Title: In re Application of Ohio Power Co.

State: ohio

Issuer: Ohio Supreme Court

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. 2024-Ohio-2890.] 
 
 
 
 
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. 2024-OHIO-2890 
IN RE APPLICATION OF OHIO POWER COMPANY FOR AN INCREASE IN ELECTRIC 
DISTRIBUTION RATES; 
INTERSTATE GAS SUPPLY, L.L.C., APPELLANT; PUBLIC UTILITIES 
COMMISSION, APPELLEE; OHIO POWER COMPANY, INTERVENING 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.  
2024-Ohio-2890.] 
Public utilities—Electric-distribution rates—R.C. 4903.09—R.C. 4909.15—
Findings of fact in Public Utilities Commission’s orders regarding electric-
distribution utility’s application for distribution-rate increase were 
supported by evidence of record as required by R.C. 4903.09, and 
commission complied with R.C. 4909.15 by finding that the electric-
distribution rates were just and reasonable—Orders affirmed. 
(No. 2023-0464—Submitted February 6, 2024—Decided August 1, 2024.) 
APPEAL from the Public Utilities Commission, Nos. 20-585-EL-AIR, 20-586-EL-
ATA, and 20-587-EL-AAM. 
SUPREME COURT OF OHIO 
 
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__________________ 
BRUNNER, J., authored the opinion of the court, which KENNEDY, C.J., and 
FISCHER, DEWINE, DONNELLY, STEWART, and WINKLER, JJ., joined.  ROBERT C. 
WINKLER, J., of the First District Court of Appeals, sat for DETERS, J. 
 
BRUNNER, J. 
{¶ 1} This appeal stems from intervening appellee Ohio Power Company’s 
most recent electric-distribution-rate case.  At issue is whether appellee, the Public 
Utilities Commission, authorized Ohio Power to recover through its distribution 
rates the costs it incurs to provide generation service.  Retail electric-generation 
service is a competitive service under R.C. 4928.03, while electric distribution 
remains a noncompetitive service under R.C. 4928.15(A).  Ohio law, including the 
state’s electric policy as expressed in R.C. 4928.02, mandates that electric-
distribution utilities—like Ohio Power—separate competitive generation rates 
from noncompetitive distribution and transmission rates.  See R.C. 4928.05(A)(1), 
4928.31(A)(1), and 4928.141. 
{¶ 2} In the proceedings below, the commission found that the evidence 
was insufficient to enable it to determine whether Ohio Power is recovering any 
known and quantifiable generation costs through its distribution rates.  See In re 
Application of Ohio Power Co. for an Increase in Elec. Distrib. Rates, PUCO No. 
20-585-EL-AIR, 2021 WL 5496172, *52 (Nov. 17, 2021); In re Application of 
Ohio Power Co. for an Increase in Elec. Distrib. Rates, PUCO No. 20-585-EL-
AIR, 2023 WL 2016753, *15 (Feb. 28, 2023). 
{¶ 3} Appellant, Interstate Gas Supply, L.L.C. (“IGS”), a competitive retail 
electric-service (“CRES”) provider, which does business in Ohio Power’s service 
territory, argues on appeal that the commission ignored uncontroverted evidence 
that Ohio Power is recovering generation-related costs through its distribution rates 
in violation of state law and the state’s electric policy.  IGS also argues that the 
January Term, 2024 
 
 
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commission failed to support its decision with findings of fact based on the record 
evidence as required by R.C. 4903.09. 
{¶ 4} As discussed below, IGS has failed to demonstrate reversible error.  
Therefore, we affirm the commission’s decision. 
I.  FACTS AND PROCEDURAL BACKGROUND 
A.  Background on deregulation 
{¶ 5} In 1999, the General Assembly restructured Ohio’s electric-utility 
industry to foster retail competition in the generation component of electric service 
and altered the traditional rate-based regulation of electric utilities by requiring 
separation of the three components of electric service—generation, transmission, 
and distribution.  See Am.Sub.S.B. No. 3, 148 Ohio Laws, Part IV, 7962, 7992-
8055 (“S.B. 3”).  Before generation-service competition began, the three service 
components were priced as one, and electric utilities used the revenues from the 
bundled services to support their generation, transmission, and distribution 
expenses and investments.  The separation, or unbundling, of service components 
was intended to allow customers to evaluate offers from CRES providers and to 
ensure that electric-distribution utilities would not subsidize the competitive 
generation portion of their businesses through their distribution rates.  See AK Steel 
Corp. v. Pub. Util. Comm., 95 Ohio St.3d 81, 83 (2002); Migden-Ostrander v. Pub. 
Util. Comm., 2004-Ohio-3924, ¶ 2-4. 
{¶ 6} With the advent of retail competition under S.B. 3, customers have 
the option of purchasing electric-generation service from a CRES provider—an act 
known as “shopping.”  Customers who choose not to shop for service from a CRES 
provider continue to receive generation service from their incumbent electric-
distribution utility under a “standard service offer” (“SSO”), which is the 
generation rate charged to nonshopping customers.  R.C. 4928.141.  The SSO also 
serves as the default rate for shopping customers who must return to the electric 
utility for generation service when the shopping customer’s CRES provider fails to 
SUPREME COURT OF OHIO 
 
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provide service.  R.C. 4928.14.  Electric utilities can establish their SSO for 
electric-generation service in one of two ways: through a “market-rate offer,” R.C. 
4928.142, or an “electric security plan” (“ESP”), R.C. 4928.143. 
B.  A related proceeding: the approval of Ohio Power’s fourth ESP 
{¶ 7} In 2018, the commission modified and approved a stipulation 
authorizing Ohio Power to implement a new ESP for the period June 1, 2018, 
through May 31, 2024 (“the ESP 4 case”).  See In re Application of Ohio Power 
Co. for Authority to Establish a Standard Service Offer Pursuant to R.C. 4928.143, 
in the Form of an Electric Security Plan, PUCO No. 16-1852-EL-SSO, ¶ 1 
(Apr. 25, 2018).  Among other commitments, Ohio Power agreed to file a 
distribution-rate case by June 1, 2020.  Id. at ¶ 45. 
{¶ 8} Ohio Power also proposed to establish a “competition incentive 
rider,” which was intended to remove certain costs associated with providing SSO 
service (e.g., call-center, meter-reading, and information-technology-infrastructure 
costs) that potentially were being recovered from both shopping and nonshopping 
customers through its distribution rates.  Id. at ¶ 103, 200.  The competition-
incentive rider was designed to reallocate those SSO-related costs from being 
recovered through Ohio Power’s distribution rates to an additional charge to Ohio 
Power’s nonshopping customers.  Id. at ¶ 201-202, 209, 212.  In conjunction with 
the competition-incentive rider, Ohio Power also sought approval of a companion 
rider—the “SSO credit rider”—which was designed to refund to Ohio Power’s 
distribution customers any amounts that Ohio Power recovered through the 
competition-incentive rider.  Id. at ¶ 103, 209.  The two riders would be revenue 
neutral to Ohio Power but would increase rates for nonshopping customers who 
purchased SSO generation service from Ohio Power, while lowering rates for 
shopping customers who purchased generation service from a CRES provider.  Id. 
{¶ 9} The commission approved both riders but found that they should be 
implemented as placeholder riders, id. at ¶ 214, meaning that initially no costs 
January Term, 2024 
 
 
5 
would be recovered through the competition-incentive rider or refunded through 
the SSO-credit rider.  Given the lack of evidence, the commission required Ohio 
Power to conduct a thorough analysis as part of its next distribution-rate case to 
identify the actual costs associated with providing the SSO and its customer-choice 
program, which was implemented to promote customer shopping.  Id. at ¶ 214-215.  
Following that review, the commission would determine whether any known, 
quantifiable generation-service costs were being collected by Ohio Power from all 
customers through its distribution rates and if so, whether those costs were clearly 
incurred by Ohio Power to support the SSO.  Id.  The commission noted that many 
of the costs at issue could be incurred by Ohio Power to support its generation 
service under either the SSO or the customer-choice program.  Id. at ¶ 214.  The 
commission thus concluded that additional analysis was needed to determine 
whether and how certain expenses should be reallocated through the competition-
incentive rider and refunded through the SSO-credit rider.  Id. 
{¶ 10} As a final matter, the commission found that the competition-
incentive rider was a misnomer, because it was not directly intended to promote 
customer shopping.  In re Application of Ohio Power Co. for Authority to Establish 
a Standard Service Offer, PUCO No. 16-1852-EL-SSO, at ¶ 216.  Accordingly, the 
commission changed the name of the competition-incentive rider to the “retail 
reconciliation rider.” 
C.  The present case: the commission’s review of Ohio Power’s application for a 
distribution-rate increase 
{¶ 11} In June 2020, Ohio Power filed an application under R.C. 4909.18 
to increase its distribution rates.  In an effort to comply with the commission’s 
directive in the ESP 4 case to identify and quantify its SSO costs and customer-
choice-program costs, Ohio Power offered evidence from David Roush, its 
managing director for regulated pricing and analysis.  Roush testified regarding the 
quantitative and qualitative analysis he had prepared of Ohio Power’s costs 
SUPREME COURT OF OHIO 
 
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associated with providing SSO services and with providing services to shopping 
customers, all of which are being recovered through its distribution rates.  However, 
the commission’s staff and other parties to the proceedings—including IGS—
objected to Roush’s analysis, arguing that it was insufficient for determining 
whether and how these generation costs should be allocated between shopping and 
nonshopping customers. 
{¶ 12} Thereafter, in March 2021, Ohio Power, the commission’s staff, and 
12 other parties agreed to a “Stipulation and Recommendation” that, if approved, 
would resolve all issues before the commission in the distribution-rate case.  
Relevant to the issues on appeal here, the stipulating parties recommended that the 
retail-reconciliation rider and the SSO-credit rider remain placeholder riders set at 
zero based on the staff’s report and recommendation.  IGS opposed the stipulation. 
{¶ 13} In November 2021, the commission issued an opinion and order 
modifying and approving the stipulation.  In re Application of Ohio Power Co., 
PUCO No. 20-585-EL-AIR, 2021 WL 5496172, at *51, 61.  Based on the 
commission’s staff report and testimony from Ohio Power, the staff, and the Office 
of the Ohio Consumers’ Counsel (“OCC”), the commission accepted the stipulation 
that Ohio Power continue the retail-reconciliation rider and the SSO-credit rider as 
placeholder riders set at zero.  See id. at *50-52.  According to the commission, the 
parties “expressed differing views regarding the potential quantification and 
allocation of costs between SSO and shopping customers,” and Ohio Power’s 
accounting and internal-tracking systems precluded a more thorough analysis of 
costs it incurs to provide the SSO and to support the customer-choice program.  Id. 
at *52.  As a final matter, the commission noted that IGS could assert in a future 
case that the riders should be populated, provided that a proper cost analysis is 
conducted as the commission contemplated in the ESP 4 case.  Id. at *53. 
{¶ 14} IGS filed an application for rehearing, challenging the commission’s 
approval of the stipulation to continue the riders as placeholders.  In January 2022, 
January Term, 2024 
 
 
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the commission granted the application for rehearing, In re Application of Ohio 
Power Co. for an Increase in Elec. Distrib. Rates, PUCO No. 20-585-EL-AIR, 
2022 WL 143838, *2 (Jan. 12, 2022), but in February 2023, the commission 
changed course, denied the application for rehearing, and affirmed its initial ruling, 
In re Application of Ohio Power Co., PUCO No. 20-585-EL-AIR, 2023 WL 
2016753, at *1, 13-21. 
{¶ 15} IGS appealed.  The commission submitted a merit brief in defense 
of its orders.  Ohio Power was granted leave to intervene, see 2023-Ohio-2123, and 
filed a brief in support of the commission’s orders. 
II.  STANDARD OF REVIEW 
{¶ 16} R.C. 4903.13 provides that a final order of the commission shall be 
reversed, vacated, or modified only when, upon consideration of the record, we are 
of the opinion that such order is unlawful or unreasonable.  We have “complete and 
independent power of review as to all questions of law” in appeals from orders of 
the commission.  Ohio Edison Co. v. Pub. Util. Comm., 78 Ohio St.3d 466, 469 
(1997).  “[We] will not, however, reverse or modify a [commission] decision as to 
questions of fact where the record contains sufficient probative evidence to show 
that the [commission’s] determination is not manifestly against the weight of the 
evidence and is not so clearly unsupported by the record as to show 
misapprehension, mistake, or willful disregard of duty.”  Monongahela Power Co. 
v. Pub. Util. Comm., 2004-Ohio-6896, ¶ 29. 
III.  DISCUSSION 
{¶ 17} IGS raises four propositions of law, which it labels “assignments of 
error.”  None has merit. 
 
 
SUPREME COURT OF OHIO 
 
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A.  IGS’s First Proposition of Law: Did the commission allow Ohio Power to 
recover through its distribution rates the costs that it incurs to supply 
competitive retail electric-generation services? 
{¶ 18} IGS first argues that the commission has allowed Ohio Power to 
recover through its distribution rates the costs that it incurs to supply competitive 
retail electric-generation services, in violation of state law and the state’s electric 
policy.  See R.C. 4909.15 (requiring the commission to fix just and reasonable 
distribution rates); R.C. 4928.05(A)(1) (barring the commission from regulating 
competitive retail electric service supplied by an electric-distribution utility); 
R.C. 4928.02(H) (state policy prohibiting recovery of generation-related costs 
through distribution rates).  According to IGS, the record before the commission 
contained “uncontroverted evidence” demonstrating that Ohio Power is recovering 
through its distribution rates at least $4.7 million in known and quantifiable costs 
that it incurs to provide SSO service.  IGS maintains that the commission erred by 
not ordering Ohio Power to (1) populate the retail-reconciliation rider with rates to 
recover and reassign the $4.7 million in SSO costs to Ohio Power’s nonshopping 
customers and (2) populate the SSO-credit rider as needed to refund the recovered 
amount to Ohio Power’s distribution customers. 
{¶ 19} The commission and Ohio Power counter that the record before the 
commission lacked sufficient data and analysis to show that generation-related 
costs are included in Ohio Power’s distribution rates.  They assert that without any 
evidence that known or quantifiable generation costs are included in the distribution 
rates, the commission had no basis on which to populate the retail-reconciliation 
rider and the SSO-credit rider. 
{¶ 20} As discussed below, IGS has not demonstrated reversible error.  
Some background is necessary, however, before we address IGS’s argument. 
1.  Background on Ohio Power’s initial cost study filed in response to the 
commission’s directive in the ESP 4 case 
January Term, 2024 
 
 
9 
{¶ 21} IGS relies primarily on Roush’s testimony to support its claim that 
$4.7 million in SSO costs should be removed from Ohio Power’s distribution rates 
under the retail-reconciliation rider and refunded to all distribution customers under 
the SSO-credit rider.  Ohio Power filed the transcript of Roush’s initial prehearing 
direct testimony on June 5, 2020, in support of its application for a distribution-rate 
increase.  Among other things, Roush’s testimony was intended to serve as a 
response to the commission’s directive in the ESP 4 case, by which the commission 
instructed Ohio Power to conduct an analysis of its costs to provide electric-
generation service to nonshopping customers and to shopping customers—costs 
that are potentially being recovered through its distribution rates.  Roush had 
conducted a quantitative and qualitative analysis to differentiate between certain 
SSO and shopping-service costs that are included in Ohio Power’s distribution 
rates.  Roush also computed rates that would serve to populate the retail-
reconciliation rider and the SSO-credit rider. 
{¶ 22} Several parties, including IGS, contested and criticized Roush’s 
analysis.  Ohio Power subsequently joined the parties to the joint stipulation in 
recommending that the rates charged under the retail-reconciliation rider and the 
SSO-credit rider remain at zero.  Given the stipulation, Ohio Power did not offer 
Roush’s initial prehearing direct testimony and cost analysis into evidence at the 
evidentiary hearing on the joint stipulation. 
{¶ 23} During the evidentiary hearing, however, IGS introduced Roush’s 
initial prehearing direct testimony and his cost analysis in support of its position 
that the commission should populate the retail-reconciliation rider and the SSO-
credit rider.  The commission admitted the portions of pages 11 and 12 of the 
transcript of Roush’s testimony (IGS’s exhibit No. 3) in which Roush testified 
regarding his analysis of the SSO and customer-choice-program costs as it relates 
to funding the retail-reconciliation rider and the SSO-credit rider.  The commission 
SUPREME COURT OF OHIO 
 
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also admitted exhibit DMR-2 to Roush’s prehearing testimony, which is a summary 
of Roush’s cost analysis and proposed rider rates. 
{¶ 24} Roush’s initial prehearing direct testimony and analysis reflect that 
Ohio Power’s distribution rates include $4.7 million in direct costs that it incurs to 
provide SSO service.  The $4.7 million consists of (1) charges to Ohio Power that 
are required by Ohio law to fund the commission and the OCC, see 
R.C. 4905.10(A) and 4911.18(A), and (2) uncollectible expenses directly 
assignable to providing SSO service. 
{¶ 25} The commission, however, rejected IGS’s contention that Roush’s 
testimony and cost analysis justified a finding that $4.7 million in generation-
service costs should be removed from Ohio Power’s distribution rates and collected 
under the retail-reconciliation rider and refunded to all distribution customers under 
the SSO-credit rider.  See In re Application of Ohio Power Co., PUCO No. 20-585-
EL-AIR, 2023 WL 2016753, at *15.  The commission, citing the commission’s 
staff report and testimony from staff witness Craig Smith, an administrator with the 
commission’s Reliability and Service Analysis Division of the Service Monitoring 
and Enforcement Department, found that the rider rates should remain at zero 
because Roush failed to include in his analysis “the complete evaluation of SSO 
and shopping costs as contemplated by the Commission in the ESP 4 Case.”  (Italics 
in original.)  Id.  According to the commission’s staff report and the supporting 
testimony of Smith, Roush identified only a limited number of costs to be included 
in the riders and did not provide a detailed cost-of-service study differentiating 
costs or service between shopping and nonshopping customers.  Id.  The 
commission also noted that there was “a lack of granular cost of service information 
in [Ohio Power’s] [accounting and] internal[-tracking] systems that preclude[ed] 
an accurate and verifiable accounting.”  In re Application of Ohio Power Co., 
PUCO No. 20-585-EL-AIR, 2021 WL 5496172, at *52; see also 2023 WL 2016753 
at *15. 
January Term, 2024 
 
 
11 
2.  IGS has not shown that the commission’s findings based on the evidence 
of record were unlawful or unreasonable 
{¶ 26} IGS argues that Roush’s initial prehearing direct testimony and cost 
analysis support a finding that Ohio Power is improperly recovering $4.7 million 
in SSO costs through its distribution rates.  According to IGS, the evidence was 
“uncontroverted.”  This is inaccurate, however, because several parties before the 
commission—including IGS—submitted evidence challenging Roush’s testimony 
and cost analysis. 
{¶ 27} Moreover, the commission ultimately rejected Roush’s initial 
prehearing direct testimony and cost analysis.  See 2021 WL 5496172 at *52; 2023 
WL 2016753 at *45-50.  Yet IGS does not set forth any grounds contesting the 
commission’s rejection of Roush’s testimony and cost analysis.  Rather than 
challenging the commission’s rejection of this evidence, IGS rests its argument on 
an undisputed legal conclusion: that Ohio Power is prohibited by state law and the 
state’s energy policy from recovering generation-related costs through its 
distribution rates.  But IGS cannot prevail on its state-law and -policy claims 
without first demonstrating that the commission erred in rejecting Roush’s 
testimony and cost analysis.  That is, absent a showing by IGS that the commission 
acted unlawfully or unreasonably in rejecting this evidence, there is no evidentiary 
support for IGS’s allegation that the commission committed any statutory 
violations. 
{¶ 28} A party that challenges commission-approved rates and charges has 
the burden on appeal to this court under R.C. 4903.13 of showing that the rates and 
charges are unjust, unreasonable, or unlawful.  AT&T Communications of Ohio, 
Inc. v. Pub. Util. Comm., 51 Ohio St.3d 150, 154 (1990).  Because IGS has not 
shown any error in the commission’s orders on this issue, it has failed to carry its 
burden on appeal.  Therefore, we reject IGS’s first proposition of law. 
SUPREME COURT OF OHIO 
 
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B.  IGS’s Second Proposition of Law: Did the commission violate R.C. 4903.09 
in finding that SSO-related costs should not be allocated to the retail-
reconciliation rider? 
{¶ 29} R.C. 4903.09 requires the commission to file “findings of fact and 
written opinions setting forth the reasons prompting the decisions arrived at, based 
upon said findings of fact.”  In its second proposition of law, IGS claims that the 
record does not support the commission’s finding that there was “no basis upon 
which to conclude that [Ohio Power’s] distribution rates include known, 
quantifiable costs that should be allocated to the [retail reconciliation rider],” In re 
Application of Ohio Power Co., PUCO No. 20-585-EL-AIR, 2021 WL 5496172, at 
*52, and therefore the commission violated R.C. 4903.09.  This argument lacks 
merit. 
{¶ 30} IGS’s argument is premised on its belief that the commission 
ignored uncontested evidence that shows that Ohio Power’s proposed distribution 
rates would result in its collecting at least $4.7 million in generation-related costs.  
The commission did not ignore such evidence; the commission rejected it.  As noted 
in our discussion of IGS’s first proposition of law, the commission found that the 
evidence that IGS relies on here—namely, Roush’s initial prehearing direct 
testimony and cost analysis—was insufficient to support a finding that $4.7 million 
in SSO-related costs should be removed from Ohio Power’s distribution rates and 
redistributed to customers through the retail-reconciliation rider and the SSO-credit 
rider.  Specifically, the commission found that two factors precluded an accurate 
evaluation of SSO costs and shopping costs embedded in Ohio Power’s distribution 
rates: (1) Roush identified only a limited number of costs in his initial analysis and 
(2) Ohio Power’s accounting and internal-tracking systems lacked accessible data 
regarding costs and services provided to shopping and nonshopping customers.  See 
2021 WL 5496172 at *51-52; In re Application of Ohio Power Co., PUCO No. 20-
585-EL-AIR, 2023 WL 2016753, at *15.  In support of these findings, the 
January Term, 2024 
 
 
13 
commission cited the commission’s staff report and testimony from staff witness 
Smith, as well as other evidence from Roush. 
{¶ 31} IGS acknowledges that the commission cited evidence from the 
record in support of its findings.  However, IGS claims that the commission violated 
R.C. 4903.09 because the “uncontroverted evidence” supports a finding that Ohio 
Power is recovering $4.7 million in generation-related costs through its distribution 
rates. 
{¶ 32} IGS misunderstands the test for determining the commission’s 
compliance with R.C. 4903.09.  The question under R.C. 4903.09 is not whether 
the record contained sufficient evidence to support a particular finding by the 
commission.  See In re Application of E. Ohio Gas Co., 2023-Ohio-3289, ¶ 28; 
Cleveland Elec. Illum. Co. v. Pub. Util. Comm., 4 Ohio St.3d 107, 110, fn.5 (1983).  
Rather, R.C. 4903.09 requires the commission to provide this court with an 
adequate record so that we may determine how the commission reached its 
decision.  MCI Telecommunications Corp. v. Pub. Util. Comm., 32 Ohio St.3d 306, 
311 (1987); Allnet Communications Servs., Inc. v. Pub. Util. Comm., 70 Ohio St.3d 
202, 209 (1994).  The commission’s orders must contain sufficient detail for us to 
determine the factual basis and reasoning relied on by the commission.  Tongren v. 
Pub. Util. Comm., 85 Ohio St.3d 87, 89 (1999); Payphone Assn. v. Pub. Util. 
Comm., 2006-Ohio-2988, ¶ 32.  As noted above, the commission’s orders in this 
case contain ample record citations for this court to determine the factual basis for 
the commission’s findings. 
{¶ 33} In sum, IGS has not shown a violation of R.C. 4903.09.  Therefore, 
we reject IGS’s second proposition of law. 
C.  IGS’s Third Proposition of Law: Did the commission violate R.C. 4903.09 in 
rejecting evidence from IGS’s witness Frank Lacey? 
{¶ 34} In its third proposition of law, IGS contends that the commission 
violated R.C. 4903.09 when it rejected the cost analysis of IGS’s witness Frank 
SUPREME COURT OF OHIO 
 
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Lacey, the president of Electric Advisors Consulting, L.L.C.  Lacey provides 
policy- and market-related consulting services to advanced energy-management 
companies and end-use customers.  In rebuttal to the cost analysis conducted by 
Roush, IGS submitted prehearing direct testimony from Lacey regarding his 
separate analysis of Ohio Power’s generation-related costs.  According to Lacey, 
Ohio Power’s proposed distribution rates would result in Ohio Power’s recovery of 
approximately $64 million in SSO-related costs, which he said should be 
reallocated through the retail-reconciliation rider and refunded to all distribution 
customers through the SSO-credit rider. 
{¶ 35} The commission rejected Lacey’s testimony on the ground that he 
failed to comply with the commission’s directive in the ESP 4 case requiring an 
analysis of Ohio Power’s cost of providing SSO generation service, as well as an 
analysis of costs incurred to support the customer-choice program, to determine 
whether any of those costs were being recovered by Ohio Power through its 
distribution rates.  In re Application of Ohio Power Co., PUCO No. 20-585-EL-
AIR, 2021 WL 5496172, at *52.  According to the commission, Lacey made no 
attempt to factor customer-choice-program costs into his analysis.  Id.  The 
commission found that because Lacey failed to provide a complete analysis of costs 
as was ordered in the ESP 4 case, there was no evidentiary support for his 
recommendation to fund the retail-reconciliation rider and the SSO-credit rider in 
the amount of $64 million.  Id.; In re Application of Ohio Power Co., PUCO No. 
20-585-EL-AIR, 2023 WL 2016753, at *15. 
{¶ 36} On appeal, IGS argues that the record does not support the 
commission’s decision to reject Lacey’s analysis on the ground that his analysis 
was incomplete.  IGS’s third proposition of law lacks merit. 
1.  The commission’s basis for rejecting Lacey’s analysis is readily 
discernible from its orders 
January Term, 2024 
 
 
15 
{¶ 37} As noted above, in its orders, the commission explained that Lacey’s 
analysis was rejected as incomplete because he had failed to factor customer-
choice-program costs into his analysis as required by the commission’s directive in 
the ESP 4 case.  To meet the requirements of R.C. 4903.09, the commission’s orders 
must show in sufficient detail the facts in the record on which they are based and 
the reasoning followed by the commission in reaching its decision.  MCI 
Telecommunications Corp., 32 Ohio St.3d at 312.  Here, the commission complied 
with R.C. 4903.09 by citing the specific paragraphs of its order in the ESP 4 case 
in which it set out the requirement that any future analysis include costs attributable 
to the customer-choice program.  2021 WL 5496172 at *52.  Moreover, the 
commission explained why it rejected Lacey’s analysis and cited the evidence of 
record where Lacey admitted that he had not attempted to factor customer-choice-
program costs into his analysis.  Id.  And that is all that R.C. 4903.09 requires. 
2.  This court lacks jurisdiction over IGS’s remaining arguments under its 
third proposition of law 
{¶ 38} IGS also alleges that the commission violated R.C. 4903.09 because 
the grounds on which it rejected Lacey’s testimony lacked evidentiary support in 
the record.  According to IGS, in the ESP 4 case, the commission required only 
Ohio Power to conduct an analysis of its SSO and customer-choice-program costs.  
IGS thus maintains that the commission erred in rejecting Lacey’s analysis for his 
failure to comply with the directive in the ESP 4 case to conduct an analysis of 
customer-choice-program costs, because that order does not apply to IGS. 
{¶ 39} IGS, however, did not raise this argument in its application for 
rehearing before the commission as required by R.C. 4903.10.  It is well settled that 
setting forth specific grounds in an application for rehearing is a jurisdictional 
prerequisite for our review.  Consumers’ Counsel v. Pub. Util. Comm., 70 Ohio 
St.3d 244, 247 (1994).  Moreover, we strictly construe the specificity test set forth 
in R.C. 4903.10.  Discount Cellular, Inc. v. Pub. Util. Comm., 2007-Ohio-53, ¶ 59.  
SUPREME COURT OF OHIO 
 
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IGS’s failure to specifically raise this issue in its application for rehearing before 
the commission deprives us of jurisdiction to consider the argument on appeal. 
{¶ 40} In its final argument under this proposition of law, IGS alleges that 
the commission violated R.C. 4903.09 by finding that IGS was attempting to 
improperly relitigate an issue that was resolved in the ESP 4 case.  The commission 
found that IGS’s ongoing objection to the commission’s directive in the ESP 4 case 
to analyze Ohio Power’s customer-choice-program costs constituted an untimely 
attempt to challenge the commission’s ruling in that case.  In re Application of Ohio 
Power Co., PUCO No. 20-585-EL-AIR, 2023 WL 2016753, at *17.  The 
commission made this finding in its second rehearing entry, see id., as IGS 
acknowledges.  But IGS never filed a subsequent application for rehearing alleging 
error in the commission’s analysis in its second rehearing entry.  That means IGS 
never sought rehearing on this ground, so we lack jurisdiction to consider the 
argument now.  See Harris Design Servs. v. Columbia Gas of Ohio, Inc., 2018-
Ohio-2395, ¶ 23. 
D.  IGS’s Fourth Proposition of Law: Did the commission violate R.C. 4903.09 
when it deferred its decision to populate the riders to a future case? 
{¶ 41} In its fourth proposition of law, IGS contends that the commission 
violated R.C. 4903.09 by leaving the rates set at zero for the retail-reconciliation 
rider and the SSO-credit rider and by unlawfully deferring population of the riders 
to a future case.  IGS maintains that the commission’s orders fell short of complying 
with R.C. 4903.09 because the commission relied solely on information contained 
in the commission’s staff report, which it contends was insufficient to support 
setting the riders at zero and failed to address all material issues.  According to IGS, 
reversal is warranted under In re Application of FirstEnergy Advisors for 
Certification as a Competitive Retail Elec. Serv. Power Broker & Aggregator, 
2021-Ohio-3630, because this court found a violation of R.C. 4903.09 in that case 
under similar circumstances. 
January Term, 2024 
 
 
17 
1.  IGS’s reliance on FirstEnergy Advisors is misplaced 
{¶ 42} In FirstEnergy Advisors, the commission issued an order approving 
FirstEnergy Advisors’ application to provide regulated utility services.  
FirstEnergy Advisors at ¶ 1.  The commission based its decision solely on a report 
prepared by its staff.  The staff report merely stated that FirstEnergy Advisors had 
provided staff with the information it had requested, that staff had reviewed that 
information, and that staff believed that FirstEnergy Advisors had met all the 
requirements for approval of its application.  Id. at ¶ 24. 
{¶ 43} We explained that the commission can adopt reports prepared by its 
staff and incorporate them into its orders but that to comply with R.C. 4903.09, 
those reports must contain sufficient factual findings and conclusions of law.  
FirstEnergy Advisors at ¶ 22.  We held that the commission violated R.C. 4903.09 
in two ways: First, neither the commission’s order—nor the staff report that the 
commission adopted—explained how FirstEnergy Advisors had met the applicable 
legal requirements to provide regulated utility services.  FirstEnergy Advisors at 
¶ 24-25, 27.  Second, the commission failed to cite any evidence in the record on 
which it based its decision.  Id. at ¶ 25, 27. 
{¶ 44} In contrast, the commission’s orders in this case provide sufficient 
detail to enable us to determine how the commission reached its decision regarding 
the retail-reconciliation rider and the SSO-credit rider.  The commission 
determined that the riders should continue as placeholders with rates set at zero 
based on the commission’s staff report and recommendation.  See In re Application 
of Ohio Power Co., PUCO No. 20-585-EL-AIR, 2021 WL 5496172, at *51; In re 
Application of Ohio Power Co., PUCO No. 20-585-EL-AIR, 2023 WL 2016753, at 
*14.  In its report, the staff recommended that the riders remain at zero because 
Ohio Power had failed to examine all costs that it incurs to provide the SSO and to 
support the customer-choice program.  According to the staff report, unless all such 
costs are identified as being included in distribution rates, the staff cannot determine 
SUPREME COURT OF OHIO 
 
18 
whether or how those costs should be allocated between shopping and nonshopping 
customers.  The commission also cited testimony from staff witness Smith, who 
explained the staff’s position and reiterated that the staff was unable to recommend 
just and reasonable rates for the riders given the lack of (1) a detailed cost-of-
service study and (2) granular data regarding the allocation of costs and services 
between shopping and nonshopping customers.  See 2023 WL 2016753 at *15, 21.  
In short, contrary to IGS’s claim, the commission’s orders in this case suffer from 
none of the deficiencies that plagued the commission’s bare-bones order that was 
at issue in FirstEnergy Advisors. 
2.  IGS’s remaining arguments do not require a different result 
{¶ 45} In the remainder of this proposition of law, IGS claims that the 
commission violated R.C. 4903.09 by failing to address several material issues.  We 
find that IGS’s remaining arguments lack merit. 
{¶ 46} First, IGS claims that it presented evidence to the commission 
showing that the commission did not have the authority to authorize the recovery 
of generation-related-service costs through distribution rates and that such recovery 
“promoted adverse economic effects on consumers, competitors, and competition 
in the generation-service market.”  According to IGS, it presented these issues 
through witness testimony and its briefs but the commission did not address any of 
the legal or economic consequences of setting the riders at zero. 
{¶ 47} IGS’s claim of adverse legal and economic consequences hinges on 
its proving that Ohio Power is recovering generation-related costs through its 
distribution rates.  But as already discussed, the commission rejected IGS’s 
evidence on this point, and on appeal, IGS has failed to demonstrate that the 
commission erred in doing so. 
{¶ 48} Second, IGS claims that the commission failed to determine that “the 
resulting distribution rates are just and reasonable” as required by R.C. 4909.15(E).  
According to IGS, the commission’s staff report on which the commission relied in 
January Term, 2024 
 
 
19 
its orders states that the staff could not determine whether rates were just and 
reasonable based on the initial cost-of-service study provided by Ohio Power.  In 
addition, IGS contends that the commission violated R.C. 4909.15 when, instead 
of determining in this case whether the approved distribution rates were just and 
reasonable, the commission informed IGS that it could argue in favor of populating 
the riders in a future case. 
{¶ 49} To the extent IGS is arguing that the commission failed to find that 
Ohio Power’s distribution rates are just and reasonable, this argument lacks merit.  
The commission made this finding as required by R.C. 4909.15.  See In re 
Application of Ohio Power Co., PUCO No. 20-585-EL-AIR, 2021 WL 5496172, at 
*59-61.  To the extent that IGS is arguing that Ohio Power’s distribution rates are 
unjust and unreasonable under R.C. 4909.15 because the commission refused to 
fund the riders, that claim is rejected, because it is based on the faulty assertion that 
the evidence shows that Ohio Power is recovering generation-related costs through 
its distribution rates. 
{¶ 50} Finally, IGS’s argument that any reliance on the staff’s 
characterization that the SSO and the shopping costs are distribution-related or 
should be socialized (i.e., paid by both shopping and nonshopping customers) also 
fails.  We reject this argument because IGS does not identify where in the 
commission’s orders the commission characterized such costs as distribution-
related or found that they should be socialized. 
IV.  CONCLUSION 
{¶ 51} For the foregoing reasons, we affirm the commission’s orders. 
Orders affirmed. 
_________________ 
 
IGS Energy, Joseph Oliker, and Evan Betterton, for appellant. 
 
Dave Yost, Attorney General, and John H. Jones, Thomas G. Lindgren, and 
Janet R. Gregory, Assistant Attorneys General, for appellee. 
SUPREME COURT OF OHIO 
 
20 
 
American Electric Power Service Corporation, Steven T. Nourse, and 
Michael J. Schuler; and Porter, Wright, Morris & Arthur, L.L.P., and L. Bradfield 
Hughes, for intervening appellee. 
_________________