Title: State ex rel. Toledo Edison Co. v. Clyde

State: ohio

Issuer: Ohio Supreme Court

Document:

The State ex rel. Toledo Edison Company, Appellant, v. City of Clyde et al., 
Appellees. 
[Cite as State ex rel. Toledo Edison Co. v. Clyde (1996), __ Ohio St.3d __.] 
Municipal corporations -- Public utilities -- Section 3 of Clyde Ordinance 
1995-01 violates the Miller Act with respect to termination of Toledo 
Edison Company’s service to existing facilities inside Clyde -- Section 
3 of Clyde Ordinance 1995-01 not subject to Miller Act regarding new 
facilities. 
 
(No. 95-1358 -- Submitted April 15, 1996 -- Decided August 28, 1996.) 
 
Appeal from the Court of Appeals for Sandusky County, Nos. S-88-046 and 
S-95-002. 
 
In July 1965, the Toledo Edison Company (“Toledo”) acquired, by warranty 
deed, the electric generating, transmission, and distribution system then owned and 
operated by the village (now city) of Clyde, and received a twenty-five-year 
nonexclusive franchise to provide electricity to Clyde’s inhabitants. 
 
In 1987, Clyde exercised its rights under Section 4, Article XVIII of the Ohio 
Constitution and re-established a municipal electric system.  The next year, two 
years before the franchise agreement expired, Clyde’s city council authorized Clyde 
to build a duplicate electric distribution system to provide electric service to its 
 
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inhabitants.  Later that same year, Toledo asked Clyde to renew the nonexclusive 
franchise agreement for an additional twenty-five years.  Clyde declined.   
 
Toledo then initiated a mandamus proceeding, case No. S-88-046, against 
Clyde, its mayor, its city manager, and its city council members, claiming that 
construction of a duplicate system and failure to renew the franchise forced Toledo 
to abandon or withdraw from its existing electric distribution facilities and system 
in Clyde.  Toledo argued that Clyde must obtain approval from the Public Utilities 
Commission of Ohio before requiring Toledo to abandon its existing electrical 
distribution facilities or withdraw from its electric service inside Clyde.  Toledo 
requested an order directing Clyde to file an application with the commission 
seeking approval to require Toledo to abandon its facilities and withdraw its electric 
service from Clyde. 
 
Subsequently, the court of appeals adopted in its judgment entry the parties’ 
settlement agreement in case No. S-88-046, as follows: 
 
“Toledo Edison and the City of Clyde hereby agree that, in the event that the 
City of Clyde determines to undertake any action requiring the cessation of electric 
service in Clyde by Toledo Edison, or requiring the withdrawal or abandonment of 
Toledo Edison’s facilities within the City of Clyde, the City of Clyde shall comply 
 
3
with Ohio Revised Code Section 4905.21.  Notwithstanding the expiration of the 
franchise described in paragraph 1 above, the City of Clyde shall not require Toledo 
 
4
Edison to abandon or withdraw its facilities within the City of Clyde, or the electric 
service rendered thereby, unless and until the City of Clyde obtains an order from 
the Public Utilities Commission of Ohio, approving such abandonment or 
withdrawal.” 
 
The settlement agreement also stated that it did not grant a franchise to 
Toledo.  Neither party appealed the order adopting the settlement agreement. 
 
On January 3, 1995, Clyde’s city council gave the first reading of Ordinance 
1995-01.  As passed on January 17, 1995, the ordinance reads as follows: 
 
“SECTION 2.  There is presently no provider of electric, water or sewer 
utility services, other than the City of Clyde and its utility departments, that is 
authorized by the City of Clyde under Article XVIII of the Constitution of the State 
of Ohio, to provide such utility services within the corporate limits of the City of 
Clyde. 
 
“SECTION 3.  On and after the effective date of the ordinance, all utility 
service arrangements for electric, water or sewer utility service within the corporate 
limits of the City of Clyde, as the same may be altered from time to time through 
annexation or otherwise, shall be made with the City of Clyde’s electric, water or 
sewer utilities.
 
5
 
“SECTION 4.  This ordinance shall not affect utility services or products 
currently provided at transmission voltages of approximately 69,000 volts or more.  
Nor shall this ordinance affect utility service arrangements between individual 
residents of the City of Clyde and providers of utility services other than the City of 
Clyde, if such arrangements are existing and in place as of the effective date of this 
Ordinance.  Such arrangements are hereby permitted to continue, at the option of the 
residents having such arrangements, until such time as the City of Clyde obtains 
such authorization or approval as may be required under the laws of the State of 
Ohio to cause such existing arrangements to be terminated and utility service 
provided by the City of Clyde to be substituted for the service provided under such 
other arrangements.”  (Emphasis added.) 
 
That same day, Resolution No. 1995-04 was passed, instructing the city 
solicitor to initiate abandonment proceedings before the commission seeking to 
replace electric service inside Clyde’s city limits with service by Clyde and also 
seeking removal of Toledo’s distribution system from inside Clyde’s city limits.  An 
application in accordance with the resolution was filed the next day with the 
commission, case No. 95-02-EL-ABN.1  The application did not seek commission 
approval of Section 3 of Ordinance 1995-01.   
 
6
 
Two weeks later, Toledo filed a new mandamus action against Clyde, case 
No. S-95-002, and a separate motion for contempt against Clyde in case No. S-88-
046, alleging that Section 3 of Ordinance 1995-01 violated R.C. 4905.21 and the 
judgment entry in case No. S-88-046 because Section 3 closed some or all of 
Toledo’s lines for service.  Toledo requested a writ of mandamus ordering Clyde to 
obey R.C. 4905.21 by filing an application with the commission for permission to 
require Toledo to abandon its lines within Clyde and prohibiting the second 
reading, enactment, or enforcement of Ordinance 1995-01 to the extent that it 
violated the writ of mandamus.   
 
Clyde moved to dismiss Toledo’s new mandamus complaint.  The parties 
then stipulated that the case involved only one substantive legal issue: “Whether the 
Clyde Respondents violated this Court’s Journal Entry of April 24, 1989 or the 
Miller Act by not requesting in Clyde’s Miller Act application at the Public Utilities 
Commission authorization for the requirement imposed by Section 3 of the City of 
Clyde Ordinance No. 1995-01 that all future utility service arrangements be made 
with the City of Clyde.”  
 
7
 
Clyde then filed its answer to the mandamus complaint, asserting that the 
complaint failed to state a claim upon which relief could be granted, that the court 
lacked jurisdiction to grant the injunctive relief requested, that Toledo had a plain 
and adequate remedy at law, and that Toledo lacked standing as a relator under R.C. 
2731.02. 
 
The court of appeals stated that Section 3 of Clyde Ordinance 1995-01 did 
not apply to anyone currently receiving service from Toledo and that Clyde was 
otherwise in compliance with the April 24, 1989 judgment entry and R.C. 4905.21.  
The court then held, without explanation, that Section 3 of Clyde Ordinance 1995-
01 did not violate R.C. 4905.21, and that Clyde need not seek or obtain commission 
approval before enforcing that section of its ordinance.  The court of appeals then 
found Toledo’s complaint not well taken.   
 
The cause is now before this court upon an appeal as of right. 
_____________________ 
 
Richard W. McLaren, Jr., for appellant. 
 
Duncan & Allen, Gregg D. Ottinger and John P. Coyle; Homan & Pearce 
and William D. Pearce, for appellee. 
 
8
 
Chester, Willcox & Saxbe, John W. Bentine and Jeffrey L. Small, urging 
affirmance for amicus curiae, American Municipal Power-Ohio, Inc. 
______________________ 
 
Per Curiam.  In order to obtain a writ of mandamus, the relator must show 
“that the relator has a clear legal right to the relief prayed for, that the respondent is 
under a legal duty to perform the requested act, and that relator has no plain and 
adequate remedy at law.”  State ex rel. Fostoria Daily Review Co. v. Fostoria Hosp. 
Assn. (1988), 40 Ohio St.3d 10, 11, 531 N.E.2d 313, 314.  For the reasons that 
follow, we reverse the decision of the court of appeals and find that Section 3 of 
Clyde Ordinance 1995-01 violates the Miller Act with respect to the termination of 
Toledo’s service to existing facilities inside Clyde, but affirm the decision of the 
court of appeals that Section 3 of Clyde Ordinance 1995-01 is not subject to the 
Miller Act regarding new facilities. 
 
Under Section 4, Article XVIII of the Ohio Constitution, “[a]ny municipality 
may acquire, construct, own, lease and operate within or without its corporate 
limits, any public utility the product or service of which is or is to be supplied to the 
municipality or its inhabitants, and may contract with others for any such product[s] 
or service.”  Thus, Clyde had constitutional authority to build a municipal utility 
 
9
to serve its inhabitants.  Wooster v. Graines (1990), 52 Ohio St.3d 180, 181, 556 
N.E.2d 1163, 1164.  This right is not generally subject to statutory restriction.  
Lucas v. Lucas Local School Dist. (1982), 2 Ohio St.3d 13, 2 OBR 501, 442 N.E.2d 
449; Columbus v. Pub. Util. Comm. (1979), 58 Ohio St.2d 427, 12 O.O.3d 361, 390 
N.E.2d 1201; Columbus v. Ohio Power Siting Comm. (1979), 58 Ohio St.2d 435, 12 
O.O.3d 365, 390 N.E.2d 1208.   
 
However, municipal utility operations are subject to statewide police power 
limitations for health and safety reasons, for example, water fluoridation (Canton v. 
Whitman [1975], 44 Ohio St.2d 62, 73 O.O.2d 285, 337 N.E.2d 766), approval of 
sewage projects (Delaware Cty. Bd. of Commrs. v. Columbus [1986], 26 Ohio St.3d 
179, 184, 26 OBR 154, 158-159, 497 N.E.2d 1112, 1117), and designation of a 
river as a scenic river area (Columbus v. Teater [1978], 53 Ohio St.2d 253, 260-
261, 7 O.O.3d 410, 414, 374 N.E.2d 154, 159).  Moreover, the Miller Act, R.C. 
4905.20 and 4905.21, requires municipalities to obtain commission approval before 
forcing the abandonment of nonmunicipal utility facilities or the withdrawal of 
nonmunicipal utility services located inside the municipality.  See, e.g., State ex rel. 
Klapp v. Dayton Power & Light Co. (1967), 10 Ohio St.2d 14, 39 O.O.2d 9, 225 
 
10
N.E.2d 230;  State ex rel. Wear v. Cincinnati & Lake Erie RR. Co. (1934), 128 Ohio 
St. 95, 190 N.E. 224. 
 
R.C. 4905.21 provides that any “political subdivision desiring to abandon or 
close, or have abandoned, withdrawn, or closed for traffic or service all or any part 
of any [electric] line * * * shall make application to the public utilities commission 
in writing.”  It is undisputed that Clyde is a “political subdivision” and that Toledo 
is a “public utility” within the meaning of the Miller Act.  Thus, Clyde must seek 
commission approval before forcing Toledo to close or abandon its electric lines or 
service inside Clyde’s city limits.  Therefore, if enforcing Section 3 of Clyde 
Ordinance 1995-01 amounts to the forced abandonment of Toledo’s facilities or 
service, then Clyde’s ordinance violates the Miller Act.   
 
This presents us with two issues: First, does the Miller Act require 
commission review and oversight for the termination of service over single-
customer service lines, like the ones at issue here?  Second, does the Miller Act 
give Toledo the right to serve prospective future customers and facilities that might 
arise inside Clyde’s city limits after the expiration of Toledo’s nonexclusive 
franchise and after Clyde has established its own electric utility and declared its 
intent to serve all new customers inside Clyde’s city limits?  We answer the first 
 
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question in the affirmative, finding that the Miller Act requires commission review 
regarding the abandonment or closure of all electric lines, regardless of size.  As to 
the second question, we find that under the circumstances presently before us, the 
Miller Act protects Toledo’s existing facilities and service lines, but confers no 
right upon Toledo to serve new, prospective facilities inside Clyde’s city limits.   
 
A review of the history behind the Miller Act is important in reaching these 
conclusions.  The Miller Act derives from the Gilmore Act (G.C. 504-2 and 504-3, 
107 Ohio Laws 525), which prevented railroads and street railway companies from 
abandoning main track lines without notice and prior approval.  See State ex rel. 
Wear v. Cincinnati & Lake Erie RR. Co. (1934), 128 Ohio St. 95, 190 N.E. 224.  
Accord Toledo v. Pub. Util. Comm. (1939), 135 Ohio St. 57, 61-62, 13 O.O. 329, 
331, 19 N.E.2d 162, 164.  The focus of the Gilmore Act was to protect the public, 
which had come to rely upon the service that was being provided.  State ex rel. 
Wear, supra, 128 Ohio St. 95, 190 N.E. 224.  Accord Detroit, Toledo & Ironton RR. 
Co. v. Pub. Util. Comm. (1954), 161 Ohio St. 317, 53 O.O. 220, 119 N.E.2d 73, 
paragraph three of the syllabus. 
 
The General Assembly expanded the scope of the Gilmore Act in 1919 to 
include the provision of utilities, including gas and electric service.  G.C. 504-2 and 
 
12
504-3, as amended by 108 Ohio Laws, Part I, 373.  According to a contemporary 
newspaper account, this expansion, called the Miller Act, was prompted by the East 
Ohio Gas Company’s decision to unilaterally withdraw gas service from the village 
of Alliance, leaving it without a gas provider.  Ohio State Journal, Feb. 27, 1919, at 
1.  See, also, Cleveland v. E. Ohio Gas Co. (1921), 15 Ohio App. 117, 129.  Prior to 
this expansion of the Gilmore Act, public utilities were bound only by the terms of 
their contracts with municipalities and could voluntarily forfeit their right to 
provide service to the municipalities and withdraw their services as their contracts 
permitted.  St. Clairsville v. Pub. Util. Comm. (1921), 102 Ohio St. 574, 588-589, 
132 N.E. 151, 155, citing E. Ohio Gas Co. v. Akron (1909), 81 Ohio St. 33, 90 N.E. 
40, see paragraph four of the syllabus. 
 
“The express purpose of [the Miller Act] is that when a public utility begins 
‘furnishing service or facilities within the State of Ohio,’ regardless of the terms of 
the [franchise] contract under which it is operating, or under which it began such 
operation, its right to terminate such service is dependent upon the conclusions of 
the public utilities commission rather than upon the terms of the contract * * *.”  E. 
Ohio Gas Co. v. Cleveland (1922), 106 Ohio St. 489, 508, 140 N.E. 410, 416.   
 
13
 
Thus, like its predecessor, the Miller Act focuses upon protecting existing 
utility customers from having their service terminated without commission 
approval.  This protection extends to situations where the utility franchise contract 
has expired (Lake Shore Elec. Ry. Co. v. State ex rel. Martin [1932], 125 Ohio St. 
81, 180 N.E. 540) and where the service was provided without any franchise 
contract (State ex rel. Wear, supra, 128 Ohio St. 95, 190 N.E. 224). 
 
The operative portion of the Miller Act provides that: 
 
“[N]o public utility * * * furnishing service or facilities within this state, 
shall * * * be required to abandon or withdraw any main track or depot of a 
railroad, or main pipe line, gas line, telegraph line, telephone toll line, electric 
light line, or any portion thereof, * * * or the service rendered thereby,” without 
commission approval.  (Emphasis added.)  R.C. 4905.20. 
 
This language is subject to two reasonable, but conflicting, interpretations.  
The Act can be interpreted to apply either to the forced or voluntary abandonment 
of (1) any “main pipe line,” “main gas line,” “main electric line,” etc., or the service 
rendered thereby, or (2) not only “main track” or “main pipe line,” but also any gas 
line, telegraph line, or electric line, etc., or the service rendered thereby.   
 
14
 
When a statute is susceptible of more than one interpretation, courts seek to 
interpret the statutory provision in a manner that most readily furthers the 
legislative purpose as reflected in the wording used in the legislation.  United Tel. 
Co. v. Limbach (1994), 71 Ohio St.3d 369, 372, 643 N.E.2d 1129, 1131; Harris v. 
Van Hoose (1990), 49 Ohio St. 3d 24, 26, 550 N.E.2d 461, 462.  Courts review 
several factors in order to glean the General Assembly’s intent, including the 
circumstances surrounding the legislative enactment, the history of the statute, the 
spirit of the statute (the ultimate results intended by adherence to the statutory 
scheme), and the public policy that induced the statute’s enactment.  R.C. 1.49.   
 
Several of these factors are relevant to the case at bar.  As reflected above, 
the Gilmore Act and the Miller Act were specifically enacted and have been used to 
protect existing utility facilities, utility consumers, and their utility providers from 
the forced termination of utility services or the removal of nonmunicipal utility 
facilities without commission approval.  E. Ohio Gas Co., supra, 106 Ohio St. 489, 
140 N.E. 410; State ex rel. Klapp, supra, 10 Ohio St.2d 14, 39 O.O.2d 9, 225 
N.E.2d 230; State ex rel. Wear, supra, 128 Ohio St. 95, 190 N.E. 224.  For the 
reasons that follow, we interpret the Miller Act to apply to the abandonment or 
withdrawal of any electric line, regardless of size, or the service rendered thereby.
 
15
 
The interpretation of the Miller Act as limited to main electric lines applies to 
the electric industry our holding that the Miller Act applies only to “main” railroad 
tracks but not to “spur” or “side” rail track.  Toledo, supra, 135 Ohio St. at 61-62, 
13 O.O. at 331, 19 N.E.2d at 164.  However, we find that Toledo is factually 
distinguishable from the case at bar.   
 
In Toledo, we reviewed the General Assembly’s specific preenactment 
wording changes in the Miller Act, in which the phrase “side track, spurs or other 
track” was deleted from the Act and the phrase “main track or tracks” was inserted 
in its place.  In light of these changes, we determined that the Miller Act applied 
only to “main” track, but not to “spur” or “side” railroad tracks.  Id.  There were no 
similar language changes regarding the “electric line” portions of the Miller Act.  
Thus, our interpretation of the Miller Act in Toledo may properly be limited to the 
railroad industry and is distinguishable from the case at bar. 
 
This interpretation is also arguably consistent with our quotation of the 
Miller Act in State ex rel. Klapp, wherein we stated that: 
 
“Section 4905.20 reads: 
 
“ ‘No * * * public utility as defined in Section 4905.02 of the Revised Code 
furnishing service or facilities in this state, shall abandon or be required to abandon 
 
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or withdraw any main * * * electric light line * * * or any portion thereof * * *.’”  
(Ellipses sic; emphasis added.)  10 Ohio St.2d at 15, 39 O.O.2d at 10, 225 N.E.2d at 
232. 
 
Our quotation of the statute with these ellipses indicated that the word “main” 
did apply to the phrase “electric light line.”  Nevertheless, notwithstanding this 
parsing of the statute, we held that the Miller Act required commission approval 
before the city of Piqua could force the Dayton Power & Light Company to 
abandon service and withdraw all of its facilities from the city of Piqua, including 
the small, customer-specific service lines like the ones at bar.  Thus, irrespective of 
how we may have quoted the Miller Act, we applied the Act to require commission 
approval of the withdrawal of all lines and facilities from inside Piqua, regardless of 
size.  Id. 
 
Additionally, we find the limitation of the Miller Act to main electric lines 
unwise from a policy perspective.  This interpretation is ripe for abuse by 
municipalities.  A municipality could manipulate the Miller Act and systematically 
exclude a public utility from serving selected customers, or even an entire service 
area, without commission oversight.  This situation is inconsistent with the Miller 
 
17
Act’s focus of protecting existing utility facilities and services to existing 
customers. 
 
Additionally, the terms “main,” “spur,” and “side” have no meaning in the 
electric industry.  The electric industry calls high-voltage lines (69,000 volts or 
greater) “transmission lines,” and customer-specific lines “service lines” or 
“distribution lines.”  See R.C. 4933.81(C).  Therefore, interpreting the Miller Act to 
apply only to “main” electric lines may well create confusion in the electric 
industry.  Therefore, we find that the General Assembly’s intent to protect 
consumers is best promoted by interpreting the Miller Act to apply to the 
abandonment or withdrawal of services from any electric line, including individual-
customer-service lines like the ones at bar.  This interpretation maximizes consumer 
protection and reduces the opportunities for abuse by requiring commission 
oversight and review over the abandonment of any electric line, regardless of size. 
 
Toledo correctly argues that enforcing Section 3 of Ordinance 1995-01 would 
terminate Toledo’s service to a facility simply because that facility has a new 
occupant.  Toledo’s existing electric lines do not become unprotected by the Miller 
Act merely because the name on the bill changes.  Termination of the current 
 
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utility/customer relationship does not alter the fact that the service line itself is 
protected by the Act.  Accordingly, we find that Section 3 of Clyde Ordinance 
1995-01 violates the Miller Act to the extent that it requires Toledo to stop service 
over its existing electric lines to facilities inside Clyde’s city limits without 
commission approval.   
 
However, Toledo incorrectly argues that in addition to protecting its existing 
electric lines and service, the Miller Act gives Toledo the right to serve new 
facilities and customers not yet in existence.  We find that this argument lacks 
merit.   
 
The Act protects only existing facilities and the service rendered thereby.  
The General Assembly incorporated this protection into the Miller Act by providing 
that “no public utility * * * furnishing service * * * shall * * * be required to 
abandon or withdraw any * * * electric light line” without commission approval. 
(Emphasis added.)  R.C. 4905.20.  This same perspective is also reflected in R.C. 
4905.21, which provides that “[t]his section applies to all service now rendered 
* * *.”  (Emphasis added.)  Thus, the Miller Act protects not only the utility 
provider’s electric lines, but also the provider’s right to continue “furnishing 
 
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service” over those lines to its current customers.  See, e.g., State ex rel. Klapp, 
supra, 10 Ohio St.2d 14, 39 O.O.2d 9, 225 N.E.2d 230.   
 
This language does not create in a utility the right to expand its customer 
base, after its franchise expires, to serve unknown future facilities and customers 
inside a city that has not only created its own municipal utility but also declared an 
intent to serve all new facilities and customers.  Simply stated, the Miller Act 
protects the nexus between the utility provider and its existing facilities or load 
centers, binding them together in such a manner that only the commission can 
compel termination of that relationship.  New facilities or load centers have no 
nexus to the public utility; their only relationship is with the municipality.  First, 
these new facilities are hypothetical and may never be realized.  Second, no nexus 
between the public utility and the new facilities preceded creation of the municipal 
utility, so there is nothing for the Miller Act to protect. 
 
Finding otherwise would mean that once a municipality entered into a 
franchise arrangement with a public utility to provide utility services to municipal 
inhabitants, the municipality could terminate that arrangement only with 
commission approval.  This position is inconsistent with the intent behind Section 
4, Article XVIII of the Ohio Constitution and with the concept that “municipalities 
 
20
have the exclusive power to contract for public utility services.  This exclusive 
power necessarily presumes that while being able to grant public utility franchises, 
a municipality may likewise exclude a public utility from serving its inhabitants.” 
Lucas, supra, 2 Ohio St.3d at 16, 2 OBR at 504, 442 N.E.2d at 452.   
 
In Lucas, the village of Lucas provided electric power to all of the village 
inhabitants, including the Lucas Local School District.  The school board resolved 
to buy its electric power from a different source.  The village then obtained an 
injunction to prevent the school board from purchasing power from anyone other 
than the village.  The court of appeals in Lucas affirmed.   
 
We agreed with the trial court and the court of appeals, stating that 
“contracting for public utility services is exclusively a municipal function under 
Section 4, Article XVIII, of the Ohio Constitution.” Lucas, supra, 2 Ohio St.3d at 
15, 2 OBR at 503, 442 N.E.2d at 451.  We then applied the “substantial 
interference” test set forth in Columbus v. Teater, supra, 53 Ohio St.2d 253, 7 
O.O.3d 410, 374 N.E.2d 154, and held that permitting the school board to contract 
separately for electric service would circumvent the village’s right to require a 
franchise to serve its inhabitants and would substantially interfere with the village’s 
 
21
constitutional power to control the public utilities which serve the village’s 
inhabitants.  Id. at 15-16, 2 OBR at 503, 442 N.E.2d at 451-452. 
 
Thus, the question at bar becomes whether the expansion of Toledo’s service 
territory inside Clyde after the franchise has expired and Clyde has declared its 
intent to serve its inhabitants amounts to a substantial interference with Clyde’s 
constitutional right to require a franchise to serve its inhabitants.  We find that it 
does. 
 
Municipalities’ power to control operation of utilities within their municipal 
boundaries is also reflected in the Certified Territory Act, R.C. 4933.81 to 4933.90.  
R.C. 4933.83(A) and 4933.87.  See, also, Legislative Service Commission Analysis 
of 1978 H.B. No. 577 (as passed by the House) at 3.  Perhaps the best example of 
the General Assembly’s recognition of municipal utility exclusivity appears in R.C. 
4933.83(A): 
 
“Except as otherwise provided in this section and Article XVIII of the Ohio 
Constitution, each electric supplier shall have the exclusive right to furnish electric 
service to all electric load centers located presently or in the future within its 
certified territory, * * * provided that nothing in [the Certified Territory Act] shall 
impair the power of municipal corporations to require franchises or contracts 
 
22
for the provision of electric service within their boundaries * * *.”  (Emphasis 
added.) 
 
Thus, while electric suppliers like Toledo have the “exclusive right” to 
furnish electricity to the current and future customers inside their service territories, 
this right is expressly limited by Clyde’s right to require a franchise contract to 
serve its inhabitants.   
 
The right to require a contract necessarily also means the ability to exclude 
competitors of a municipal utility.  Permitting competition inside the municipal 
utility boundaries would be inconsistent with a municipality’s right to require a 
contract to serve the municipal inhabitants.  Therefore, absent a franchise or 
contract with a municipality giving a public utility the right to serve the municipal 
inhabitants, that public utility has no right to serve those customers within its 
service territory that are located within a municipality with a Section 4, Article 
XVIII utility.  Accordingly, a municipality may exclude another energy provider, 
including the local public utility, from attempting to provide utility service inside 
the municipal boundaries.  
 
Here, Clyde created a municipal utility and exercised its power to exclude 
Toledo from serving new, future utility facilities inside Clyde’s city limits.  At the 
 
23
same time, Clyde sought commission approval to terminate Toledo’s existing 
customer relationships and to remove its facilities from inside Clyde under the 
Miller Act.  As to these new facilities, Clyde did all that was required of it under the 
Miller Act.   
 
Once Toledo’s franchise with Clyde expired, Toledo was an occupant at 
sufferance inside Clyde’s city limits.  State ex rel. Klapp v. Dayton Power & Light 
Co. (S.D. Ohio 1957), 170 F. Supp. 722, 725, affirmed, 263 F.2d 909 (C.A. 6, 
1959), reversed on other grounds (1959), 359 U.S. 552, 79 S.Ct. 115, 3 L.Ed.2d 
1035. 
 
“Mere acquiescence in the continued unauthorized occupancy of the streets, 
or nonaction on the part of public officials to prevent obstruction, or delay in 
bringing action to procure an order of ouster, could not serve to confer any right 
upon the defendant [utility] company or estop the city from maintaining this 
proceeding [for ouster].”  Ohio Elec. Power Co. v. State ex rel. Martin (1929), 121 
Ohio St. 235, 240, 167 N.E. 877, 878.   
 
Toledo also argues that, since it has an affirmative duty under R.C. 4905.22 
and 4933.83 to serve the current and future electric needs in its service territory, the 
 
24
Miller Act protects Toledo’s interest in future customers as well as existing 
customers.  We find that this argument is without merit.   
 
The Certified Territory Act does not support this proposition.  The Certified 
Territory Act expressly exempts home rule municipalities from that Act: 
 
“[N]othing in [the Certified Territory Act] shall impair the power of 
municipal corporations to require franchises or contracts for the provision of 
electric services within their boundaries.”  R.C. 4933.83(A). 
 
Therefore, unless a public utility has a franchise giving it the right to serve 
the municipal inhabitants, that public utility has no right to serve customers within 
its service territory that are located within a municipality that is operating a Section 
4, Article XVIII utility and declared an intention to serve such customers.  R.C. 
4933.87(A).   
 
In this case, Toledo’s franchise with Clyde expired in 1990, and Clyde has 
refused to enter into another franchise  with Toledo.  Thus, Toledo has no right 
under the Certified Territory Act to serve any Clyde inhabitant or structure other 
than those it was serving before Clyde created its own utility and declared an intent 
to serve all new customers and facilities inside its city limits.  
 
25
 
Toledo relies upon several cases as support for its argument that, absent 
commission approval, it has the right to serve future customers inside Clyde’s city 
limits.  Lake Shore Elec. Ry. Co., supra, 125 Ohio St. 81, 180 N.E. 540;  Indus. Gas 
Co. v. Pub. Util. Comm. (1939), 135 Ohio St. 408, 14 O.O. 290, 21 N.E.2d 166;  
State ex rel. Klapp, supra, 10 Ohio St.2d 14, 39 O.O.2d 9, 225 N.E.2d 230;  State 
ex rel. Wear, supra, 128 Ohio St. 95, 190 N.E. 224.  None of these cases stand for 
the proposition espoused by Toledo.   
 
Although we held in Wear, Lake Shore Elec. Ry. Co. and Klapp that the 
Miller Act prevailed over a city’s right to oust a public utility or prevent it from 
providing service inside its city limits, these cases do not control the situation at 
bar.  These cases all involved situations involving termination of existing services 
to current customers.  None asked this court to consider whether, as here, a utility’s 
right to serve unknown future customers inside a city that has created its own utility 
and declared its intent to serve all new customers with the city’s utility was 
protected by the Act. 
 
In Wear, the city of Springfield sought to stop the Cincinnati & Lake Erie 
Railroad Company from providing passenger rail service through Springfield.  
Springfield had no franchise or contract with the railroad.  We looked upon the 
 
26
public’s interest in continued service and the statewide disruption that would occur 
if termination were permitted, and held that the Miller Act required commission 
approval before Springfield could require the railroad to terminate the service.  A 
similar result was reached in Lake Shore Elec. Ry. Co.  The city of Bellevue sought 
to oust the Lake Shore Electric Railway Company from providing passenger rail 
service to and through Bellevue.  We held that the Miller Act prevented the city 
from terminating the rail service without commission approval.  Neither Wear nor 
Lake Shore Elec. Ry. Co. stands for the proposition that a utility can expand its 
reach within a city to new customers after the city has created its own utility and 
declared an intent to serve all new customers with the city’s utility. 
 
In Klapp, the city of Piqua sought to stop the Dayton Power & Light 
Company from providing electric service to Piqua and to compel it to withdraw its 
equipment and facilities from within Piqua’s city limits.  Piqua had a municipal 
utility and intended to serve all of its inhabitants.  Piqua asserted its constitutional 
authority under Sections 3 and 4, Article XVIII for ousting Dayton Power & Light 
without commission approval.  We held that the proposed ouster was subject to 
commission approval under the Miller Act.  As reflected in the court of appeals’ 
opinion in an earlier phase of the underlying action, “it is obvious that Piqua may 
 
27
operate its own utility.  But this fact has no bearing upon the issue involved herein.  
We are concerned with pre-existing facilities and services furnished to the 
inhabitants of Piqua by a foreign utility.”  State ex rel. Klapp v. Dayton Power & 
Light Co. (1960), 113 Ohio App. 433, 438, 178 N.E.2d 838, 842.  In contrast, the 
question now before us relates to services for new, prospective Clyde inhabitants 
and facilities.  Thus, Klapp provides no support for Toledo’s claimed right to serve 
new customers and structures in this case. 
 
In Indus. Gas Co., the Industrial Gas Company sought commission 
permission to change the structure of its company and withdraw service from some 
of its customers, but continue to serve other, higher-profit-margin customers in the 
same area on a contract basis.  The commission denied the company’s application to 
selectively withdraw service.  We agreed, stating that a public utility must serve all 
of the customers within its service territory.  Utilities cannot selectively pick out the 
best customers to serve and then refuse to serve the remaining customers in its 
service territory.  135 Ohio St. 408, 14 O.O. 290, 21 N.E.2d 166, paragraph two of 
the syllabus.  Here, Toledo is not preserving service to its current customers, but 
trying to obtain new customers under the aegis of the Miller Act.  Indus. Gas Co. 
does not stand for the position espoused by Toledo.
 
28
 
Once Toledo’s franchise expired and Clyde declared its intent to serve all 
new Clyde customers, Toledo was prohibited from initiating new service 
relationships inside Clyde’s municipal utility boundaries.  With the exception of 
Toledo’s pre-1995 customers and facilities, Clyde had the exclusive right to provide 
utility service to its inhabitants after the franchise expired.  Accord R.C. 4933.03 
(municipal consent required to supply electricity inside the municipality); 4933.16 
(municipal consent required to maintain electric distribution facilities inside city 
limits); 4933.83(A) (municipal corporation may require franchise or contract to 
serve customers within city limits); 4933.87.  Accordingly, we hold that the 
requirement that all new facilities will be customers of Clyde’s utility department 
contained in Section 3 of Clyde Ordinance 1995-01 does not violate the Miller Act.
 
Toledo’s second proposition of law contends that Clyde’s ordinance amounts 
to an unconstitutional deprivation of property without due process of law.  We find 
that this argument is not properly before us because it was not decided by the court 
of appeals and is outside the single issue that the parties agreed by stipulation to 
present to the court of appeals below.  Toledo’s second proposition of law is 
without merit. 
 
29
 
For the reasons set forth above, we find that the court of appeals incorrectly 
interpreted the Miller Act.  Accordingly, the judgment of the court of appeals is 
reversed in part and affirmed in part.  We order Clyde to seek approval from the 
Public Utilities Commission before taking any action to terminate Toledo Edison’s 
service to facilities that Toledo Edison served before the effective date of 
Ordinance 1995-01. 
 
 
 
 
 
 
 
Judgment reversed in part 
 
 
 
 
 
 
 
 
and affirmed in part,  
 
 
 
 
 
 
 
 and writ granted. 
 
MOYER, C.J., F.E. SWEENEY, PFEIFER, COOK and STRATTON, JJ., concur. 
 
DOUGLAS and RESNICK, JJ., not participating. 
                                                 
1  
On April 11, 1996, the commission issued its opinion and order denying 
Clyde’s abandonment application in case No. 95-02-EL-ABN, because that 
application was not in the public interest.  The commission held that the application 
had an extraterritorial impact and failed to address the issue of Toledo’s stranded 
investment.  However, the commission noted that Clyde could file another 
application sometime in the future.