Case Title: Ohio Consumers' Counsel v. Pub. Util. Comm.

Citation: 2006-Ohio-5789

Docket Number: 20050518 and 20050946

State: ohio

Court: Ohio Supreme Court

Date: 2006-11-22T00:00:00Z

Document:
[Cite as Ohio Consumers' Counsel v. Pub. Util. Comm., 111 Ohio St.3d 300, 2006-Ohio-5789.] 
 
 
OHIO CONSUMERS’ COUNSEL, APPELLANT, v. PUBLIC UTILITIES COMMISSION 
OF OHIO ET AL., APPELLEES. 
[Cite as Ohio Consumers’ Counsel v. Pub. Util. Comm., 111 Ohio St.3d 300, 
2006-Ohio-5789.] 
Electric utilities – Restructuring – Retail market competition – Rate-stabilization 
plan – Inclusion of alternative proposal in motion for rehearing did not 
require separate new rate application – Commission violated R.C. 
4903.09 by approving certain charges on rehearing and modifying its 
previous order without record support  or statement of reasons – 
Competitive bidding process in plan satisfies R.C. 4928.14(B) and Ohio 
Adm.Code 4901:1-35 – Commission erred in denying discovery of side 
agreements made by parties to stipulated rate-stabilization plan. 
(Nos. 2005-0518 and 2005-0946 – Submitted April 25, 2006 – Decided 
November 22, 2006.) 
APPEAL from the Public Utilities Commission of Ohio, Nos. 03-93-EL-ATA, 03-
2079-EL-AAM, 03-2081-EL-AAM, and 03-2080-EL-ATA. 
____________ 
PFEIFER, J. 
Background 
{¶ 1} This is an appeal as of right by appellant, Ohio Consumers’ 
Counsel (“OCC”), from orders of the Public Utilities Commission of Ohio 
(“commission” or “PUCO”) in case Nos. 03-93-EL-ATA, 03-2079-EL-AAM, 03-
2081-EL-AAM, and 03-2080-EL-ATA.  Cincinnati Gas & Electric Company 
(“CG & E”) was the applicant in all four cases, and OCC and Industrial Energy 
Users-Ohio (“IEU-O”) were intervening parties.  CG & E and IEU-O are 
intervening appellees in this appeal. 
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{¶ 2} Am.Sub.S.B. No. 3, 148 Ohio Laws, Part IV, 7962 (“S.B. 3”) 
restructured Ohio’s electric-utility industry to increase retail competition in the 
generation component of electric service.  S.B. 3 required each Ohio electric 
utility to file a transition plan with the commission that included a rate-
unbundling plan providing for separation of the generation, transmission, and 
distribution components of electric service.  See R.C. 4928.31.  S.B. 3 provided 
for a transition period, termed the “market development period,” during which an 
electric utility’s rates were subject to regulatory requirements.  The maximum 
transition period permitted by statute was five years, ending December 31, 2005.  
R.C. 4928.01(A)(17) and (29) and 4928.40. 
{¶ 3} On August 31, 2000, the commission approved CG & E’s 
transition plan.  In re Application of Cincinnati Gas & Electric Company for 
Approval of its Electric Transition Plan, etc., case Nos. 99-1658-EL-ETP et seq.  
The order provided for a market development period ending no earlier than 
December 31, 2005, for residential customers.  The market development period 
for nonresidential customers was to end when 20 percent of the load of each such 
class switched the purchase of its generation supply, but no later than December 
31, 2005, the maximum transition period permitted by statute.  See R.C. 
4928.40(B)(2). 
{¶ 4} On January 10, 2003, CG & E filed an application to modify its 
nonresidential generation rates to provide for market-based-standard-service-offer 
pricing and to establish an alternative competitive-bid process after its market 
development period ended.  In re Application of Cincinnati Gas & Electric 
Company to Modify its Nonresidential Generation Rates to Provide for Market-
Based Standard Service Offer Pricing, etc., case No. 03-93-EL-ATA.  Numerous 
parties intervened in that case, including OCC and IEU-O.  The commission 
consolidated that case with other related CG & E applications, case Nos. 03-2079-
January Term, 2006 
3 
EL-AAM, 03-2081-EL-AAM, and 03-2080-EL-ATA (collectively, the “rate-
stabilization-plan cases”). 
{¶ 5} On December 9, 2003, the commission advised CG & E to file a 
“rate stabilization plan” as part of the proceedings because the competitive retail 
market for electric generation had not fully developed in the CG & E territory.  
On April 22, 2004, a public hearing was held in Cincinnati.  An evidentiary 
hearing commenced on May 17, 2004, but was adjourned because of ongoing 
settlement discussions.  On May 19, 2004, CG & E presented a stipulation it had 
reached with several, but not all, of the parties to the proceedings that, if 
approved, would resolve all of the issues in the rate-stabilization-plan cases.  The 
parties to the stipulation included, among others, CG & E, the commission staff, 
and IEU-O.  OCC opposed the stipulation. 
{¶ 6} On May 20, 2004, hearings resumed.  OCC made an oral motion to 
compel discovery from CG & E relating to alleged side agreements among CG & 
E and its affiliates with other parties to the stipulation.  A PUCO attorney 
examiner denied OCC’s discovery motion. 
{¶ 7} CG & E and others presented testimony in support of the 
stipulation, and OCC and others presented evidence opposing the stipulation.  The 
hearings concluded on June 1, 2004.  Posthearing briefs and letters from 
consumers were filed. 
{¶ 8} On September 29, 2004, the commission issued its opinion and 
order approving the stipulation with modifications.  The order required, among 
other things, commission approval for changes in certain cost components, more 
avoidability of certain charges by shopping customers, and full corporate 
separation by CG & E if it failed to implement the stipulation as modified.  The 
commission also affirmed the attorney examiner’s denial of OCC’s discovery 
motion. 
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{¶ 9} Several parties, including CG & E and OCC, filed applications for 
rehearing.  In its application for rehearing, CG & E accepted some of the 
commission’s modifications and proposed others.  The commission, after 
reviewing CG & E’s alternative proposal, found that with certain clarifications 
and revisions, CG & E’s modifications were meritorious.  OCC’s application for 
rehearing was denied. 
{¶ 10} OCC and others filed applications for a second rehearing.  The 
commission denied OCC’s second rehearing application on January 19, 2005.  
The commission issued a third rehearing entry on April 13, 2005.  The 
commission’s second and third rehearing entries further refined CG & E’s rate-
stabilization plan. 
{¶ 11} Following the commission’s second rehearing entry, OCC filed its 
notice of appeal in case No. 2005-0518.  Following the commission’s third 
rehearing entry, OCC filed a notice of appeal, case No. 2005-0946.  We 
consolidated these appeals because identical issues are raised in each case. 
Standard of Review 
{¶ 12} “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, 
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, at ¶ 50.  We will not reverse or modify a PUCO decision as to 
questions of fact where 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, at ¶ 
29.  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 
January Term, 2006 
5 
record.  Id.  Although we have “complete and independent power of review as to 
all questions of law” in appeals from the commission, Ohio Edison Co. v. Pub. 
Util. Comm. (1997), 78 Ohio St.3d 466, 469, 678 N.E.2d 922, 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. (1979), 58 Ohio St.2d 108, 110, 12 O.O.3d 115, 388 N.E.2d 
1370. 
Proposition of Law No. 1 
Procedural Integrity of Alternative Proposal 
{¶ 13} In proposition of law No. 1, OCC contends that the commission 
failed to meet certain procedural requirements when it granted, in part, CG & E’s 
first application for rehearing.  On September 29, 2004, the commission issued 
the original order approving, with a number of modifications, the stipulation 
regarding CG & E’s rate-stabilization plan.  CG & E filed an application for 
rehearing opposing some of the modifications.  In its application, CG & E made 
an “alternative proposal,” which OCC refers to as the “new proposal,”1 suggesting 
additional modifications of the commission’s order.  The commission found that 
CG & E’s proposed modifications, with certain clarifications and revisions, were 
meritorious and approved them. 
{¶ 14} OCC maintains that CG & E’s first application for rehearing did 
not set forth specific grounds challenging the reasonableness or lawfulness of the 
commission’s order as R.C. 4903.10 requires.  Rather, OCC claims that CG & E’s 
alternative proposal was an application filled with “new charges, terms, and 
conditions” and argues that it was improper as a matter of posthearing pleading.  
OCC contends that the commission was required to adhere to the statutory 
                                                 
1. We will refer to CG & E’s proposed modifications as the “alternative proposal.” 
 
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procedural protections set forth in R.C. 4928.14(A), 4928.15(A),2 4909.18, and 
4909.19 before it approved CG & E’s alternative proposal. 
{¶ 15} We conclude that the commission did not fail to adhere to any 
required procedural protections.  The commission treated CG & E’s alternative 
proposal as an assignment of error on rehearing and not as a new or separate 
proposal.  The commission determined that subject to certain clarifications and 
modifications, CG & E’s first assignment of error, i.e., the alternative proposal, 
should be sustained.  The commission merely modified its opinion and order just 
as it might do based on any other party’s arguments on rehearing.  Under R.C. 
4903.10(B), if the commission determines upon rehearing that its “original order 
or any part thereof is in any respect unjust or unwarranted, or should be changed,” 
it can abrogate or modify the order.  The commission also has discretion under 
this section to decide whether a subsequent hearing is necessary to take additional 
evidence. 
{¶ 16} OCC characterizes CG & E’s alternative proposal as an application 
for a rate increase and claims that the commission was required to comply with 
the procedures – public notice, a staff investigation, and a hearing – set forth in 
R.C. 4909.18 and 4909.19.  We conclude, however, that CG & E’s alternative 
proposal was not an application for a rate increase as contemplated by R.C. 
4909.18.  That statute provides: 
{¶ 17} “Any public utility desiring to establish any rate, joint rate, toll, 
classification, charge, or rental, or to modify, amend, change, increase, or reduce 
any existing rate, * * * shall file a written application with the public utilities 
commission.” 
{¶ 18} The commission has discretion under R.C. 4909.18 in determining 
whether an application seeks a rate increase.  R.C. 4909.18 applies to increases of 
                                                 
2.  R.C. 4928.15(A) is not relevant to this matter, as it concerns noncompetitive retail electric 
distribution service as opposed to competitive retail electric generation service. 
January Term, 2006 
7 
an “existing” rate charged by a utility.  Here, although the commission’s order 
approved CG & E’s rate as a market-based standard service offer, that rate had 
not yet been implemented.  Even if the commission’s approval of CG & E’s 
alternative proposal amounted to a rate increase over the market-based standard 
service offer approved in its original order, it was not an increase of an existing 
rate.  The notice, investigation, and hearing requirements of R.C. 4909.19 are not 
triggered because they apply only upon application for a rate increase pursuant to 
R.C. 4909.18, which we have determined did not occur. 
{¶ 19} Moreover, OCC seemingly ignores the fact that the commission 
provided notice and held extensive hearings in this matter.  CG & E initiated this 
matter under R.C. 4928.14(A), which requires that a market-based standard 
service offer “shall be filed with the public utilities commission under section 
4909.18 of the Revised Code.”  A hearing is required in two instances: (1) when 
an application for an increase in an existing rate is filed or (2) if the application is 
not for an increase in an existing rate, if the proposals in the application appear 
“unjust or unreasonable.”  R.C. 4909.18 and 4909.19.  The commission provided 
notice and held hearings using the “unjust and unreasonable” standard when it 
considered CG & E’s proposed rate-stabilization-plan stipulation.  OCC has not 
shown that the commission abused its discretion by failing to hold additional 
hearings on CG & E’s alternative proposal. 
{¶ 20} Finally, OCC not only challenges the commission’s handling of 
this matter on statutory procedural grounds, but claims that a lack of notice and 
hearing constituted violations of due process as well.  We have repeatedly held 
that there is no constitutional right to notice and hearing in rate-related matters if 
no statutory right to a hearing exists.  See Consumers’ Counsel v. Pub. Util. 
Comm. (1994), 70 Ohio St.3d 244, 248-249, 638 N.E.2d 550; Armco, Inc. v. Pub. 
Util. Comm. (1982), 69 Ohio St.2d 401, 409, 23 O.O.3d 361, 433 N.E.2d 923; 
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8 
Cleveland v. Pub. Util. Comm. (1981), 67 Ohio St.2d 446, 453, 21 O.O.3d 279, 
424 N.E.2d 561. 
{¶ 21} We conclude that, in relation to CG & E’s alternative proposal, the 
commission did not violate any of the procedural requirements set forth in R.C. 
4928.14(A), 4909.18, or 4909.19, or any due process guarantees. 
Justification for Modifications on Rehearing 
{¶ 22} OCC also contends in proposition of law No. 1 that the 
commission failed to comply with the requirements of R.C. 4903.09 because it 
approved CG & E’s alternative proposal without any evidentiary support in the 
record and without setting forth the reasons supporting that decision.  R.C. 
4903.09 provides that “[i]n all contested cases heard by the public utilities 
commission * * * the commission shall file * * * findings of fact and written 
opinions setting forth the reasons prompting the decisions arrived at, based upon 
said findings of fact.” 
{¶ 23} We have held that “[i]n order to meet the requirements of R.C. 
4903.09, therefore, the PUCO’s order must show, in sufficient detail, the facts in 
the record upon which the order is based, and the reasoning followed by the 
PUCO in reaching its conclusion.”  MCI Telecommunications Corp. v. Pub. Util. 
Comm. (1987), 32 Ohio St.3d 306, 312, 513 N.E.2d 337.  Although strict 
compliance with the terms of R.C. 4903.09 is not required, “ ‘[a] legion of cases 
establish[es] that the commission abuses its discretion if it renders an opinion on 
an issue without record support.’ ”  Tongren v. Pub. Util. Comm. (1999), 85 Ohio 
St.3d 87, 90, 706 N.E.2d 1255, quoting Cleveland Elec. Illum. Co. v. Pub. Util. 
Comm. (1996), 76 Ohio St.3d 163, 166, 666 N.E.2d 1372. 
{¶ 24} Under the stipulation approved by the commission’s original order, 
CG & E’s market-based standard service offer consisted of two components: the 
price-to-compare 
component 
and 
the 
provider-of-last-resort 
(“POLR”) 
component.  The price-to-compare component represents that portion of the 
January Term, 2006 
9 
market-based standard service offer that consumers switching to a competitive 
retail electric service provider may avoid paying to CG & E.  The POLR 
component, which the commission refers to as the “unavoidable” or 
“nonbypassable” component, represents charges incurred by CG & E for risks 
associated with its statutory obligation under R.C. 4928.14(C) as the default 
provider, or provider of last resort, for customers who opt for another provider 
who then fails to provide service.  See Constellation NewEnergy, 104 Ohio St.3d 
530, 2004-Ohio-6767, 820 N.E.2d 885, at ¶ 39, fn. 5. 
{¶ 25} These components are themselves made up of separate 
components.  The POLR component comprises a rate-stabilization-charge 
component and an annually adjusted component.  The annually adjusted 
component was designed to maintain adequate electric capacity reserves in excess 
of expected demand and to recover costs associated with homeland security, 
taxes, environmental compliance, and emissions allowances.  Neither CG & E nor 
the commission identified the purpose of the rate-stabilization charge.  
Nevertheless, the charge is self-defining, and the signatory parties agreed to it. 
{¶ 26} In its first application for rehearing, CG & E proposed modifying 
the stipulation approved by the commission’s order.  Under CG & E’s proposal, 
the POLR component would include four components.  In addition to the rate-
stabilization charge and the annually adjusted component, the POLR component 
would also include an “infrastructure maintenance fund” component and a 
“system reliability tracker” component.  The infrastructure-maintenance-fund 
charge was intended “to compensate CG & E for committing its generation assets 
to serve market-based standard service offer consumers.”  The system reliability-
tracker was intended to permit CG & E “to recover its annually committed 
capacity, purchased power, reserve capacity, and other market costs necessary to 
serve market-based standard service offer consumers.”  CG & E suggested other 
changes as well, and after reviewing these suggestions, the commission found that 
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with certain clarifications and revisions of its own, CG & E’s proposed 
modifications were meritorious. 
{¶ 27} OCC contends that the commission’s modifications to its order 
were not simple adjustments made upon further consideration on rehearing.  OCC 
claims that the commission violated R.C. 4903.09 when it approved on rehearing 
certain charges and made other modifications to its order without record evidence 
and without setting forth any basis for the decision. 
{¶ 28} We agree.  The portion of the commission’s first rehearing entry 
approving CG & E’s alternative proposal is devoid of evidentiary support.  There 
are no citations to the record supporting the commission’s modifications on 
rehearing.  In addition, the commission did not sufficiently set forth its reasoning 
for the changes on rehearing.  Instead, it merely asserted, without further 
justification, that the modifications would provide rate certainty for consumers, 
ensure financial stability for CG & E, and further encourage the development of 
competitive markets. 
{¶ 29} CG & E maintains that the evidence presented to the commission 
in the May hearings supported the commission’s modifications on rehearing 
because CG & E’s alternative proposal contained the same components as the 
litigated stipulation.  According to CG & E, the stipulation, as modified by the 
order, and the alternative proposal, as modified by the commission’s first 
rehearing entry, contained the same price-to-compare and POLR components.  
CG & E’s argument ignores the commission’s approval of the infrastructure-
maintenance fund as a component of the POLR without reference to record 
evidence and without explanation.  In fact, aside from defining the purpose and 
amount of recovery allowed to CG & E from the infrastructure-maintenance fund, 
the commission offered no factual basis or other justification for approving this 
charge. 
January Term, 2006 
11 
{¶ 30} CG & E claims that the infrastructure-maintenance fund, together 
with the system reliability tracker, represented the reserve capacity charge 
previously set forth in the stipulation as part of the annually adjusted component.  
Although this may be true, we have found nothing in the commission’s first 
rehearing entry to support that assertion.  Under the commission’s rehearing 
entry, CG & E’s costs for maintaining adequate reserve capacity are now covered 
by the system-reliability tracker.  The commission did not mention the 
infrastructure-maintenance fund – which is intended to compensate CG & E for 
committing its generation capacity to serve consumers who choose the market-
based standard service offer through 2008 – in the context of maintaining 
adequate reserve capacity requirements.  In that respect, the infrastructure-
maintenance fund may be some type of surcharge and not a cost component.  
Without explanation from the commission, however, we cannot know for certain.  
In any event, even if we accepted CG & E’s claim as true, that would not excuse 
the commission from its statutory obligation to justify its orders. 
{¶ 31} We are also troubled that the commission’s first rehearing entry set 
the “baseline” for determining certain cost components in the alternative proposal 
– the system-reliability tracker, annually adjusted component, and the “fuel and 
economy purchased power” component – without any record support and without 
any explanation.  The commission did clarify that it would review the 
reasonableness of expenditures in these categories by requiring CG & E to 
establish levels for these cost components for subsequent years.  Nevertheless, the 
commission allowed CG & E to preset the amount of the annually adjusted 
component for 2005 and 2006 without record evidence or explanation.  It is 
impossible to make any determination about the reasonableness of these 
components without evidence and explanation from the commission. 
{¶ 32} CG & E also defends the commission’s approval of its alternative 
proposal by asserting that it merely resulted in an increased price to compare – the 
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price shopping consumers may avoid paying to CG & E – thereby enhancing the 
development of the competitive market, and set the various unavoidable POLR 
charges at much lower levels.  The commission did find that the modifications on 
rehearing would increase the price to compare for all shoppers and would further 
increase the price to compare by making the annually adjusted component 
permanently avoidable for an increased percentage of consumers.3  But the 
commission did not make any finding on rehearing that the POLR charges were 
lower. 
{¶ 33} We concede that moving the emission allowance from the annually 
adjusted component to the price-to-compare component, as the commission’s first 
rehearing entry did, would seemingly lower the POLR, because the annually 
adjusted component is a component of the POLR.  In addition, increasing the 
percentage of consumers who could avoid paying the annually adjusted 
component would apparently lower the POLR because, under the alternative 
proposal, the annually adjusted component becomes an avoidable component of 
the price to compare for that percentage of shoppers who switch to an alternate 
generation provider.  But it is not clear whether other modifications, such as the 
introduction of the unavoidable infrastructure-maintenance-fund charge, the 
system-reliability-tracker charge (which may or may not be avoidable in 
subsequent years), and presetting the annually-adjusted-component charge for 
2005 and 2006, would increase or decrease the nonbypassable POLR charge. 
{¶ 34} We have held that the commission may modify orders as long as it 
justifies those changes.  Consumers’ Counsel v. Pub. Util. Comm. (1984), 10 Ohio 
St.3d 49, 50-51, 10 OBR 312, 461 N.E.2d 303.  “On the other hand, PUCO orders 
which merely made summary rulings and conclusions without developing the 
                                                 
3.  The commission stated that the percentage of consumers who could avoid the annually adjusted 
component “was increased by the [September 29, 2004] opinion and order from 25 percent to 50 
percent.”  It appears, however, that the commission’s order altered only the rate stabilization 
charge and not the annually adjusted component. 
January Term, 2006 
13 
supporting rationale or record have been reversed and remanded.”  MCI 
Telecommunications, 32 Ohio St.3d at 312, 513 N.E.2d 337. 
{¶ 35} In this matter, the commission made several modifications on 
rehearing without any reference to record evidence and without thoroughly 
explaining its reasons.  The commission approved the infrastructure-maintenance-
fund charge without evidentiary support or justification.  The commission 
approved other modifications without citing evidence in the record and with very 
little explanation.  The commission cannot justify the modifications made on 
rehearing merely by stating that those changes benefit consumers and the utility 
and promote competitive markets.  The commission’s reasoning and the factual 
basis supporting the modifications on rehearing must be discernible from its 
orders. 
{¶ 36} For these reasons, we hold that the commission failed to comply 
with the requirements of R.C. 4903.09 when it modified its September 29 order 
on rehearing.  Accordingly, we remand this matter to the commission for further 
clarification of all modifications made in the first rehearing entry to the order 
approving the stipulation.  On remand, the commission is required to thoroughly 
explain its conclusion that the modifications on rehearing are reasonable and 
identify the evidence it considered to support its findings. 
Proposition of Law No. 2 
{¶ 37} In proposition of law No. 2, OCC challenges the commission’s 
factual finding that CG & E offered a market-based standard service offer as 
required by R.C. 4928.14(A) and Ohio Adm.Code 4901:1-35.  OCC’s argument 
focuses on the commission’s order that approved the stipulation and the 
modifications to that order in the first rehearing entry. 
Order Approving CG & E’s Market-Based Standard Service Offer 
{¶ 38} R.C. 4928.14(A) provides that “[a]fter its market development 
period, an electric distribution utility in this state shall provide customers, on a 
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14 
comparable and nondiscriminatory basis within its certified territory, a market-
based standard service offer of all competitive retail electric services necessary to 
maintain essential electric service to consumers, including a firm supply of 
electric generation service.” 
{¶ 39} Ohio Adm.Code 4901:1-35-02(C) provides that an electric 
distribution utility “may propose a plan for a standard service offer * * * that 
varies from these rules where there is substantial support from a number of 
interested stakeholders.” 
{¶ 40} CG & E and other parties signed a stipulation that proposed a rate-
stabilization plan that would govern CG & E’s generation rates following the end 
of the market development period.  CG & E’s rate-stabilization plan provided for 
a market-based standard service offer made up of two components: (1) a price-to-
compare component and (2) the POLR component. 
{¶ 41} In making its original determination that CG & E’s standard 
service offer was market based, the commission focused primarily on the price-to-
compare component of CG & E’s standard service offer.  The price-to-compare 
component represents that portion of the standard service offer that consumers 
switching to a competitive retail electric service provider can avoid paying to CG 
& E.  The commission considered testimony comparing the price to compare 
under the stipulation to three other rates to determine whether the price to 
compare was consistent with other market prices.  CG & E witness Judah L. Rose 
compared the stipulated price to compare with (1) the rate that CG & E offered 
with its initial application in this proceeding, along with various adjustments to 
account for market conditions, (2) generation rates offered by other Ohio electric 
distribution utilities, and (3) the actual rates at which some competitive retail 
electric providers have contracted to provide retail service. 
{¶ 42} After considering data and arguments from OCC and others 
attempting to refute CG & E’s evidence, the commission found that CG & E’s 
January Term, 2006 
15 
standard service offer was a market-based rate.  The commission stated that (1) 
R.C. 4928.14 allowed it flexibility in approving methods for determining market-
based rates for standard service offers, (2) the stipulation was negotiated among 
five suppliers and other organizations representing various categories of 
consumers, from low-income residential consumers to large industrial users, (3) 
the stipulation allowed for modifications to reflect changes in certain costs, and 
(4) revisions to the stipulation would allow the commission to monitor prices and 
confirm that prices will remain market based over time. 
{¶ 43} The burden is on OCC to show that the commission’s decision is 
against the manifest weight of the evidence or is clearly unsupported by the 
evidence.  AK Steel Corp. v. Pub. Util. Comm. (2002), 95 Ohio St.3d 81, 86, 765 
N.E.2d 862.  OCC has failed to show that the commission’s finding was 
unsupported by the evidence so as to be unlawful or unreasonable.  See R.C. 
4903.13. 
{¶ 44} We hold that the commission’s finding that CG & E’s standard 
service offer was market based is supported by sufficient probative evidence.  As 
already noted, CG & E’s standard service offer was made up of two components: 
the price-to-compare and the POLR.  The commission analyzed testimony about 
the price to compare from CG & E witness Rose and considered the objections 
and evidence in opposition to his testimony.  We have recognized the 
commission’s duty and authority to enforce the competition-encouraging statutory 
scheme of S.B. 3, and we have accorded due deference in this regard to the 
commission’s statutory interpretations and expertise in establishing and 
modifying rates.  Migden-Ostrander v. Pub. Util. Comm., 102 Ohio St.3d 451, 
2004-Ohio-3924, 812 N.E.2d 955, at ¶23.  OCC has offered no evidence or 
argument to refute the commission’s decision that CG & E has provided a 
“comparable and nondiscriminatory” rate under R.C. 4928.14(A). 
Modifications on Rehearing to Market-Based Standard Service Offer 
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16 
{¶ 45} OCC claims that the commission can no longer rely on the fact that 
the stipulation was negotiated among several parties to determine that the 
standard service offer was market based, because the modifications approved on 
rehearing changed the standard service offer.  It is true, as OCC claims, that CG & 
E’s alternative proposal on rehearing was not presented in the form of a stipulated 
agreement as was CG & E’s rate-stabilization plan.  We do not consider this fact, 
standing alone, to be fatal to the commission’s finding on rehearing that CG & 
E’s standard service offer remained market based. 
{¶ 46} First, the fact that CG & E’s rate-stabilization plan resulted from a 
stipulation negotiated among several competitors in retail electric service and 
various categories of consumers was not the sole criterion relied on by the 
commission in finding that the standard service offer was market based.  Second, 
the stipulation included a provision that allowed any signatory party to withdraw 
and void the rate-stabilization plan should the commission reject or modify any 
part of the stipulation.  None of the signatory parties exercised its option to void 
the agreement despite significant modifications made by the commission to the 
original stipulation. 
{¶ 47} OCC also claims that the standard service offer under CG & E’s 
alternative proposal is not a market-based rate under R.C. 4928.14(A) any more 
than was the rate approved by the commission under the stipulation.  The 
commission’s modifications on rehearing to the price to compare, however, 
appear to have altered that component in a manner that would promote 
competition.  For example, the commission modified its order to increase the 
price to compare for all shoppers by moving the cost-of-emissions allowances 
from the POLR component to the price-to-compare component.  It further 
increased the price to compare by making the annually adjusted component 
permanently avoidable for a percentage of each class of consumers.  The 
January Term, 2006 
17 
commission found that increasing the price to compare would encourage further 
development of competitive markets. 
{¶ 48} We have explained in past cases that we “will not reverse an order 
of the Public Utilities Commission unless the party seeking reversal demonstrates 
the prejudicial effect of the order.”  Tongren, 85 Ohio St.3d at 92, 706 N.E.2d 
1255; Myers v. Pub. Util. Comm. (1992), 64 Ohio St.3d 299, 302, 595 N.E.2d 
873.  OCC has not demonstrated harm or prejudice with respect to the 
commission’s changes on rehearing to the price-to-compare component.  
Accordingly, we reject OCC’s second proposition of law. 
Proposition of Law No. 3 
{¶ 49} In proposition of law No. 3, OCC claims that CG & E’s rate-
stabilization plan does not provide for a competitive bidding process as required 
by R.C. 4928.14(B) and Ohio Adm.Code 4901:1-35.  OCC claims that the law 
requires CG & E to offer customers the option to purchase power at a 
competitively bid rate and that CG & E’s rate-stabilization plan has provided for a 
competitive bid only as a “test.” 
{¶ 50} R.C. 4928.14(B) provides that after the market development 
period, “each electric distribution utility also shall offer customers within its 
certified territory an option to purchase competitive retail electric service the price 
of which is determined through a competitive bidding process.”  This section also 
provides that “[t]he commission may determine at any time that a competitive 
bidding process is not required, if other means to accomplish generally the same 
option for customers is readily available in the market and a reasonable means for 
customer participation is developed.” 
{¶ 51} OCC concedes that R.C. 4928.14(B) allows utilities to avoid 
providing a competitively bid rate if there are “other means to accomplish 
generally the same option” but contends that CG & E’s rate-stabilization plan 
does not comply.  The commission found, however, that CG & E’s plan offers “a 
SUPREME COURT OF OHIO 
18 
reasonable alternative to a more traditional competitive bidding process, provides 
for a reasonable means of customer participation through the various options that 
are open to customers under the [plan], and fulfills the statutory requirements for 
a competitive bidding process.” 
{¶ 52} In lieu of a competitively bid price, CG & E’s rate-stabilization 
plan utilized the price to compare  – the price shopping consumers may avoid 
paying to CG & E – to evaluate the market price for CG & E’s service area.  The 
plan allows the commission at any time to implement a competitive bidding 
process to test CG & E’s price to compare against the market price.  If the price to 
compare is significantly different from the test bid price, either the commission or 
CG & E may begin discussions with all parties to continue, amend, or terminate 
the rate-stabilization plan. 
{¶ 53} We approved a somewhat similar alternative to the competitive-bid 
process in Constellation, 104 Ohio St.3d 530, 2004-Ohio-6767, 820 N.E.2d 885, 
at ¶ 44-49.  The stipulation in Constellation provided for “ongoing Commission 
review of market-based rates, through a competitive bidding process, if 
necessary” and provided that “if market-based rates do not reasonably reflect the 
rates established by the Stipulation, then the Commission may terminate the [rate 
stabilization plan] and trigger a competitive bidding process * * *.”  Id. at ¶ 48. 
{¶ 54} Like the plan in Constellation, CG & E’s rate-stabilization plan, as 
approved by the commission’s order and as modified on rehearing, provides 
customers with a reasonable means of customer participation as R.C. 4928.14(B) 
requires.  Various incentives were provided to consumers in the form of shopping 
credits.4  Moreover, consumers could bypass certain charges, such as the rate-
                                                 
4.  A “shopping credit” is an incentive to consumers to obtain competitive retail electric generation 
service from a provider other than an incumbent electric distribution utility.  Constellation 
NewEnergy, Inc. v. Pub. Util. Comm., 104 Ohio St.3d 530, 2004-Ohio-6767, 820 N.E.2d 885, at ¶ 
30.  
January Term, 2006 
19 
stabilization charge, the annually adjusted component, and the system-reliability 
tracker. 
{¶ 55} OCC also claims that the commission erred in not following its 
own rules regarding the competitive bidding process.  See Ohio Adm.Code 
Chapter 4901:1-35.  Ohio Adm.Code 4901:1-35-02(B) provides that the 
commission may waive the requirements of the chapter for good cause shown or 
upon its own motion.  Ohio Adm.Code 4901:1-35-02(C) allows electric 
distribution utilities to propose plans for a “competitive bidding process that 
varies from these rules where there is substantial support from a number of 
interested stakeholders.” 
{¶ 56} We conclude that the commission’s approval of CG & E’s 
alternative to the competitive bidding process was reasonable and lawful.  The 
commission found that CG & E’s price to compare, as part of the standard service 
offer, was market based, and OCC has offered no evidence to contradict that 
finding.  Various customer groups were parties to the stipulation and approved the 
price to compare and the method by which the price to compare would be tested 
to ensure that it remains market based.  CG & E’s rate-stabilization plan provides 
for a reasonable means of customer participation.  Finally, there appears to be 
significant competition in CG & E’s service area through the presence of five 
competitive electric retail service providers.  For these reasons, we reject OCC’s 
third proposition of law. 
Proposition of Law No. 4 
{¶ 57} In the fourth proposition of law, OCC contends that the 
commission’s order and first entry on rehearing approving CG & E’s rate-
stabilization plan permit discriminatory treatment of customers in violation of 
R.C. 4905.32 through 4905.35.  OCC argues that the commission’s decision to 
allow the first 25 percent of switched residential load customers to avoid paying 
the rate-stabilization charge of the nonbypassable POLR component is 
SUPREME COURT OF OHIO 
20 
discriminatory because consumers who are not in the first 25 percent cannot avoid 
the charge.  OCC also alleges that the rate-stabilization plan is discriminatory 
because it allows residential customers who have already switched to a competitor 
when the plan goes into effect to avoid the rate-stabilization charge automatically. 
{¶ 58} OCC relies on R.C. 4905.32, 4905.33, 4905.34 and 4905.35.  R.C. 
4928.05(A)(1) provides that “[o]n and after the starting date of competitive retail 
electric service, a competitive retail electric service supplied by an electric utility 
* * * shall not be subject to supervision and regulation * * * by the public utilities 
commission under [R.C.] Chapters 4901. to 4909. * * *, except * * * division (B) 
of 4905.33, and [R.C.] 4905.35.”  R.C. 4905.33(B) is inapplicable because OCC 
makes no claim under that provision that CG & E is furnishing “free service or 
service for less than actual cost for the purpose of destroying competition.”  R.C. 
4905.35(A) provides that “[n]o public utility shall make or give any undue or 
unreasonable preference or advantage to any person, firm, corporation, or locality, 
or subject any person, firm, corporation, or locality to any undue or unreasonable 
prejudice or disadvantage.” 
{¶ 59} In AK Steel Corp., 95 Ohio St.3d 81, 765 N.E.2d 862, we rejected 
arguments similar to those made by OCC here.  In that case, AK Steel argued that 
shopping incentives in the form of shopping credits were discriminatory under 
R.C. 4905.35(A) because the credit was higher for the first 20 percent of those in 
each class who switch to an electric marketer.  We held that “although customers 
who take the early initiative to shop for an alternate supplier of generation will 
benefit from their actions, the benefit does not amount to undue preference or 
discrimination, because all customers will have an equal opportunity to take 
advantage of the shopping incentives.”  Id. at 87, 765 N.E.2d 862. 
{¶ 60} In this matter, OCC has offered no argument or evidence to 
contradict the commission’s conclusion that all residential consumers will have an 
January Term, 2006 
21 
equal opportunity to avoid the rate-stabilization charge.  Thus, based on our 
decision in AK Steel, we reject OCC’s argument. 
{¶ 61} Moreover, OCC is not asking us to eliminate this particular 
shopping incentive but, rather, to require the commission to allow all shoppers to 
avoid the rate-stabilization charge.  Decisions on the level of shopping incentives, 
however, are within the discretion of the commission.  See Constellation, 104 
Ohio St.3d 530, 2004-Ohio-6767, 820 N.E.2d 885, at ¶ 34.  OCC’s argument in 
this regard is speculative; there is no way to prove that limiting the percentage of 
residential customers who may avoid the rate-stabilization charge to 25 percent 
will cut off later shopping.  According to the commission, the percentage of 
residential consumers who are shopping has never approached the 25 percent 
level. 
{¶ 62} OCC has not met its burden of showing that the provision allowing 
a certain percentage of residential customers who shop to avoid the rate-
stabilization charge is discriminatory.  Therefore, we overrule proposition of law 
No. 4. 
Proposition of Law No. 5 
{¶ 63} OCC maintains that the commission violated R.C. 4909.18, 
4928.15, and 4928.38 by approving nonbypassable charges for those customers 
switching to competitive retail electric service providers without requiring a rate 
case and without statutory authorization.  OCC complains that the infrastructure-
maintenance fund, system-reliability tracker, rate-stabilization charge, and 
annually adjusted component are anticompetitive charges and that the commission 
lacked statutory authorization to approve them.  OCC essentially claims that these 
charges should be avoidable by shopping customers. 
{¶ 64} R.C. 4928.14(A) requires an electric distribution utility, after its 
market development period, to provide consumers within its certified territory “a 
market-based standard service offer of all competitive retail electric services 
SUPREME COURT OF OHIO 
22 
necessary to maintain essential electric service to consumers, including a firm 
supply of electric generation service.” 
{¶ 65} R.C. 4928.14(C) provides that “[a]fter the market development 
period, the failure of a supplier to provide retail electric generation service to 
customers within the certified territory of the electric distribution utility shall 
result in the supplier’s customers, after reasonable notice, defaulting to the 
utility’s standard service offer filed under division (A) of this section until the 
customer chooses an alternative supplier.” 
{¶ 66} Under the stipulation providing for the rate-stabilization plan, the 
signatory parties agreed upon an unavoidable POLR charge to compensate CG & 
E for its statutory obligation to provide last-resort services to consumers in its 
area.  The POLR charge comprised two components: the rate-stabilization charge 
and the annually adjusted component.  Under CG & E’s alternative proposal, the 
POLR charge was modified to include two additional components: an 
infrastructure-maintenance fund and the system-reliability tracker. 
{¶ 67} In its order, the commission held that the annually adjusted 
component did not create a subsidy by shopping customers for standard-service-
offer customers because CG & E has expenses related to its statutory obligation to 
provide POLR service, which the annually adjusted component was intended to 
offset.  Similarly, the commission noted on rehearing that the system-reliability 
tracker was designed to allow CG & E to recover expenses related to its POLR 
obligation.  The commission never specifically addressed the rate-stabilization 
charge or the infrastructure-maintenance fund, but the same reasoning would 
apply because these are also components of the POLR charge. 
{¶ 68} We conclude that the commission’s decision in this regard was not 
unlawful.  Under R.C. 4928.14(A) and (C), an electric distribution utility, such as 
CG & E, has an obligation to ensure generation supply for customers not being 
served by a competitive retail electric service provider by offering a market-based 
January Term, 2006 
23 
standard service offer that establishes prices for that supply.  The standard service 
offer would apply to customers who choose not to shop for an alternative supplier 
and to those who shop and return to CG & E for electric generation services.  We 
have traditionally deferred to the judgment of the commission in situations 
involving the commission’s special expertise.  See AT & T Communications of 
Ohio, Inc. v. Pub. Util. Comm. (1990), 51 Ohio St.3d 150, 154, 555 N.E.2d 288.  
Indeed, we recently agreed with the commission’s determination that similar 
charges were legally sustainable and could reasonably be applied to all customers.  
See Constellation, 104 Ohio St.3d 530, 2004-Ohio-6767, 820 N.E.2d 885, at ¶ 36-
40. 
{¶ 69} OCC also claims that nothing in the record justifies the level of the 
nonbypassable charges and that the commission failed to comply with procedural 
protections in R.C. 4909.18 and 4928.15 for reviewing noncompetitive services.  
We addressed these arguments in our discussion of the first proposition of law.  
Moreover, the commission rejected OCC’s argument that the annually adjusted 
component, the infrastructure-maintenance fund, and the system-reliability tracker 
were noncompetitive services.  Instead, the commission found that these 
components were part of CG & E’s competitive electric generation charges and 
were not charges on distribution or transmission services under R.C. 4928.15.  
“Due deference should be given to statutory interpretations by an agency that has 
accumulated substantial expertise and to which the General Assembly has 
delegated enforcement responsibility.”  Weiss v. Pub. Util. Comm. (2000), 90 
Ohio St.3d 15, 17-18, 734 N.E.2d 775, citing Collinsworth v. W. Elec. Co. (1992), 
63 Ohio St.3d 268, 272, 586 N.E.2d 1071.  For these reasons, we overrule 
proposition of law No. 5. 
Proposition of Law No. 6 
SUPREME COURT OF OHIO 
24 
{¶ 70} OCC contends that the commission approved provisions of the 
rate-stabilization plan and alternative proposal that allow CG & E to improperly 
avoid its corporate separation obligations in violation of R.C. 4928.17. 
{¶ 71} Under its 2000 electric-transition-plan opinion, the commission 
approved CG & E’s modified corporate separation plan, which provided for the 
transfer of its generating assets to an exempt wholesale generator no later than 
December 31, 2004.  See In re Application of CG & E for Approval of Its Electric 
Transition Plan, case No. 99-1658-EL-ETP (Aug. 31, 2000), 45-47.  CG & E’s 
rate-stabilization plan included a provision that CG & E would not be required to 
transfer generating assets to an electric wholesale generator by the end of 2004.  
The commission approved this provision, finding that it was reasonable for CG & 
E to retain its generating assets during the period it is committed to provide 
stabilized rates.  According to the commission, it would be inappropriate to ask 
CG & E to stabilize its rates and then deny it the ability to do so.  The 
commission, therefore, amended CG & E’s corporate separation plan to allow it to 
retain its generating assets through 2008.  Thus, the commission’s approval of this 
provision amended CG & E’s corporate separation plan as approved by the 2000 
electric-transition-plan opinion. 
{¶ 72} OCC is apparently arguing that the commission violated R.C. 
4928.17(A) by not requiring CG & E to transfer its generating assets by 
December 31, 2004, as CG & E’s corporate separation plan provided.  The 
commission has discretion to approve an alternative functional corporate 
separation plan for an interim period upon a determination of “good cause.”  See 
R.C. 4928.17(C) (“The commission shall issue an order approving or modifying 
and approving a corporate separation plan under this section, to be effective on 
the date specified in the order, only upon findings that the plan reasonably 
complies with the requirements of division (A) of this section and will provide for 
ongoing compliance with the policy specified in section 4928.02 of the Revised 
January Term, 2006 
25 
Code.  However, for good cause shown, the commission may issue an order 
approving or modifying and approving a corporate separation plan under this 
section that does not comply with division (A)(1) of this section but complies 
with such functional separation requirements as the commission authorizes to 
apply for an interim period prescribed in the order, upon a finding that such 
alternative plan will provide for ongoing compliance with the policy specified in 
section 4928.02 of the Revised Code”). 
{¶ 73} OCC acknowledges the commission’s authority under R.C. 
4928.17(C) to approve a modified corporate separation plan.  OCC, nevertheless, 
contends that the commission’s discretion to approve a modified separation plan 
“to apply for an interim period” is not unlimited as to time.  OCC complains that 
CG & E has already operated under a “functional separation plan” for five years 
under the 2000 electric-transition-plan opinion.  Now CG & E has proposed to 
extend that plan for an additional three years under the rate-stabilization plan.  
According to OCC, this results in an unfair competitive advantage and illegal 
preference to CG & E. 
{¶ 74} OCC has failed to offer any legal authority or evidentiary proof to 
support its claims.  Under R.C. 4928.17(C), the commission’s discretion is limited 
only by the “good cause” standard and the requirement that the commission find 
that “such alternative plan will provide for ongoing compliance with the policy 
specified in” R.C. 4928.02.  OCC has not supported its claims of competitive 
disadvantage and undue preference with any testimony or other evidence in the 
record.  The commission’s “good cause” determination under R.C. 4928.17(C) 
was a factual determination, and OCC has offered no evidence to show that the 
commission’s finding is against the manifest weight of the evidence or is clearly 
unsupported by the record.  See AK Steel, 95 Ohio St.3d at 85-86, 765 N.E.2d 
862. 
SUPREME COURT OF OHIO 
26 
{¶ 75} OCC claims that the doctrine of collateral estoppel bars relitigation 
of CG & E’s electric-transition-plan case from 2000.  According to OCC, the 
provision requiring CG & E to divest its generating assets by December 31, 2004, 
cannot be modified because the issue of corporate separation was already 
determined in the earlier case.  OCC waived this issue by not setting forth this 
specific ground in its first application for rehearing.  See R.C. 4903.10; 
Consumers’ Counsel v. Pub. Util. Comm., 70 Ohio St.3d at 247, 638 N.E.2d 550.  
Even if it had preserved this issue, OCC’s collateral-estoppel claim is without 
merit.  Collateral estoppel precludes the relitigation of a point of law or fact that 
was at issue in a former action between the same parties and was passed upon by 
a court of competent jurisdiction.  See Consumers’ Counsel v. Pub. Util. Comm. 
(1985), 16 Ohio St.3d 9, 10, 16 OBR 361, 475 N.E.2d 782.  The doctrine is 
inapplicable here because there was no relitigation in this matter of a point of law 
or fact that was passed upon by the commission in the 2000 electric-transition-
plan case.  The corporate separation issue addressed in that case was whether CG 
& E could delay transferring its generating assets from December 31, 2000, to the 
end of 2004.  The issue in this matter – whether CG & E should be allowed to 
amend its corporate separation plan to allow it to retain generating assets through 
2008 – was not decided in the electric-transition-plan case.  These cases involved 
different pricing plans, different time periods, i.e., the market development period 
and the succeeding period, and different reasons for approving a modified 
corporate separation plan. 
{¶ 76} OCC has not met its burden of showing that the commission’s 
order in this instance was unlawful or unreasonable.  R.C. 4928.17(C) expressly 
grants the commission discretion to approve alternative corporate separation 
plans.  We overrule OCC’s sixth proposition of law. 
Proposition of Law No. 7 
January Term, 2006 
27 
{¶ 77} OCC claims that the commission erred when it did not permit the 
discovery of undisclosed agreements between CG & E and the signatory parties 
that were not made part of the stipulation.  OCC contends that the commission 
violated R.C. 4903.082 and Ohio Adm.Code 4901-1-16 when it denied its 
discovery request. 
{¶ 78} In May 2004, OCC requested production of documents from CG & 
E for all agreements entered into on or after January 26, 2004, between CG & E 
and the parties to the matters before the commission.  At a hearing, after it 
became clear that CG & E would not comply with the request for documents, 
OCC orally moved for an order to compel.  The examiner denied OCC’s motion 
to compel, citing commission precedent that the existence of side agreements was 
not relevant to the commission’s determination as to the reasonableness of the 
proposed stipulation and because, to the extent that side agreements involved 
settlement discussions, they were privileged.  The commission upheld the 
examiner’s ruling on the same basis. 
{¶ 79} OCC argues that the commission cannot make a reasonableness 
determination regarding the stipulation without knowing whether side agreements 
existed among the stipulating parties and the terms of those agreements.  The 
reasonableness test considers whether the settlement was a product of serious 
bargaining among capable, knowledgeable parties, whether the settlement benefits 
ratepayers and the public interest, and whether the settlement package violates 
any important regulatory principle or practice.  Constellation, 104 Ohio St.3d 530, 
2004-Ohio-6767, 820 N.E.2d 885, at ¶ 8. 
{¶ 80} In Constellation, we rejected exactly this argument as applied to 
the second and third prongs of the reasonableness test.  Id. at ¶ 10-15.  In that 
case, we upheld the commission’s decision that alleged side agreements were not 
discoverable because the information sought by discovery – information related to 
the negotiation of the proposed stipulation – was privileged.  We further agreed 
SUPREME COURT OF OHIO 
28 
with the commission that the information sought was not relevant to whether the 
stipulation satisfied the second and third criteria for testing reasonableness.  Id. at 
¶ 14-15.  Based on this reasoning, we uphold the commission’s denial of OCC’s 
discovery request to the extent that the relevance of the information sought was 
based on the second and third prongs of the reasonableness test.  As the 
commission noted in Constellation, “no agreement among the signatory parties to 
the stipulation can change the terms of the stipulation.  Either the terms of the 
stipulation are, on their face, beneficial to the ratepayers and the public or they are 
not.  Even if there were side agreements among the signatory parties, those 
agreements would not change the public benefit or detriment of the stipulation.”  
Id. at ¶ 14. 
{¶ 81} The remaining issue, which was not raised in Constellation, is 
whether the commission erred in denying discovery of side agreements requested 
by OCC as relevant to the first test of reasonableness: whether the settlement is a 
product of serious bargaining among capable, knowledgeable parties.  We hold 
that the commission erred in this regard. 
{¶ 82} We have “complete and independent power of review as to all 
questions of law” in appeals from the commission.  See Luntz Corp. v. Pub. Util. 
Comm. (1997), 79 Ohio St.3d 509, 512, 684 N.E.2d 43.  Ohio Adm.Code 4901-1-
16(B) provides that “any party to a commission proceeding may obtain discovery 
of any matter, not privileged, which is relevant to the subject matter of the 
proceeding.  It is not a ground for objection that the information sought would be 
inadmissible at the hearing, if the information sought appears reasonably 
calculated to lead to the discovery of admissible evidence.”  R.C. 4903.082 
provides that “[a]ll parties and intervenors shall be granted ample rights of 
discovery.  The present rules of the public utilities commission should be 
reviewed regularly by the commission to aid full and reasonable discovery by all 
January Term, 2006 
29 
parties.  Without limiting the commission’s discretion the Rules of Civil 
Procedure should be used wherever practicable.”  See, also, R.C. 4903.22. 
{¶ 83} The text of Ohio Adm.Code 4901-1-16(B), the commission’s 
discovery rule, is similar to Civ.R. 26(B)(1), which governs the scope of 
discovery in civil cases.  Civ.R. 26(B) has been liberally construed to allow for 
broad discovery of any unprivileged matter relevant to the subject matter of the 
pending proceeding.  Moskovitz v. Mt. Sinai Med. Ctr. (1994), 69 Ohio St.3d 638, 
661, 635 N.E.2d 331 (“The purpose of Civ.R. 26 is to provide a party with the 
right to discover all relevant matters, not privileged, that are pertinent to the 
subject of the pending proceeding”).  See Disciplinary Counsel v. O’Neill (1996), 
75 Ohio St.3d 1479, 664 N.E.2d 532 (“Pursuant to Civ.R. 26(B)(1), a party may 
obtain discovery regarding non-privileged information relevant to the claim or 
defense of a proceeding. This includes determining the existence of documents 
and the identity of persons having knowledge of any discoverable matter”). 
Relevancy to “Serious Bargaining” Criterion 
{¶ 84} OCC argues that the existence of side agreements could be relevant 
to a determination that the stipulation was not the product of serious bargaining.  
OCC suggests that if CG & E and one or more of the signatory parties agreed to a 
side financial arrangement or some other consideration to sign the stipulation, that 
information would be relevant to the commission’s determination of whether all 
parties engaged in “serious bargaining.”  We agree. 
{¶ 85} The commission found that “serious bargaining did occur, among 
capable, knowledgeable parties” and that “[m]ultiple bargaining sessions, open to 
all parties, took place before the commencement of the hearings.”  The 
commission noted that testimony at the hearing indicated that all parties 
participated in negotiating sessions, although not all parties signed the stipulation.  
The existence of side agreements between CG & E and the signatory parties 
entered into around the time of the stipulation could be relevant to ensuring the 
SUPREME COURT OF OHIO 
30 
integrity and openness of the negotiation process.  Although the commission’s 
most recent decisions have denied discovery of side agreements, in the past, the 
commission has allowed their disclosure based on this same reasoning.  See In re 
Joint Application of SBC Communications, Inc. et al. for Consent and Approval of 
a Change of Control, case No. 98-1082-TP-AMT (Apr. 9, 1999) 7. 
{¶ 86} Both the commission and intervenor IEU-O contend that the 
possible existence of separate, undisclosed agreements among some of the parties 
is irrelevant to the commission’s evaluation of the reasonableness of the 
stipulation.  They urge this court to conclude that the commission’s 
reasonableness review is limited to the written stipulation, just, according to them, 
as we did in Constellation.  Whether the stipulation was the product of serious 
bargaining, however, was not addressed in Constellation and cannot be resolved 
solely by reviewing the proposed stipulation.  The commission cannot rely merely 
on the terms of the stipulation but, rather, must determine whether there exists 
sufficient evidence that the stipulation was the product of serious bargaining.  
Any such concessions or inducements apart from the terms agreed to in the 
stipulation might be relevant to deciding whether negotiations were fairly 
conducted.  The existence of concessions or inducements would seem particularly 
relevant in the context of open settlement discussions involving multiple parties, 
such as those that purportedly occurred here.  If there were special considerations, 
in the form of side agreements among the signatory parties, one or more parties 
may have gained an unfair advantage in the bargaining process.  Therefore, we 
hold that the commission erred in denying discovery of this information based on 
lack of relevancy. 
Privilege 
{¶ 87} The commission and the intervenors also argue that recent 
commission precedent and this court’s decision in Constellation support their 
position that side agreements are not discoverable because they are privileged.  In 
January Term, 2006 
31 
Constellation, we upheld the commission’s practice of denying discovery of side 
agreements on the commission’s belief that these agreements are privileged.  
Constellation, 104 Ohio St.3d 530, 2004-Ohio-6767, 820 N.E.2d 885, at ¶ 14-15.  
For the following reasons, we modify that ruling. 
{¶ 88} Constellation was this court’s review of a case involving an 
application by the Dayton Power & Light Company for an extension of its market 
development period.  See In re Continuation of Rate Freeze & Extension of 
Market Dev. Period for Dayton Power & Light Co., case No. 02-2779-EL-ATA 
(Sept. 2, 2003).  In that case, the commission cited Goodyear Tire & Rubber Co. 
v. Chiles Power Supply, Inc. (C.A.6, 2003), 332 F.3d 976, as persuasive authority 
and held that side agreements, “being information related to the negotiation of the 
proposed stipulation,” are privileged.  In Goodyear, the Sixth Circuit recognized a 
“settlement privilege” under federal law that protects statements made in 
furtherance of settlement from third-party discovery.  Id. at 980-982. 
{¶ 89} Although federal case law such as Goodyear is not binding on this 
court with regard to interpreting the Civil Rules, it can be instructive where, as 
here, Ohio’s rule is similar to the federal rule.  See First Bank of Marietta v. 
Mascrete, Inc. (1997), 79 Ohio St.3d 503, 508, 684 N.E.2d 38.  Fed.R.Civ.P. 
26(b)(1) and Ohio Civ.R. 26(B)(1) are substantially similar.  We do not find 
Goodyear persuasive, however, and decline to recognize a settlement privilege 
applicable to Ohio discovery practice. 
{¶ 90} The court in Goodyear crafted a new settlement privilege under 
Fed.R.Evid. 501 that protects settlement communications from third-party 
discovery.  Goodyear, 332 F.3d at 980-982.  There is no broad consensus of 
support, in federal courts or in other states, for such a privilege.  See In re 
Subpoena Issued to Commodity Futures Trading Comm. (D.D.C.2005), 370 
F.Supp.2d 201, 207-210.  The Sixth Circuit appears to be the only circuit court of 
appeals to recognize such a privilege.  See In re Subpoena Duces Tecum Issued to 
SUPREME COURT OF OHIO 
32 
Commodity Futures Trading Comm. (C.A.D.C.2006), 439 F.3d 740, 754 
(declining to assess the merits of a privilege claim novel “in this circuit and in all 
but one other circuit court of appeals”). 
{¶ 91} Moreover, the settlement privilege in Goodyear is grounded solely 
in federal law.  Goodyear, 332 F.3d at 979-980.  Goodyear was a diversity case, 
however, and should have been governed by the controlling state privilege law.  
Under Fed.R.Evid. 501, in cases where state law supplies the rule of the decision, 
such as a diversity-jurisdiction matter, “the privilege of a witness, person, 
government, State, or political subdivision thereof shall be determined in 
accordance with State law.”  See Samuelson v. Susen (C.A.3, 1978), 576 F.2d 
546, 549-551; Home Indemn. Co. v. Lane Powell Moss & Miller (C.A.9, 1995), 
43 F.3d 1322, 1328.  See, also, Grupo Condumex, S.A. de C.V. v. SPX Corp. 
(N.D.Ohio 2004), 331 F.Supp.2d 623, 629, fn. 3 (stating that Goodyear, as a 
diversity case, should have applied the state law of privilege). 
{¶ 92} Privilege under Ohio law is governed by statute or “by principles 
of common law as interpreted by the courts of this state in the light of reason and 
experience.”  Evid.R. 501.  Yet the commission and intervenors have cited no 
Ohio statute or case law that expressly creates a “settlement privilege” pertaining 
to information sought at the discovery stage.  Indeed, Evid.R. 408 provides that 
evidence of settlement may be used for several purposes at trial, making it clear 
that discovery of settlement terms and agreements is not always impermissible. 
{¶ 93} Even if we were to conclude that Goodyear was persuasive 
authority, the commission misapplied its holding in this matter.  The absolute 
privilege recognized in Goodyear protects against the disclosure of settlement 
communications, that is, statements “made during settlement talks.”  Goodyear, 
332 F.3d at 979.  Here, OCC is not seeking to discover the communications made 
during settlement negotiations but, rather, the terms of the side agreements and 
the agreements themselves.  The Sixth Circuit stated that the settlement privilege 
January Term, 2006 
33 
is absolute but extends only to the underlying discussions made during settlement 
negotiations and not to the occurrence of settlement talks, the terms of any 
settlement, or the settlement agreement itself.  Id. at 981-982.  If there were side 
agreements, such as contracts negotiated between CG & E and the signatory 
parties to prevent or conclude further litigation that were not made part of the 
stipulation, Goodyear would not preclude discovery of such information. 
{¶ 94} Accordingly, we hold that the commission abused its discretion in 
barring discovery of side agreements in this matter based on a federal settlement 
privilege.  We remand this matter to the commission and order that it compel 
disclosure of the requested information.  Upon disclosure, the commission may, if 
necessary, decide any issues pertaining to admissibility of that information. 
Conclusion 
{¶ 95} For the reasons explained above, we hold that the commission 
failed to comply with R.C. 4903.09 by not providing record evidence and 
sufficient reasoning when it modified its order on rehearing and that the 
commission abused its discretion when it denied discovery regarding alleged side 
agreements.  Accordingly, the commission’s orders are affirmed in part and 
reversed in part, and this matter is remanded for further consideration consistent 
with this opinion. 
Orders affirmed in part, 
and reversed in part, 
and cause remanded. 
 
MOYER, C.J., RESNICK, LUNDBERG STRATTON, O’CONNOR, O’DONNELL 
and LANZINGER, JJ., concur. 
__________________ 
Janine L. Migden-Ostrander, Ohio Consumers’ Counsel, and Jeffrey L. 
Small and Ann M. Hotz, Assistant Consumers’ Counsel, for appellant. 
SUPREME COURT OF OHIO 
34 
Jim Petro, Attorney General, Duane W. Luckey, Senior Deputy Attorney 
General, and Thomas W. McNamee and Werner L. Margard III, Assistant 
Attorneys General, for appellee Public Utilities Commission of Ohio. 
Paul A. Colbert, Rocco O. D’Ascenzo, James B. Gainer, and Kate E. 
Moriarty, for intervening appellee Cincinnati Gas & Electric Company. 
McNees Wallace & Nurick L.L.C., Samuel C. Randazzo, Daniel J. 
Neilsen, and Lisa G. McAlister, for intervening appellee Industrial Energy Users-
Ohio. 
______________________