Title: Util. Serv. Partners, Inc. v. Pub. Util. Comm.

State: ohio

Issuer: Ohio Supreme Court

Document:

[Until this opinion appears in the Ohio Official Reports advance sheets, it may be cited as 
Util. Serv. Partners, Inc. v. Pub. Util. Comm., Slip Opinion No. 2009-Ohio-6764.] 
 
 
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. 2009-OHIO-6764 
UTILITY SERVICE PARTNERS, INC., APPELLANT, v. PUBLIC UTILITIES 
COMMISSION OF OHIO ET AL., APPELLEES. 
[Until this opinion appears in the Ohio Official Reports advance sheets, it 
may be cited as Util. Serv. Partners, Inc. v. Pub. Util. Comm.,  
Slip Opinion No. 2009-Ohio-6764.] 
Public Utilities Commission — Order requiring natural gas company to repair 
service lines upheld. 
(No. 2008-1507 — Submitted September 2, 2009 — Decided  
December 29, 2009.) 
APPEAL from Public Utilities Commission of Ohio, No. 07-478-GA-UNC. 
__________________ 
CUPP, J. 
{¶ 1} Utility Service Partners, Inc. (“USP”) appeals from an order of the 
Public Utilities Commission of Ohio making Columbia Gas of Ohio, Inc. 
(“Columbia”) responsible for the repair and replacement of hazardous natural gas 
service lines.  USP alleges that the commission lacked statutory authority to issue 
the order and that the order lacked record support, substantially impaired the 
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obligations of USP’s contracts, and resulted in an unconstitutional taking of 
property.  None of USP’s arguments has merit, and we affirm. 
I 
{¶ 2} A service line is part of the pipeline system used to distribute 
natural gas.  Running roughly from the curb to the meter, it is the last part of the 
journey natural gas takes from the depths of the earth to the home of the 
consumer.  Unlike every other part of Columbia’s distribution system, the service 
line is generally owned by the customer. 
{¶ 3} Before the order in this case, if a service line leaked—for example, 
as a result of corrosion or because struck by the shovel of a backhoe—the 
customer was responsible for the costs of repairing or replacing the line. If the 
leak was hazardous, gas service was terminated until the line was repaired, 
whether the customer could afford the repair or not. 
{¶ 4} To help customers prepare for such an eventuality, USP offered 
customers what it called an “external gas line warranty.” For a monthly fee, USP 
would assume responsibility to repair or replace the service line if something went 
wrong.  At the time of the commission order at issue herein, roughly one hundred 
thousand of Columbia’s 1.4 million customers had purchased warranties from 
USP. 
{¶ 5} In April 2000, a serious event, termed an “incident” under federal 
law, occurred at a southwestern Ohio home.  See 49 C.F.R. 191.3(1)(i) and (ii) 
(defining “incident” to include “[a]n event that involves a release of gas from a 
pipeline * * * and * * * [a] death, or personal injury necessitating in-patient 
hospitalization; or * * * property damage * * * of $50,000 or more”).  The part of 
the service line that connects to the meter (called the “riser”) failed and pulled 
away from the remainder of the line.  Natural gas began blowing out of the 
disconnected line, apparently filling the basement.  Something ignited, and the gas 
exploded.  As a commission staff person testified in this case, “By the time the 
January Term, 2009 
3 
 
company got there, stopped the flow of gas and everything the house was severely 
damaged, actually ended up being totaled.  As we were doing our investigation at 
the site, we had several homeowners come up to us and say, ‘That same thing 
happened to my gas meter.  The gas line pulled out and gas was blowing at the 
foundation of my house’ * * *.” 
{¶ 6} That month, the commission initiated an investigation of the gas 
company in question. Over the next three years, while the investigation was 
underway, at least three more risers failed and caused explosions. In response, in 
2005, the commission opened a statewide investigation and charged its staff, with 
the cooperation of natural gas companies, to report on the condition and 
performance of risers in Ohio. 
{¶ 7} The staff issued its report in November 2006.  A few weeks later, 
the chairman of the commission filed a letter in the investigation docket asking 
Ohio’s distribution companies to consider “utilities taking over responsibility for 
the customer owned service lines” versus “the prudence” of “leav[ing] 
responsibility with the homeowner.” 
{¶ 8} Apparently Columbia found taking over responsibility from the 
customer the prudent course, and in April 2007, it submitted an application 
seeking authority to “assum[e] responsibility for * * * the future maintenance, 
repair and replacement of customer-owned service lines.” Numerous parties 
intervened, including two parties that opposed Columbia’s assumption of service-
line responsibility.  One was a plumbing company that stood to lose both warranty 
and repair business to Columbia. The other was USP, which asserted that 
Columbia’s proposal to assume service-line responsibility “would eradicate the 
corresponding gas service line warranty component of [its] business.” 
{¶ 9} In October 2007, the case went to hearing, and USP actively 
participated in the hearing.  On December 28, 2007, Columbia filed a stipulation 
signed by the company, staff, Ohio Consumers’ Counsel, and a consumer group.  
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The stipulation recommended that Columbia “be permitted to assume 
responsibility for * * * the future maintenance, repair and replacement of 
hazardous service lines.” More hearings were held, this time concerning the 
stipulation.  USP again participated, and filed a posthearing brief urging the 
commission to reject the stipulation. 
{¶ 10} Nevertheless, the commission approved it.  USP sought rehearing 
but was denied.  This appeal followed. 
II 
{¶ 11} The sole issue on appeal is whether the commission reasonably and 
lawfully made Columbia responsible for the repair and replacement of hazardous 
service lines.  See R.C. 4903.13.  USP challenges the order on four grounds, 
arguing (1) that the commission lacked statutory authority to make Columbia 
responsible for service lines, (2) that the order was not supported by evidence, (3) 
that the order was unconstitutional because it substantially impaired the 
obligations of contracts, and (4) that the order was unconstitutional because it 
resulted in a taking without just compensation.  We find USP’s arguments to lack 
merit, and we affirm the commission’s order. 
A 
{¶ 12} USP argues that the commission lacked statutory authority to make 
Columbia responsible for the repair or replacement of hazardous service lines.  
This argument is without merit. 
{¶ 13} In issuing the order, the commission relied on R.C. 4905.06. That 
section gives the commission general supervisory authority over utilities; among 
other things, it provides the commission with the “power to inspect” public 
utilities, which “includes the power to prescribe any rule or order that the 
commission finds necessary for protection of the public safety.”  The few strings 
attached to this power—“any” rule or order is permitted if the commission “finds 
[it] necessary”—imply a generous grant of discretion to issue safety-related 
January Term, 2009 
5 
 
orders.  See Akron v. Pub. Util. Comm. (1948), 149 Ohio St. 347, 359, 37 O.O. 
39, 78 N.E.2d 890 (recognizing the commission’s “broad” authority under various 
statutes “to protect and safeguard the interests of the public, particularly in respect 
to health, safety and welfare”).  Thus, if the order was related to the “protection of 
the public safety,” the commission acted within its powers. 
{¶ 14} We find that the order is related to the protection of the public 
safety.  The commission expressly acted “to improve the level of public safety,” 
and the terms of its order were rationally related to that end.  Service lines carry 
natural gas, and natural gas is dangerous unless it is handled properly.  It is 
noxious, flammable, invisible, and naturally odorless.  Exposure to natural gas is 
potentially lethal to persons and destructive of property.  We have long 
recognized its dangers.  See, e.g., Suiter v. Ohio Valley Gas Co. (1967), 10 Ohio 
St.2d 77, 78, 39 O.O.2d 65, 225 N.E.2d 792 (“It is a matter of common 
knowledge that * * * gas is a * * * dangerous commodity with a marked tendency 
to escape from its proper confines”); Northwestern Ohio Natural Gas Co. v. First 
Congregational Church of Toledo (1933), 126 Ohio St. 140, 184 N.E. 512, 
paragraph four of the syllabus (recognizing “the highly dangerous character of gas 
and its tendency to escape”). 
{¶ 15} Thus, the order, in seeking to improve the regulation of pipelines 
that prevent the escape of a dangerous substance, had a clear tie to public safety.  
And the order gave Columbia responsibility only over “hazardous” service lines, 
eliminating any argument that the commission exceeded the bounds of the safety 
power. We conclude that the commission acted with statutory authority. 
{¶ 16} On this point, USP’s objections boil down to two issues: first, that 
the commission lacked the power to regulate “previously * * * non-jurisdictional 
property” and, second, that the commission “affect[ed] the contract rights and 
property of third parties over whom it has no jurisdiction.” 
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{¶ 17} It is true that service lines used to be nonjurisdictional in the sense 
that Columbia’s customers used to be responsible for arranging and paying for 
service-line repair.  But this does not mean that the commission exceeded the 
bounds of its jurisdiction.  The commission merely regulated, in a new way, a 
person (Columbia) and a kind of property (segments of the distribution system) 
already subject to its jurisdiction.  See R.C. 4905.03(A)(6), 4905.04, 4905.06, and 
4929.03. 
{¶ 18} Modifying a regulatory scheme is not problematic in itself.  
Agencies undoubtedly may change course, provided that the new regulatory 
course is permissible.  See, e.g., Luntz Corp. v. Pub. Util. Comm. (1997), 79 Ohio 
St.3d 509, 512–513, 684 N.E.2d 43 (“the commission must, when appropriate, be 
willing to change its policies”); see also Fed. Communications Comm. v. Fox 
Television Stations, Inc. (2009), 129 S.Ct. 1800, 1811, 173 L.Ed.2d 738 (an 
agency “need not demonstrate to a court’s satisfaction that the reasons for the new 
policy are better than the reasons for the old one; it suffices that the new policy is 
permissible under the statute, that there are good reasons for it, and that the 
agency believes it to be better, which the conscious change of course adequately 
indicates” [emphasis sic]).  The issue, then, is whether the commission’s new 
course is permissible under the statute.  We find that it is. 
{¶ 19} Four catastrophic home explosions provided the commission with 
striking evidence of what can happen when service lines fail.  It investigated the 
matter, identified a possible safety gap (which was confirmed during the hearings 
in this case), and acted to close that gap and head off any further incident.  The 
result of this regulatory deliberation and fact-finding, at issue here, is permissible 
under R.C. 4905.06. 
{¶ 20} USP’s other argument—that commission orders simply may not 
“affect” unregulated parties—fares no better.  USP cites no authority in support of 
this hopelessly overbroad proposition.  If the commission could not issue orders 
January Term, 2009 
7 
 
that “affect” unregulated parties, it could not function.  It would be a rare order 
that did not affect unregulated persons: an order increasing rates, for instance, has 
the “effect” of transferring additional money from unregulated persons to 
regulated companies; likewise, an order denying a proposed construction project 
“affects” unregulated suppliers of labor and materials.  The mere fact an order 
affects unregulated parties is not problematic—it is inevitable.  USP must show 
that the commission lacked authority to do what it did, and that inquiry is 
governed by the Revised Code, not the mere presence or absence of effects on 
third parties.1    
B 
{¶ 21} In its second proposition of law, USP asserts that the commission 
lacked support in the record for two determinations it made: (1) that there was a 
safety problem with service lines that do not have the kind of riser whose failure 
prompted the commission’s initial investigation and (2) that Columbia should be 
responsible for the repair and replacement of service lines. We find both 
determinations, however, amply supported in the record. 
 
1. 
{¶ 22} Service lines can pose safety hazards.  They carry a dangerous 
substance that has a tendency to escape.  The undisputed evidence shows that a 
series of explosions resulting from service-line failures damaged or destroyed 
homes from 2000 to 2003. If the explosive destruction of multiple homes does not 
establish a safety issue, it is unclear what would. 
{¶ 23} USP concedes that there was evidence of safety issues associated 
with risers (the above-ground portion of the service line), but it asserts that there 
was no evidence of safety issues with any other part of the service line.  The 
                                                 
1. We do not suggest that an order’s effect on an unregulated person can never be relevant to the 
lawfulness or reasonableness of a given order; that question is not before us.  We hold only that 
the mere fact that an unregulated person might be affected by an order does not deprive the 
commission of power to issue it.   
SUPREME COURT OF OHIO 
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record, however, shows that the riser is part of the service line, and USP cites no 
authority limiting the commission’s safety jurisdiction to the narrowest segment 
manifesting safety issues on a particular line. But even if we accept USP’s 
conceptual division of the service line, the record contains substantial evidence 
that service lines in general—not simply a particular type of failed riser—also 
posed safety issues. 
{¶ 24} Indeed, numerous witnesses for both sides agreed that service lines 
in general can create safety issues.  For example, Michael Ramsey (a Columbia 
manager charged with ensuring compliance with pipeline safety regulations) 
explained that “leaks in steel service lines” can “present hazards to life and 
property.” In addition to leaks caused by damage from digging, steel service lines 
leak when they corrode, and Ramsey testified that “a leaking customer service 
line,” if not fixed, could “present a danger” to both owner and neighbors because 
“gas can migrate and could migrate to [the neighbor’s] house.” If the “gas 
migrates into the structure, and if there is a source of ignition, it can cause * * * 
catastrophic damage to the structure.” 
{¶ 25} Witnesses sponsored by USP confirmed the point.  For example, 
USP witness Carter Funk recognized that corrosion causes leaks on underground 
service lines and acknowledged on cross-examination that “[c]orrosion and bare 
steel service lines can present a safety hazard.” USP witness Timothy Phipps also 
recognized that corrosion causes leaks on underground service lines, and he also 
agreed on cross-examination that “one of the reasons for repairing gas leaks on 
gas lines is * * * safety.” He knew this because he had “seen the aftermath of 
more than one” “fire at a house from a gas line,” which also “create[d] a danger to 
other residences in the immediate vicinity.” 
{¶ 26} The record thus supports the commission’s determination that 
service lines, wherever they run, present safety issues. 
 
2. 
January Term, 2009 
9 
 
{¶ 27} Likewise, the record supported the commission’s decision to place 
service-line responsibility in the hands of a single regulated company.  Evidence 
showed that the incomplete, decentralized, and unregulated system for repairing 
service lines then in existence had significant flaws. 
{¶ 28} Testimony showed that there were major gaps in service-line 
warranty coverage.  Roughly 93 percent of Columbia’s 1.4 million customers did 
not hold service-line warranties with USP. The commission reasonably accorded 
significance to this fact. 
{¶ 29} If a customer without a warranty smelled natural gas outside his 
home, he might choose not to report it—especially if he was in financial straits.  
Reporting a leak would bring a utility truck to the home and perhaps a dilemma to 
the customer: either arrange for an expensive repair or suffer an indefinite 
termination of gas service. If a customer did not report the leak, it could delay the 
time in which it would be detected by Columbia, which under federal law must 
inspect lines outside business districts only every three to five years.  See 49 
C.F.R. 192.723.  Given that natural gas leaks are dangerous, it stands to reason 
that a system containing natural disincentives to report leaks is a hindrance to 
safety. 
{¶ 30} And even if customers could afford repair, the evidence showed 
that there were issues in the industry actually doing the repairs.  Before the order, 
if a repair was needed, either the homeowner or warranty company would locate 
and hire a private contractor to fix the line.  A number of witnesses for both the 
commission and Columbia highlighted flaws with this decentralized, 
unsupervised system, but it is sufficient here to consider what USP’s own witness 
had to say. 
{¶ 31} Timothy Phipps, owner and operator of a company that did repair 
work for USP, explained on cross-examination that “the sort of thing you see that 
contractors do [is] that they can be taking shortcuts,” which he equated with 
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“doing a shoddy job.” He also explained that it was hard to determine which 
contractors were doing “a shoddy job”; as he put it, there are “some bad eggs out 
there[,] but who knows where they are at.  I couldn’t say.” When asked what 
percentage of contractors took shortcuts, Phipps answered, “I would say probably 
20, 30 percent,” and “possibly” a third. 
{¶ 32} To be fair, Phipps qualified his testimony by stating that “it’s 
immaterial whether [private contractors] took a shortcut,” “because the gas 
company checks everything that they do,” that Columbia’s inspectors “are very 
thorough about their checks,” and that “[Columbia’s] people are trained.”  
Perhaps it is true that Columbia’s employees would catch shortcuts; but if so, we 
find this fact at least as favorable to the commission as to USP. 
{¶ 33} In short, the record supports the commission’s decision to make 
Columbia responsible for the repair and replacement of hazardous service lines. 
 
3. 
{¶ 34} USP cannot establish that the order is not supported by evidence.  
What USP establishes, at best, either is irrelevant or does not justify reversal.  It 
points out other types of evidence that could have been presented but were not.  
For example, it states, “The Staff Report [in the case investigating risers 
statewide] makes no reference whatsoever to any safety issues associated with 
metal customer-owned service lines.” But why a report from a different case 
should have addressed the case below is left unexplained. USP also asserts that 
“neither Columbia nor the Staff presented any evidence regarding clamor from 
the public over the safety of customer-owned service lines.” But it should go 
without saying that no regulatory authority conditions jurisdiction on public 
clamor.  USP also repeatedly points out that risers are more dangerous than 
underground service lines. But, not surprisingly, no authority limits the 
commission’s safety authority to the most unsafe pipeline—or segment of that 
pipeline. 
January Term, 2009 
11 
 
{¶ 35} Evidence before the commission pointed both ways, and mostly in 
favor of the commission.  USP, in essence, asks us to reweigh the evidence.  But 
that is outside the scope of our function on appeal.  Elyria Foundry Co. v. Pub. 
Util. Comm., 114 Ohio St.3d 305, 2007-Ohio-4164, 871 N.E.2d 1176, ¶ 39. 
C 
{¶ 36} In its third proposition of law, USP argues that the commission 
violated the state and federal constitutional prohibition against the impairment of 
the obligation of contracts.  Section 10, Article I, United States Constitution; 
Section 28, Article II, Ohio Constitution.  It states that the commission “nullified 
at least 100,000 of USP’s warranty service contracts” and “destroy[ed] USP’s 
contractual relationship with its customers.” Despite USP’s assertions, we do not 
find that the commission violated the Contract Clause. 
{¶ 37} In determining whether the obligations of USP’s then-existing 
contracts were unconstitutionally impaired, the parties agree that Energy Reserves 
Group, Inc. v. Kansas Power & Light Co. (1983), 459 U.S. 400, 103 S.Ct. 697, 74 
L.Ed.2d 569, applies.  That case instructs us to ask “ ‘whether the state law has, in 
fact, operated as a substantial impairment of a contractual relationship.’ ” Id. at 
411, quoting Allied Structural Steel v. Spannaus (1978), 438 U.S. 234, 244, 98 
S.Ct. 2716, 57 L.Ed.2d 727.  If so, then we determine whether the government has 
“a significant and legitimate public purpose behind the regulation.”  Id. at 411.  
And if that is the case, we inquire “whether the adjustment of ‘the rights and 
responsibilities of contracting parties [is based] upon reasonable conditions and 
[is] of a character appropriate to the public purpose justifying [the legislation’s] 
adoption.’ ” (Brackets sic.)  Id. at 412, quoting United States Trust Co. of New 
York v. New Jersey (1977), 431 U.S. 1, 22, 97 S.Ct. 1505, 52 L.Ed.2d 92.  In 
applying the Energy Reserves test, we conclude that the commission order is valid 
under the Contract Clause. 
 
1. 
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{¶ 38} The first inquiry we make is “whether the state law has, in fact, 
operated as a substantial impairment of a contractual relationship.” Allied 
Structural Steel Co., 438 U.S. at 244.  USP has not created a record sufficient to 
allow this court to make that determination. 
{¶ 39} No contract or detailed description of the terms of any contract has 
been included in the record.  Thus, USP’s assertions that its contracts were 
“nullified” are merely unsupported legal conclusions.  Without evidence of the 
“obligation of contracts,” it is impossible to determine whether they have been 
“impaired.”  Cf., e.g., Keystone Bituminous Coal Assn. v. DeBenedictus (1987), 
480 U.S. 470, 504, 107 S.Ct. 1232, 94 L.Ed.2d 472 (“In assessing the validity of 
petitioners’ Contracts Clause claim in this case, we begin by identifying the 
precise contractual right that has been impaired * * *” [emphasis added]).  USP 
thus has failed to create a record sufficient for us to decide whether any obligation 
of its contracts has been impaired. 
{¶ 40} We may not speculate regarding USP’s contractual obligations.  
Thus, the lack of this essential evidence is fatal to USP’s impairment-of-contracts 
claim.  See Hughes v. Wendel (1942), 317 U.S. 134, 63 S.Ct. 103, 87 L.Ed. 139 
(“Appellant contends that this statute * * * impairs the obligation of her contract 
contrary to Article I, § 10 of the Constitution.  The record, however, does not set 
forth appellant’s lease, and the incomplete summary of it contained in her 
pleading is not adequate to enable us to determine what her rights may be.  
Accordingly, we must dismiss the appeal”); see also Chicago, Burlington, & 
Quincy RR. Co. v. Cram (1913), 228 U.S. 70, 85, 33 S.Ct. 437, 57 L.Ed. 734 
(“The contention is made that the statute impairs the obligation of the contracts * 
* *; but that contention was not made in the court below and cannot therefore be 
made here.  Besides, there is no evidence of the contracts in the record”). 
 
2. 
January Term, 2009 
13 
 
{¶ 41} Even if we assume, however, that USP demonstrated that the 
obligations of its existing contracts have been substantially impaired by the 
commission order, the impairing regulation in this case is justified by “a 
significant and legitimate public purpose.”  Energy Reserves, 459 U.S. at 411–
412, 103 S.Ct. 697, 74 L.Ed.2d 569. 
{¶ 42} As Energy Reserves made clear, the Contract Clause’s prohibition 
“must be accommodated to the inherent police power of the State ‘to safeguard 
the vital interests of its people.’ ” Id. at 410, quoting Home Bldg. & Loan Assn. v. 
Blaisdell (1934), 290 U.S. 398, 434, 54 S.Ct. 231, 78 L.Ed. 413.  In that case, the 
court held that the state was prompted by “significant and legitimate state 
interests” in “exercis[ing] its police power to protect consumers from the 
escalation of natural gas prices caused by deregulation.” Id. at 416–417; see also, 
e.g., Keystone Bituminous Coal Assn., 480 U.S. at 503, 107 S.Ct. 1232, 94 
L.Ed.2d 472, quoting Manigault v. Springs (1905), 199 U.S. 473, 480, 26 S.Ct. 
127, 130, 50 L.Ed. 274 (“ ‘[I]t is to be accepted as a commonplace that the 
Contract Clause does not operate to obliterate the police power of the States’ ”).  
While it is true that “private contracts are not subject to unlimited modification 
under the police power,” state regulation need only “serve a legitimate public 
purpose” and “courts properly defer to legislative judgment as to the necessity and 
reasonableness of a particular measure.”  United States Trust Co. of New York v. 
New Jersey (1977), 431 U.S. 1, 22–23, 97 S.Ct. 1505, 52 L.Ed.2d 92 (state action 
violated the Contract Clause in a case in which a state was a party to the contract). 
{¶ 43} This point of law is amplified by numerous cases in which we have 
affirmed the commission’s police-power orders against Contract Clause 
challenges.  These cases make clear that “ ‘[t]he provisions of the state and 
federal constitutions, inhibiting laws impairing the obligation of contract, do not 
affect the power of the state to protect the public health or the public safety.’ ” 
Columbia Gas of Ohio, Inc. v. Pub. Util. Comm. (1983), 5 Ohio St.3d 105, 109, 5 
SUPREME COURT OF OHIO 
14 
 
OBR 241, 449 N.E.2d 433, quoting Akron v. Pub. Util. Comm. (1948), 149 Ohio 
St. 347, 37 O.O. 39, 78 N.E.2d 890, paragraph four of the syllabus; see also, e.g., 
Atwood Resources, Inc. v. Pub. Util. Comm. (1989), 43 Ohio St.3d 96, 100, 538 
N.E.2d 1049 (“because the provisions of the state and federal Constitutions, 
prohibiting laws impairing the obligation of contracts, do not affect the police 
power, Atwood’s ‘private endeavors’ are subject to regulation”); Ohio Edison Co. 
v. Power Siting Comm. (1978), 56 Ohio St.2d 212, 217, 10 O.O.3d 371, 383 
N.E.2d 588; Akron, 149 Ohio St. at 359; cf. Steele, Hopkins & Meredith Co. v. 
Miller (1915), 92 Ohio St. 115, 125, 110 N.E. 648. 
{¶ 44} Here, the commission’s order represented an exercise of police 
power.  At a minimum, the police power includes actions taken to protect public 
safety.  See Ohio Edison Co., 56 Ohio St.2d at 217, 10 O.O.3d 371, 383 N.E.2d 
588 (defining “police power legislation” as that “designed to protect public health, 
safety, and welfare”); Arnold v. Cleveland (1993), 67 Ohio St.3d 35, 47, 616 
N.E.2d 163 (“Legislative concern for public safety is not only a proper police 
power objective—it is a mandate”).  The commission expressly stated that its 
order was “an effort to improve the level of public safety,” and the commission 
reasonably and with ample support in its record determined that making Columbia 
responsible for service lines would protect the public safety.  Thus, even if the 
obligations of USP’s contracts were impaired, the order was driven by a 
significant and legitimate public purpose and satisfies the second part of the 
Energy Reserves test. 
3. 
{¶ 45} If USP had shown substantial impairment (which it did not), then 
only the third inquiry would remain: whether the regulation is based “ ‘upon 
reasonable conditions and [is] of a character appropriate to the public purpose 
justifying [the legislation’s] adoption.’ ”  Energy Reserves, 459 U.S. at 412, 103 
S.Ct. 697, 74 L.Ed.2d 569, quoting United States Trust Co. of New York, 431 U.S. 
January Term, 2009 
15 
 
at 22, 97 S.Ct. 1505, 52 L.Ed.2d 92.  We have held that we will not invalidate an 
exercise of the police power “unless the * * * determination that the [regulation] 
bears a real and substantial relationship to public health, safety and welfare 
appears to be clearly erroneous.”  Ohio Edison, 56 Ohio St.2d at 218, 10 O.O.3d 
371, 383 N.E.2d 588. 
{¶ 46} Here, the evidence showed that the decentralized, unregulated, and 
incomplete repair regime that had grown up in Ohio did not adequately protect 
public safety.  The order rationally responded to this situation by consolidating a 
diffuse system and placing repair responsibility into the hands of the party the 
commission determined to be the best qualified to exercise it: a pervasively 
regulated, thoroughly supervised, pipeline-expert natural gas company.  That the 
order was well tailored to meet its objective is evidenced by the fact that 
Columbia was authorized to take control only over hazardous lines and would 
own only those portions of the line that it has actually repaired or replaced.  For 
these reasons, the third part of the Energy Reserves test is satisfied. 
{¶ 47} Finding that USP satisfies none of inquiries set forth in Energy 
Reserves, we must reject its Contract Clause challenge. 
D 
{¶ 48} In its fourth proposition of law, USP argues that the order resulted 
in a “taking of private property without just compensation.”  USP does not argue 
that its property has been taken, but that the commission “took property rights 
from the homeowner.” USP, however, lacks standing to raise the constitutional 
rights of property owners, so we do not reach the merits of the takings claim. 
{¶ 49} “A party must have standing to be entitled to have a court decide 
the merits of a dispute.”  N. Canton v. Canton, 114 Ohio St.3d 253, 2007-Ohio-
4005, 871 N.E.2d 586, ¶ 11.  To have standing, the general rule is that “a litigant 
must assert its own rights, not the claims of third parties.”  Id. at ¶ 14.  There may 
be, however, “circumstances where it is necessary to grant a third party standing 
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to assert the rights of another.”  Kowalski v. Tesmer (2004), 543 U.S. 125, 129–
130, 125 S.Ct. 564, 160 L.Ed.2d 519.  Third-party standing is “not looked 
favorably upon,” id. at 130, but it may be granted “when a claimant (i) suffers its 
own injury in fact, (ii) possesses a sufficiently ‘ “close” relationship with the 
person who possesses the right,’ and (iii) shows some ‘hindrance’ that stands in 
the way of the claimant seeking relief.”  E. Liverpool v. Columbiana Cty. Budget 
Comm., 114 Ohio St.3d 133, 2007-Ohio-3759, 870 N.E.2d 705, ¶ 22, quoting 
Kowalski at 130. 
{¶ 50} USP has no right to assert this claim on behalf of property owners.  
Assuming that USP has suffered “its own injury in fact” under the first factor, it 
fails to establish the second or the third factors: USP’s interests appear opposed to 
those of property owners, and it has shown no hindrance in the way of property 
owners who might desire to seek relief on their own. 
{¶ 51} Regarding the second factor, close relationship with the person 
who possesses the right, nothing knits USP and property owners together besides 
“the underlying contract between them,” which we have previously held does not 
justify third-party standing.  N. Canton at ¶ 16.  The interests of USP and property 
owners are neither “interdependent,” see id., nor “common,” see Powers v. Ohio, 
499 U.S. 400, 413, 111 S.Ct. 1364, 113 L.Ed.2d 411.  If anything, their interests 
appear opposed:  The Office of the Ohio Consumers’ Counsel—which represents 
residential consumers, and thus residential property owners, in utility matters—
supported the stipulation that USP now attacks.  And it appears from the record 
that Columbia will be able to provide customers the same service as USP for a 
fraction of the cost per customer. Therefore, USP may not assert these owners’ 
rights.  See, e.g., Singleton v. Wulff (1976), 428 U.S. 106, 113–114, 96 S.Ct. 2868, 
49 L.Ed.2d 826 (“courts must hesitate before resolving a controversy * * * on the 
basis of the rights of third persons not parties to the litigation * * * [because] it 
may be that in fact the holders of those rights * * * do not wish to assert them”). 
January Term, 2009 
17 
 
{¶ 52} Nor does USP satisfy the final third-party-standing factor; there is 
no hindrance in the way of property owners who might desire to seek relief. N. 
Canton, 114 Ohio St.3d 253, 2007-Ohio-4005, 871 N.E.2d 586, at ¶ 14.  In N. 
Canton, we observed that the plaintiff city “failed to demonstrate that [the third 
party] was hindered from asserting its own rights in this matter.”  Id. at ¶ 17.  The 
third party “did not choose to file suit, nor has it even attempted to intervene in 
this case,” and “nothing * * * prohibit[ed] [the third party] from asserting its own 
claim.”  Id.  Here, likewise, USP has not shown that any barrier would hinder a 
property owner from asserting his or her own takings claim. 
{¶ 53} Even if USP had standing to raise this claim, we find that USP 
failed to support its takings argument, thus effectively waiving that argument.  In 
the argument in its initial brief, USP cites only a decision of this court from 1902 
involving riparian and sewage rights.  In light of many developments in takings 
law since that case was decided (both in Ohio and at the federal level), it is not 
clear to us that this case controls the outcome here.  No argument is supplied 
regarding whether the relevant case law, applied to the facts of this case, justifies 
a decision in USP’s favor. USP bears the burden of demonstrating the 
unlawfulness of the commission’s order, and thus we hold that USP, even if it had 
standing, failed to support its takings claim. 
{¶ 54} USP’s argument that the commission “effected a taking of contract 
rights without just compensation” was raised for the first time on reply, and USP 
has thus failed to preserve it.  See State ex rel. Colvin v. Brunner, 120 Ohio St.3d 
110, 2008-Ohio-5041, 896 N.E.2d 979, ¶ 61. 
III 
{¶ 55} For the foregoing reasons, we affirm the order of the commission. 
Order affirmed. 
 
MOYER, 
C.J., 
and 
PFEIFER, 
LUNDBERG 
STRATTON, 
O’CONNOR, 
O’DONNELL, and LANZINGER, JJ., concur. 
SUPREME COURT OF OHIO 
18 
 
__________________ 
Vorys, Sater, Seymour & Pease, L.L.P., M. Howard Petricoff, Stephen M. 
Howard, and Michael J. Settineri, for appellant. 
Richard Cordray, Attorney General, Sheryl Creed Maxfield, First 
Assistant Attorney General, Duane W. Luckey, Section Chief, and Anne L. 
Hammerstein and Sarah J. Parrot, Assistant Attorneys General, for appellee. 
Porter, Wright, Morris & Arthur, L.L.P., Kathleen M. Trafford, L. 
Bradfield Hughes, and Eric B. Gallon; and Mark R. Kempic, Kenneth W. 
Christman, Stephen B. Seiple, and Daniel A. Creekmur, for intervening appellee 
Columbia Gas of Ohio, Inc. 
_____________________