied in excess of the amount they consumed in a 
given time period.  The commission-ordered modifications would obligate 
FirstEnergy to credit a net generator not only for the generation charges for 
electricity it supplied in excess of its consumption, but for additional amounts 
equivalent to the charges for the following costs: transmission, distribution, 
ancillary services, transition (the regulatory transition charge and the generation 
transition charge), the Universal Service Fund, and the Energy Efficiency Fund.  
In this appeal, FirstEnergy takes issue only with the ordered modifications of its 
August Rider that would require FirstEnergy to pay or credit to a net generator the 
foregoing charges in addition to the electric generation charge. 
III 
Review of the Order 
{¶11} This appeal does not turn on factual determinations, either as to the 
adequacy of, or the weight to be accorded to, the record evidence.  Rather, it 
involves questions of law.  This court has complete and independent power of 
review as to questions of law.  See, e.g., Luntz Corp. v. Pub. Util. Comm. (1997), 
79 Ohio St.3d 509, 512, 684 N.E.2d 43, 45.  The determination for the court in 
this appeal is whether the commission acted unlawfully or unreasonably in 
ordering the net-generator modifications to FirstEnergy’s August Rider.  R.C. 
4903.13 provides, “A final order made by the public utilities commission shall be 
reversed, vacated, or modified by the supreme court on appeal, if, upon 
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consideration of the record, such court is of the opinion that such order was 
unlawful or unreasonable.” 
{¶12} The commission argues that R.C. 4928.67 controls and compelled 
its adoption of the net-metering rule, Ohio Adm.Code 4901:1-10-28, and its order 
of modifications of the net-generator provisions of FirstEnergy’s August Rider.  
FirstEnergy agrees that R.C. 4928.67 and the net-metering rule control, but 
disagrees that they compelled the ordered modifications of the August Rider.  
Nevertheless, while FirstEnergy’s April Rider did not, FirstEnergy’s August 
Rider did comply with the terms of the net-metering rule, as adopted by the 
commission. 
{¶13} R.C. 4928.67 and the commission’s net-metering rule speak in 
terms of measuring and charging or crediting for “electricity” produced or 
consumed.  The August Rider as submitted provides for FirstEnergy’s crediting or 
refunding to a net generator of the “energy charges of the unbundled generation 
component of the appropriate rate schedule.”  In other words, FirstEnergy must 
credit or pay to a net generator only the tariff charges for generation of the 
electricity by the net generator and supplied to FirstEnergy.  The net-generator 
provisions of the August Rider speak solely in terms of electricity generated and 
supplied, as they should.  A net-generator customer of FirstEnergy only generates 
and supplies electricity; it does not provide transmission, distribution, or ancillary 
services.  It has no allowable transition costs for which transition charges are 
assessed, and is not responsible for paying into the Universal Service Fund or the 
Energy Efficiency Fund.  Yet the commission-ordered modifications to the net-
generator provisions of the August Rider would make FirstEnergy liable for 
payment or crediting of all of those additional charges, in conflict with several 
provisions of the Revised Code in addition to R.C. 4928.67(B)(2). 
{¶14} First, electric utilities have a right to receive transition revenue 
through the imposition of a transition charge “billed on each kilowatt hour of 
January Term, 2002 
 
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electricity delivered to the customer.”  R.C. 4928.37(A)(1)(b).  This right is 
contingent only upon the electric utility demonstrating to the commission’s 
satisfaction in a transition case that the utility incurred just and reasonable 
transition costs that meet the criteria set forth in R.C. 4928.39.  These costs 
represent regulatory assets and other costs incurred by the utility under regulation 
that will not be recovered in a competitive environment.  R.C. 4928.39(A) 
through (D).  There is no counterpart to these costs that the customer-generator 
has or will incur, and the legislature makes clear that the utility “shall receive” the 
transition revenues to which the commission has deemed it to be entitled.  R.C. 
4928.37(A)(1). 
{¶15} However, in its November 21, 2000 entry, the commission ordered 
FirstEnergy to pay these revenues to net generators on the electricity supplied by 
them.  Instead of conforming to the statutory mandate that the utility “shall 
receive” its transition revenues, the commission would require the utility to pay 
transition charges to the customer-generator.  This is contrary to law and is 
unreasonable. 
{¶16} Second, the Energy Efficiency Fund rider charge imposed by R.C. 
4928.61 is required to be assessed on all retail electric distribution rates.  It is a 
uniform amount statewide, and it is determined by dividing an aggregate revenue 
target for a given year by the number of customers of electric distribution utilities 
in Ohio in the prior year.  R.C. 4928.61(B)(1).  Electric utilities such as 
FirstEnergy “shall remit” the revenues derived from this rider to the Ohio Director 
of Development on a quarterly basis.  R.C. 4928.61(C)(1).  Not only does the 
commission’s order prevent FirstEnergy from collecting this revenue from net 
generators and remitting it to the state, but it also mandates that FirstEnergy pay 
this revenue to net generators for their own use, thereby decreasing the amount of 
funds available for economic development in the state. 
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{¶17} Third, the Universal Service Fund rider required by R.C. 4928.52 
“shall” be a rider on all retail electric distribution service rates.  R.C. 4928.52(A).  
The statute requires that the USF rider be set in such a manner “so as not to shift 
among the customer classes of electric distribution utilities the costs of funding 
low-income customer assistance programs.”  R.C. 4928.52(C).  Not only does the 
commission’s order prevent FirstEnergy from collecting this revenue from net 
generators, it also mandates that FirstEnergy pay this revenue to net generators for 
their own use. 
{¶18} Fourth, transmission, distribution, and ancillary services charges in 
a FirstEnergy rate schedule are designed to compensate it for the cost of facilities 
and other costs incurred in providing those services.  See R.C. 4928.34(A)(1) 
through (3); R.C. 4928.01(A)(1); Ohio Adm.Code 4901:1-20-03(C)(2).  A 
customer-generator, whether a net consumer or a net generator, incurs none of 
these costs.  The customer-generator provides no facilities or equipment to 
support the utility distribution or transmission system.  Instead, it relies on the 
utility’s facilities to feed back the electricity produced.  Nevertheless, the 
commission’s order directs FirstEnergy to pay net generators for the costs 
FirstEnergy incurs in transmitting and distributing the net amount of electricity 
the generator supplies to FirstEnergy. 
IV 
Conclusion 
{¶19} Based on the foregoing, we hold that FirstEnergy’s August Rider, 
unmodified as to its net-generator provisions, complied with applicable statutory 
requirements and the commission’s net-metering rule and that the commission’s 
order to modify its net-generator provisions was unlawful and unreasonable under 
R.C. 4903.13.  Therefore, we reverse the order of the commission and remand 
with instructions that the commission approve FirstEnergy’s August Rider 
without modification of its net-generator provisions. 
January Term, 2002 
 
9 
Order reversed 
and cause remanded. 
 
MOYER, C.J., DOUGLAS, F.E. SWEENEY, PFEIFER, M.L. RESNICK and 
LUNDBERG STRATTON, JJ., concur. 
 
MELVIN L. RESNICK, J., of the Sixth Appellate District, sitting for COOK, J. 
__________________ 
 
Arthur E. Korkosz, Stephen L. Feld and James W. Burk; Calfee, Halter & 
Griswold, L.L.P., and James F. Lang, for appellants. 
 
Betty D. Montgomery, Attorney General, Section Chief Duane William 
Luckey, William L. Wright and Thomas G. Lindgren, Assistant Attorneys 
General, for appellee. 
 
Kelso Starrs & Associates and Thomas J. Starrs, urging affirmance for 
amici curiae American Solar Energy Society, American Wind Energy 
Association, and Solar Energy Industries Association. 
 
David C. Rinebold, urging affirmance for amicus curiae Ohio Partners for 
Affordable Energy. 
 
William Ondrey Gruber, urging affirmance for amicus curiae Ohio 
Environmental Council. 
 
Robert S. Tongren, Ohio Consumers’ Counsel, and Colleen L. Mooney, 
Assistant Consumers’ Counsel, urging affirmance for amicus curiae Ohio 
Consumers’ Counsel. 
__________________