[Until this opinion appears in the Ohio Official Reports advance sheets, it may be cited as In 

re Application of E. Ohio Gas Co., Slip Opinion No. 2023-Ohio-3289.]

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. 2023-OHIO-3289

IN RE APPLICATION OF EAST OHIO GAS COMPANY D.B.A. DOMINION ENERGY 

OHIO FOR APPROVAL OF AN ALTERNATIVE FORM OF REGULATION TO 

ESTABLISH A CAPITAL EXPENDITURE PROGRAM RIDER MECHANISM; OFFICE 

OF THE OHIO CONSUMERS’ COUNSEL ET AL., APPELLANTS; PUBLIC UTILITIES 

COMMISSION, APPELLEE; EAST OHIO GAS COMPANY D.B.A. DOMINION 

ENERGY OHIO, INTERVENING APPELLEE.

[Until this opinion appears in the Ohio Official Reports advance sheets, it 

may be cited as In re Application of E. Ohio Gas Co., Slip Opinion No. 

2023-Ohio-3289.]

Public utilities—R.C. 4929.05(A)—R.C. 4929.111(C)—Alternative rate plan—Rate 

of return for natural-gas company’s alternative rate plan is just and 

reasonable based on company’s last base-rate case—Orders affirmed.

(No. 2022-0458—Submitted May 3, 2023—Decided September 20, 2023.)

APPEAL from the Public Utilities Commission, No. 19-468-GA-ALT.

__________________
SUPREME COURT OF OHIO

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STEWART, J.

{¶ 1} Appellee, the Public Utilities Commission of Ohio, issued an opinion 

and order approving a stipulation (or settlement) that authorizes intervening 

appellee, East Ohio Gas Company d.b.a. Dominion Energy Ohio (“Dominion”), to 

implement its Capital Expenditure Program Rider (the “CEP Rider”). Following a 

rehearing, the commission filed an entry modifying the earlier order. Appellants, 

Office of the Ohio Consumers’ Counsel (“OCC”) and Northeast Ohio Public 

Energy Council (“NOPEC”), have appealed. Broadly speaking, appellants argue 

that the commission (1) erred in approving the rate of return applicable to the CEP 

Rider, (2) engaged in improper ex parte communications with its staff, and 

(3) misapplied the standard for assessing the reasonableness of the stipulation. 

Because we conclude, upon consideration of the record, that the commission’s 

orders are not unlawful or unreasonable, we affirm them.

I. BACKGROUND

{¶ 2} Ohio law authorizes a natural-gas company to apply to the 

commission for approval to “implement a capital expenditure program” for certain 

enumerated purposes. R.C. 4929.111(A). Beginning in 2012, the commission 

issued a series of orders authorizing Dominion to implement a capital-expenditure 

program and defer post-in-service carrying costs, depreciation expenses, and 

property-tax expenses associated with its capital-expenditure-program investments. 

See In re Application of E. Ohio Gas Co., Pub. Util. Comm. Nos. 11-6024-GAUNC and 11-6025-GA-AAM, 2012 Ohio PUC LEXIS 852 (Dec. 12, 2012); In re 

Application of E. Ohio Gas Co., Pub. Util. Comm. Nos. 12-3279-GA-UNC and 12-

3280-GA-AAM, 2013 Ohio PUC LEXIS 221 (Oct. 9, 2013); In re the Application 

of E. Ohio Gas Co., Pub. Util. Comm. Nos. 13-2410-GA-UNC and 13-2411-GAAAM, 2014 Ohio PUC LEXIS 151 (July 2, 2014). None of these orders authorized 

Dominion to recover the costs of its capital-expenditure programs. Rather, 
January Term, 2023

3

Dominion would have to seek approval to recover its costs in a future proceeding. 

See id. *9.

{¶ 3} In May 2019, Dominion filed an application to recover the costs of its 

capital-expenditure program by establishing the CEP Rider. Dominion styled its 

application as a request for approval of an alternative rate plan. See R.C. 

4929.05(A) (“A natural gas company may request approval of an alternative rate 

plan by filing an application under section 4909.18 of the Revised Code, regardless 

of whether the application is for an increase in rates”). An “alternative rate plan” 

is a “method, alternate to the method of section 4909.15 of the Revised Code, for 

establishing rates and charges.” R.C. 4929.01(A). Among other things, R.C. 

4909.15(A)(2) requires that the commission determine a “fair and reasonable rate 

of return” to the utility when “fixing and determining just and reasonable rates, 

fares, tolls, rentals, and charges.”

{¶ 4} In its application, Dominion proposed a 9.91 percent rate of return for 

the CEP Rider based on the rate of return that the commission authorized in 

Dominion’s most recent base-rate case,1 which was decided in 2008. See In re 

Application of E. Ohio Gas Co., Pub. Util. Comm. Nos. 07-829-GA-AIR, 07-830-

GA-ALT, 07-831-GA-AAM, 08-169-GA-ALT, and 06-1453-GA-UNC, 2008 

Ohio PUC LEXIS 655 (Oct. 15, 2008). The rate of return is one of many 

components Dominion used to calculate the costs that it proposed to collect under 

the CEP Rider.

{¶ 5} The commission’s staff issued a report recommending that the 

commission approve the application. Dominion and the commission’s staff 

thereafter jointly filed a stipulation asking the commission to approve the 

1. A base-rate case is a “formal proceeding before a utility regulatory body in which a utility files 

an application to increase its distribution rate. The distribution rate is simply * * * the cost to deliver 

* * * natural gas * * * to customers.” Public Utilities Commission of Ohio, What is a distribution 

rate case?, https://puco.ohio.gov/news/news-bureau-what-is-a-rate-case (accessed June 1, 2023) 

[https://perma.cc/2QA8-5JPN].
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application subject to the staff’s recommendations in its report, except where the 

stipulation specified otherwise. The stipulation retained the 9.91 percent rate of 

return that Dominion had proposed in its application.

{¶ 6} OCC asked the commission to either reject or modify the stipulation; 

NOPEC asked the commission to reject it. Relevant here, appellants’ witness, Dr. 

Daniel Duann, who is the assistant director of analytical services with OCC, 

testified that a 9.91 percent rate of return was unreasonably high and outdated in 

light of current market conditions. Dr. Duann advocated that the commission use 

data from 2019 and 2020 to achieve a 7.20 percent rate of return rather than use the 

rate of return from Dominion’s 2008 base-rate case.

{¶ 7} The commission modified and approved the stipulation. In doing so, 

the commission ordered Dominion to file a new base-rate case by October 2023 

rather than October 2024. The commission noted that “Dominion [could not] deny, 

that, since the approval of its last base rate case in 2008, the Company’s cost of 

debt initially dropped from 6.50 percent to 4.23 percent and [that], currently, its 

cost of debt is 2.25 percent.” Dominion’s filing of a new base-rate case, the 

commission reasoned, would create a “more expedient alignment of the Company’s 

cost of capital and capital structure with market conditions.” Even so, the 

commission approved the stipulated 9.91 percent rate of return, citing its practice 

of applying the rate of return approved in a utility’s most recent base-rate case to 

the utility’s later alternative-rate-plan and rider proceedings. The parties do not 

dispute that with the commission’s approval of the stipulation, Dominion will 

recover approximately $73 million through the CEP Rider.

{¶ 8} In approving the stipulation, the commission’s chairwoman stated at 

the commission’s December 30, 2020 public meeting: “I just want to give a big 

shout out to [the director of rates and analysis] and her staff because without her 

and their help, this case probably would’ve taken even longer, and I just want to 

really thank her for her attentiveness and working with commissioners and better 
January Term, 2023

5

understanding everything in the case and how it came about.” Public Utilities 

Commission Meeting of December 30, 2020, available at 

https://www.youtube.com/watch?v=d_ozIp9-4tQ (accessed June 1, 2023). 

Another commissioner responded that he “echo[ed] [the chairwoman’s] comments 

100 percent.” Id.

{¶ 9} Appellants filed a joint application for rehearing that not only 

challenged the opinion and order but also asserted that one could infer from the 

commissioners’ statements at the public meeting that the commission had engaged 

in improper ex parte communications with its staff in violation of R.C. 4903.081 

and Ohio Adm.Code 4901-1-09. Appellants thus asked the commission to 

“explain[] on rehearing to what extent, if at all, the merits of this case were part of 

the communications referenced in the Commissioner’s remarks when the order was 

signed.” In a second entry on rehearing, the commission stated that it had done 

nothing improper. This appeal followed.

II. ANALYSIS

{¶ 10} “R.C. 4903.13 provides that a [commission] order shall be reversed, 

vacated, or modified by this court only when, upon consideration of the record, the 

court finds the order to be unlawful or unreasonable.” Constellation NewEnergy, 

Inc. v. Pub. Util. Comm., 104 Ohio St.3d 530, 2004-Ohio-6767, 820 N.E.2d 885, 

¶ 50. However, this court has “complete and independent power of review as to all 

questions of law.” Canton Storage & Transfer Co. v. Pub. Util. Comm., 72 Ohio 

St.3d 1, 4, 647 N.E.2d 136 (1995). But we do not “reweigh the evidence or secondguess the [commission] on questions of fact.” In re Complaints of LycourtDonovan v. Columbia Gas of Ohio, Inc., 152 Ohio St.3d 73, 2017-Ohio-7566, 93 

N.E.3d 902, ¶ 35.

{¶ 11} In this case, the commission partly relied on the following three-part 

test as set forth in Ohio Consumers’ Counsel v. Pub. Util. Comm., 110 Ohio St.3d 

394, 2006-Ohio-4706, 853 N.E.2d 1153, ¶ 16, to evaluate the reasonableness of the 
SUPREME COURT OF OHIO

6

contested stipulation: “[W]hether the settlement is a product of serious bargaining 

among capable, knowledgeable parties; whether the settlement, as a package, 

benefits ratepayers and the public interest; and whether the settlement package 

violates any important regulatory principles or practices.” This court has endorsed 

the commission’s use of this test. In re Application of Ohio Power Co., 155 Ohio 

St.3d 326, 2018-Ohio-4698, 121 N.E.3d 320, ¶ 39. Appellants’ arguments are 

based on the three parts of this test.

A. Arguments concerning the rate of return

1. The commission did not violate an important regulatory principle in 

adopting the 9.91 percent rate of return

{¶ 12} In their first proposition of law, appellants attack the commission’s 

adoption of a 9.91 percent rate of return instead of a 7.20 percent rate of return. In 

their view, the 9.91 percent rate of return, which stems from the commission’s

decision in Dominion’s 2008 base-rate case, contravenes the important regulatory 

principle that a utility’s rate of return must be based on current market conditions. 

Appellants point to several statutes, a commission rule, and two decisions (one from 

this court and one from the United States Supreme Court) in support of their 

argument. As explained below, we reject appellants’ first proposition of law 

because none of their cited authority requires the commission to establish a rate of 

return based on current market conditions in this case. See Ohio Consumers’ 

Counsel v. Pub. Util. Comm., 125 Ohio St.3d 57, 2010-Ohio-134, 926 N.E.2d 261, 

¶ 20 (rejecting the appellants’ argument that the commission violated the regulatory 

principle of gradualism because they “cited no authority that gradualism is a factor 

that the commission is required to apply in every rate-design case”). We begin by 

considering the several statutes and the rule that appellants cite, then turn to the 

case law they rely on.
January Term, 2023

7

a. R.C. 4929.05

{¶ 13} R.C. 4929.05(A) authorizes a natural-gas company to seek the 

commission’s approval of an alternative rate plan. Although one requirement for 

approval is that the alternative rate plan be “just and reasonable,” R.C. 

4929.05(A)(3), nothing in the statute requires that a just and reasonable rate of 

return be based on current market conditions as appellants argue. The absence of 

the phrase “current market conditions” from the statute—as well as the other 

statutes and the rule discussed below—is significant. In matters of statutory 

interpretation, this court cannot insert or delete words. In re Application of 

Columbus S. Power Co., 138 Ohio St.3d 448, 2014-Ohio-462, 8 N.E.3d 863, ¶ 26.

b. R.C. 4929.02

{¶ 14} Another requirement for approval of an alternative rate plan is the 

expectation that the natural-gas company “continue to be in substantial compliance 

with the policy of this state specified in section 4929.02 of the Revised Code.” R.C. 

4929.05(A)(2). R.C. 4929.02(A)(1) provides that the policy of this state is to 

“[p]romote the availability to consumers of adequate, reliable, and reasonably 

priced natural gas services and goods.” Appellants seem to argue that a natural-gas 

service is reasonably priced only when the rate of return is based on current market 

conditions. But nothing in R.C. 4929.02 requires that a rate of return be based on 

current market conditions.

c. R.C. 4929.111(C)

{¶ 15} R.C. 4929.111(C) requires that to approve an application for a 

capital-expenditure program, the commission find that “the capital expenditure 

program is consistent with the natural gas company’s obligation under [R.C. 

4905.22] to furnish necessary and adequate services and facilities.” Nothing in this 

passage states that a rate of return must be based on current market conditions. Nor 

is it significant that R.C. 4929.111(C) incorporates R.C. 4905.22, because R.C. 
SUPREME COURT OF OHIO

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4905.22 also does not specify that the commission must adopt a rate of return based 

on current market conditions.

d. R.C. 4909.18

{¶ 16} A natural-gas company that seeks approval of an alternative rate plan 

may file an application under R.C. 4909.18. R.C. 4929.05(A). Appellants assert 

that the filing requirements set forth in R.C. 4909.18 help ensure that rates are just 

and reasonable. Yet, nothing in R.C. 4909.18 requires that a rate of return be based 

on current market conditions. Rather, the statute speaks to what a natural-gas 

company must include in its application when seeking approval of an alternative 

rate plan. See R.C. 4909.18(A) through (D).

e. Ohio Adm.Code 4901:1-19-06

{¶ 17} Ohio Adm.Code 4901:1-19-06 prescribes filing requirements for

alternative-rate-plan applications. Appellants assert that the rule requires an 

applicant to submit information bearing “on its current long-term cost of debt and 

current cost of equity, upon which to calculate a current overall rate of return.” Yet, 

appellants do not point to anything in the rule that requires the commission to find 

a rate of return based on current market conditions.

f. Case law

{¶ 18} Appellants rely on Babbit v. Pub. Util. Comm., 59 Ohio St.2d 81, 

391 N.E.2d 1376 (1979), and Bluefield Waterworks & Improvement Co. v. Pub. 

Serv. Comm. of West Virginia, 262 U.S. 679, 43 S.Ct. 675, 67 L.Ed. 1176 (1923), 

as further support for their position that the commission must adopt a rate of return 

based on current market conditions.

{¶ 19} In Babbit, this court spoke to the necessity of “bas[ing] rate of return 

calculations on current data” and ensuring that the rate of return “be prospective.” 

Id. at 93. But this court made these statements in the context of interpreting R.C. 

4909.15(A)(2)’s reference to a “fair and reasonable rate of return.” This case does 

not turn on how this court construed R.C. 4909.15(A)(2) in Babbit, because an 
January Term, 2023

9

alternative rate plan, by definition, is a method “alternate to the method of section 

4909.15 of the Revised Code for establishing rates and charges,” R.C. 4929.01(A).

{¶ 20} The question presented in Bluefield was whether rates prescribed in 

a state’s utilities-commission order were so low as to be confiscatory, such that 

enforcement of the rate order “deprive[d] the public utility company of its property 

in violation of the Fourteenth Amendment” to the United States Constitution. Id.

at 690. In analyzing this question, the United States Supreme Court announced 

principles that a state’s utilities commission should account for when setting a rate 

of return—among them, that a utility’s return should be “equal to that generally 

being made at the same time and in the same general part of the country in other 

business undertakings” that share “corresponding risks and uncertainties.” Id. at 

692. Appellants ask us to follow that principle in this case, but this case does not 

involve a confiscation claim.

2. The commission did not inconsistently apply its precedent

{¶ 21} Appellants next argue that the commission inconsistently applied its 

precedent in adopting a 9.91 percent rate of return. This court has “instructed the 

commission to ‘respect its own precedents in its decisions to assure the 

predictability which is essential in all areas of the law, including administrative

law.’ ” In re Complaint of Suburban Natural Gas Co., 162 Ohio St.3d 162, 2020-

Ohio-5221, 164 N.E.3d 425, ¶ 29, quoting Cleveland Elec. Illum. Co. v. Pub. Util. 

Comm., 42 Ohio St.2d 403, 431, 330 N.E.2d 1 (1975), superseded on other grounds 

by statute as recognized in Babbit, 59 Ohio St.2d 81, 391 N.E.2d 1376. The 

commission did not depart from this instruction. The commission asserted that it 

set the rate of return according to its self-described long-standing practice to utilize 

the last approved rate of return in a utility’s rate case in subsequent alternative 

regulation and rider proceedings. In support, the commission pointed to a line of 

its own decisions from the natural-gas arena. One of those decisions involved a 

situation remarkably similar to the one presented here: a natural-gas company’s 
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10

request to implement a CEP Rider. See In re Application of Columbia Gas of Ohio, 

Inc., Pub. Util. Comm. No. 17-2202-GA-ALT, 2018 Ohio PUC LEXIS 1188, *6 

(Nov. 28, 2018).

{¶ 22} According to appellants, however, the commission inconsistently 

applied In re Application of Columbia Gas to this case. They contend that the 

commission initially determined in a procedural entry that it would not follow its 

decision in In re Application of Columbia Gas but then reversed course without any

explanation. Dominion correctly points out that appellants did not articulate this 

argument in their rehearing application. But even on the merits, this argument is 

unavailing because appellants mischaracterize what the commission did in its 

procedural entry. The entry on which appellants rely was filed on June 19, 2019; 

it dealt with Dominion’s request to waive certain filing requirements at an early 

stage of the proceedings. Contrary to appellants’ assertions, the commission did 

not discuss the merits of adopting Dominion’s requested rate of return in that entry, 

nor did it discuss whether to apply its decision in In re Application of Columbia 

Gas to this case.

{¶ 23} Lastly, appellants cite three commission decisions that they contend

cut against the approach applied by the commission below: In re Application of 

Columbus S. Power Co., Pub. Util. Comm. No. 05-1194-EL-UNC, 2005 PUC 

LEXIS 655 (Dec. 15, 2005); In re Application of Columbus S. Power Co., Pub. Util. 

Comm. No. 10-155-EL-RDR, 2010 Ohio PUC LEXIS 1083 (Oct. 22, 2010); and 

In re Application of Cleveland Elec. Illum. Co., Pub. Util. Comm. Nos. 81-146-ETAIR and 81-1565-EL-UNC, 1982 Ohio PUC LEXIS 7 (Mar. 17, 1982). In 

appellants’ view, these cases stand for the general proposition that the better 

practice is to use recent data when calculating a rate of return, especially when the 

utility’s financial conditions have changed. Notably, appellants cite these decisions

for the first time in their reply brief. Although we earlier denied Dominion’s motion 

to strike appellants’ discussion of these decisions, see 169 Ohio St.3d 1438, 2023-
January Term, 2023

11

Ohio-482, 203 N.E.3d 725, we now disregard appellants’ reliance on these three 

decisions because they are used in support of an argument that was raised for the 

first time in their reply brief. See State v. Quarterman, 140 Ohio St.3d 464, 2014-

Ohio-4034, 19 N.E.3d 900, ¶ 18 (faulting a party for failing to address “dispositive 

issues” until the filing of the party’s reply brief). In summary, we conclude that 

appellants have not shown that the commission inconsistently applied its precedent.

3. The commission did not violate R.C. 4903.09

{¶ 24} Appellants also assert that the commission violated R.C. 4903.09 

when it adopted a rate of return from a prior proceeding rather than making an 

independent finding from the record. The statute provides that the commission 

must file “findings of fact and written opinions setting forth the reasons prompting 

the decision[] arrived at, based upon said findings of fact.” Id. Although “strict 

compliance” with R.C. 4903.09 is not required, Tongren v. Pub. Util. Comm., 85 

Ohio St.3d 87, 89, 706 N.E.2d 1255 (1999), the commission “must show, in 

sufficient detail, the facts in the record upon which the order is based, and the 

reasoning followed by the [commission] in reaching its conclusion,” MCI 

Telecommunications Corp. v. Pub. Util. Comm., 32 Ohio St.3d 306, 312, 513 

N.E.2d 337 (1987).

{¶ 25} The commission’s opinion and order at issue here contains sufficient 

facts regarding the 9.91 percent rate of return. The opinion and order cited five 

sources that bear on that figure: (1) Dominion’s application, (2) the testimony of 

Dominion’s regulatory and pricing director, who sponsored the stipulation at the 

commission hearing, (3) a report prepared by a third-party consultant, (4) the 

hearing transcript, and (5) Dominion’s last base-rate case.

{¶ 26} The commission’s reasoning is also sufficiently detailed. The 

opinion and order stated that the commission was adhering to its “long-standing 

practice to utilize the last approved rate of return in a utility’s rate case in 

subsequent alternative regulation and rider proceedings.” In support of this 
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statement, the commission cited a line of its own decisions involving natural-gas 

companies, including In re Columbia Gas of Ohio, Inc., Pub. Util. Comm. No. 17-

2202-GA-ALT, 2018 Ohio PUC LEXIS 1188.

{¶ 27} Appellants’ reliance on In re Application of FirstEnergy Advisors 

for Certification as a Competitive Retail Elec. Serv. Power Broker & Aggregator, 

166 Ohio St.3d 519, 2021-Ohio-3630, 188 N.E.3d 140, does not require a different 

result. In that case, the commission approved a company’s application to provide 

regulated utility services without making the required findings under R.C. 4903.09 

and Ohio Adm.Code 4901:1-24-10(C)(1) and (2) that the company was fit to 

provide the services. Instead, the commission pointed to a report prepared by its 

staff in which the staff merely stated that the company had provided requested 

information, that it had reviewed the information, and that in its view the company 

met all requirements for approval of its application. This court held that the 

commission’s failure to explain in its order how the company was fit to provide 

regulated utility services and the lack of any citation to the record constituted a 

violation of R.C. 4903.09. In re Application of FirstEnergy Advisors at ¶ 27. This 

case is distinguishable. The commission’s opinion and order cites multiple places 

in the record in support of the 9.91 percent rate of return, and the commission’s 

reasoning for adopting that rate is readily apparent from the opinion and order.

{¶ 28} Next, appellants argue that the commission erred under R.C. 4903.09 

by failing to analyze “the accuracy of the data” submitted in Dominion’s 

application, examine Dr. Duann’s testimony, or consider whether adopting a rate 

of return based on current market conditions constitutes an important regulatory 

principle. But the question for determining compliance with R.C. 4903.09 is 

whether the commission showed “in sufficient detail, the facts in the record upon 

which the order is based, and the reasoning followed by [it] in reaching its 

conclusion,” MCI Telecommunications Corp., 32 Ohio St.3d at 312, 513 N.E.2d 

337. As noted above, we find that the commission did this.
January Term, 2023

13

{¶ 29} Appellants also argue in their reply brief that the commission 

departed from R.C. 4903.09 by not discussing the effect of the COVID-19

pandemic on the proper rate of return. We earlier denied Dominion’s motion to 

strike this argument, see 169 Ohio St.3d 1438, 2023-Ohio-482, 203 N.E.3d 725, 

but we now disregard the argument, given that it was raised for the first time in 

appellants’ reply brief. See Quarterman, 140 Ohio St.3d 464, 2014-Ohio-4034, 19 

N.E.3d 900, at ¶ 18.

4. Appellants’ manifest-weight-of-the-evidence argument fails

{¶ 30} Appellants’ remaining argument under its first proposition of law is

that the commission’s approval of the 9.91 percent rate of return was against the 

manifest weight of the evidence. In support of this argument, they say they were 

the only parties to present expert testimony concerning Dominion’s cost of longterm debt, cost of equity, and capital structure on which to calculate a current rate 

of return.

{¶ 31} This court “will not reverse or modify a commission decision as to 

questions of fact when the record contains sufficient probative evidence to show 

that the commission’s decision was not manifestly against the weight of the 

evidence and was not so clearly unsupported by the record as to show 

misapprehension, mistake, or willful disregard of duty.” In re Application of Ohio 

Power Co., 155 Ohio St.3d 326, 2018-Ohio-4698, 121 N.E.3d 320, at ¶ 9. “An 

appellant bears the burden of demonstrating that the commission’s decision is 

against the manifest weight of the evidence or is clearly unsupported by the record.” 

Id.

{¶ 32} It is true that appellants presented evidence in support of a rate of 

return based on current market conditions. For example, Dr. Duann’s rate-of-return 

analysis used recent financial data from 2019 and 2020. Neither the commission’s 

staff nor Dominion cross-examined Dr. Duann. And neither the staff nor Dominion 

furnished an alternative rate-of-return calculation based on current market 
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conditions. But appellants have failed to cite any authority that requires the 

commission to adopt a rate of return based on current market conditions in this case. 

Because the linchpin of appellants’ manifest-weight argument rests on a 

requirement that does not exist in the current statutory scheme, we must reject it.

{¶ 33} The opinion concurring in part and concurring in judgment only in 

part agrees that “nothing in the statutory scheme explicitly requires [the 

commission] to set a rate of return for an alternative rate plan that precisely matches 

the company’s most recent costs of acquiring capital,” concurring opinion, ¶ 73,

and that “[t]he consumers have failed to identify any statute that was violated or 

any legal error that was committed by [the commission],” id. at ¶ 76. But 

additionally, the opinion concurring in part and concurring in judgment only in part 

points out that there are ways that the commission could have reasonably 

considered current market conditions in this alternative-rate-plan proceeding, 

including by advancing Dominion’s next base-rate case by one year, as it did here. 

See id. at ¶ 81. Nothing in this opinion should be read as prohibiting the 

commission from considering current market conditions in an alternative-rate-plan 

proceeding. We simply limit our discussion to the arguments presented to us and 

our statutorily prescribed scope of review under which we may reverse, vacate, or 

modify an order of the commission only when, upon consideration of the record, 

we find the order to be unlawful or unreasonable. See R.C. 4903.13. So regardless 

of what the opinion concurring in part and concurring in judgment only in part 

believes is “necessarily implicate[d]” by the statutory scheme, concurring opinion 

at ¶ 69, what is important here is that this court unanimously agrees that the 

commission’s orders at issue in this case are neither unlawful nor unreasonable.

B. Arguments concerning ex parte communications

{¶ 34} As a preliminary matter, we note that the commission has asserted

that this court lacks jurisdiction over appellants’ second proposition of law, part of 

which focuses on ex parte communications, because appellants did not preserve it 
January Term, 2023

15

in a second rehearing application. Dominion raises a similar argument. Because 

we previously denied the commission’s motion to dismiss in which it asserted the 

same argument, see 167 Ohio St.3d 1476, 2022-Ohio-2642, 192 N.E.3d 495, we 

proceed to consider the merits of appellants’ second proposition of law.

{¶ 35} Appellants argue that the commission and its staff engaged in 

improper ex parte communications in violation of R.C. 4903.081 and Ohio 

Adm.Code 4901-1-09. They base this argument on the chairwoman’s statement 

during the commission’s December 30, 2020 meeting in which she thanked the staff 

for its “attentiveness and working with commissioners and better understanding 

everything in the case and how it came about.” Public Utilities Commission 

Meeting of December 30, 2020, available at https://www.youtube.com

/watch?v=d_ozIp9-4tQ (accessed June 1, 2023).

{¶ 36} R.C. 4901.19 authorizes the commission to “appoint * * * experts, 

engineers, accountants, and such other officers as it considers necessary.” All 

parties generally agree that this statute authorizes the commission to appoint and 

consult with staff for the purpose of helping it carry out its statutory duties. After 

a case has been assigned a formal docket number, however, no commission member 

“shall discuss the merits of the case with any party or intervenor to the proceeding, 

unless all parties and intervenors have been notified and given the opportunity of 

being present or a full disclosure of the communication insofar as it pertains to the 

subject matter of the case has been made.” R.C. 4903.081; accord Ohio Adm.Code 

4901-1-09. “[T]he purpose of the statute is to prevent a party from gaining an unfair 

advantage over an opposing party through ex parte communications with the 

decisionmaker.” Myers v. Pub. Util. Comm., 64 Ohio St.3d 299, 303, 595 N.E.2d 

873 (1992).

{¶ 37} Appellants claim that the commission’s staff is a “party” for 

purposes of R.C. 4903.081 based on Ohio Adm.Code 4901-1-10(C), which 

provides that “[e]xcept for purposes of rule[] * * * 4901-1-30, * * * the commission 
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staff shall not be considered a party to any proceeding.” Ohio Adm.Code 4901-1-

30(A) addresses the commission’s procedures for handling stipulations; it specifies

that “[a]ny two or more parties may enter into a written or oral stipulation 

concerning issues of fact, the authenticity of documents, or the proposed resolution 

of some or all of the issues in a proceeding.” When read together with R.C. 

4903.081, Ohio Adm.Code 4901-1-10(C) and 4901-1-30(A) convey that a 

signatory to a stipulation—as the commission’s staff was here—is a party for 

purposes of the statute.

{¶ 38} The commission disputes this reading, asserting that because Ohio 

Adm.Code 4901-1-10(C) does not expressly identify Ohio Adm.Code 4901-1-09 

as one of the contexts in which its staff shall be considered a party, the staff is not 

a party for purposes of Ohio Adm.Code 4901-1-09 and R.C. 4903.081. We 

conclude that the commission’s reading is incorrect. Even assuming that the 

absence of a reference to Ohio Adm.Code 4901-1-09 in Ohio Adm.Code 4901-1-

10(C) means that the commission’s staff is excluded from the former’s 

requirements regarding ex parte discussion of cases, the requirements of R.C. 

4903.081, which are mirrored in Ohio Adm.Code 4901-1-09, still remain. And 

nothing in R.C. 4903.081 empowers the commission to waive by rule the 

requirements that the statute imposes on commission members and parties 

regarding discussions about the merits of a case.

{¶ 39} Even so, to establish a violation of R.C. 4903.081, appellants must 

show that a commission member “discuss[ed] the merits of the case” with the staff 

in its capacity as a party. See Cincinnati v. Pub. Util. Comm., 64 Ohio St.3d 279, 

280, 595 N.E.2d 858 (1992), fn. 4 (no violation of R.C. 4903.081 when the evidence 

“[did] not establish that the merits of [the case] were discussed” between the 

commission’s chairman and the chief executive officers of two utility companies). 

In legal usage, the term “merits” denotes “[t]he elements or grounds of a claim or 

defense; the substantive considerations to be taken into account in deciding a case, 
January Term, 2023

17

as opposed to extraneous or technical points, esp. of procedure.” Black’s Law 

Dictionary 1139 (10th Ed.2014).

{¶ 40} In this case, appellants asked the commission in their rehearing 

application to “explain[] on rehearing to what extent, if at all, the merits of this case 

were part of the communications referenced in the Commissioners’ remarks when 

the Order was signed.” The commission’s second entry on rehearing explained that 

the chairwoman’s statement was “nothing more than a statement of appreciation 

for [the] Staff’s efforts to assist Commissioners with understanding the background 

of the issues in the case.” Appellants’ suggestion that the communication was more 

than one of appreciation rests on speculation. See In re Application of Ohio Power 

Co., 155 Ohio St.3d 326, 2018-Ohio-4698, 121 N.E.3d 320, at ¶ 50 (“We will not 

reverse a commission order based on speculation”). Without evidence of 

wrongdoing, the commission is therefore presumed to have conducted itself within 

the bounds of the law. See In re Application of Am. Transm. Sys., Inc., 125 Ohio 

St.3d 333, 2010-Ohio-1841, 928 N.E.2d 427, ¶ 23, quoting State ex rel. Shafer v. 

Ohio Turnpike Comm., 159 Ohio St. 581, 590, 113 N.E.2d 14 (1953) (“ ‘in the 

absence of evidence to the contrary, public officers, administrative officers and 

public boards * * * will be presumed to have properly performed their duties and 

not to have acted illegally but regularly and in a lawful manner’ ” [ellipsis sic]).

{¶ 41} Appellants next argue that they were deprived of their due-process 

rights because they were “given no opportunity to rebut the extra-record 

information [the commission’s] Staff provided to [the] commissioners.” But again,

appellants have not provided evidence to verify their speculation that the 

commission’s staff provided “extra-record information” to the commissioners in a 

way that violates R.C. 4903.081.

{¶ 42} Also unavailing is appellants’ reliance on State ex rel. OwensIllinois, Inc. v. Indus. Comm., 61 Ohio St.3d 456, 575 N.E.2d 202 (1991). In that 

case, this court stated that “due process demands an opportunity to rebut the 
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18

evidence presented.” Id. at 458. Here, appellants participated in a hearing before 

the commission in which they were able to challenge the stipulation and other 

documentary and testimonial evidence presented by Dominion and the 

commission’s staff. In this way, appellants received the due process described in 

Owens-Illinois.

{¶ 43} This is not to say that the commission can enter adverse factual 

findings against a party when the party had no opportunity to challenge the evidence 

on which those findings are based. Indeed, this court held such a practice to be

unlawful in Tongren, 85 Ohio St.3d 87, 706 N.E.2d 1255. In that case, the 

commission had issued an order that referred to and relied on findings by its staff, 

but the record did not contain those findings or the facts underlying those findings. 

Id. at 90. Therefore, this court held that the order was unlawful for failing to meet 

the requirements of R.C. 4903.09, id. at 92-93, which, as previously explained,

requires that in contested cases the commission enter “findings of fact and written 

opinions setting forth the reasons prompting the decisions arrived at, based upon 

said findings of fact,” R.C. 4903.09. In Tongren, the court explained that the 

commission’s order failed to “disclos[e] the sources of its information to those who 

most require it, thereby preventing the complaining party from demonstrating 

prejudice.” Id. at 92.

{¶ 44} Tongren is distinguishable, however, because appellants have not 

pointed to anything in the proceedings of this case that is comparable to what this 

court invalidated in Tongren. Because the opinion and order in this case is 

“sufficiently supported by evidence admitted at the hearing,” Vectren Energy 

Delivery of Ohio, Inc. v. Pub. Util. Comm., 113 Ohio St.3d 180, 2006-Ohio-1386, 

863 N.E.2d 599, ¶ 50, Tongren does not apply.
January Term, 2023

19

C. Arguments concerning the remaining prongs of the three-part test for 

evaluating the reasonableness of the stipulation

1. The commission did not err in determining that the stipulation was a 

product of serious bargaining among capable, knowledgeable parties

{¶ 45} Appellants also argue in their second proposition of law that the 

stipulation was not a product of serious bargaining among capable, knowledgeable 

parties. Appellants’ particular concern here is that because the commission’s staff 

does not represent the interests of residential utility customers and has no pecuniary 

interests in the outcome of the bargaining, the staff used the stipulation to negotiate 

away the interests of the residential utility customers represented by OCC and 

NOPEC.

{¶ 46} To begin with, appellants do not point to any evidence that 

contradicts the commission’s finding that all parties were invited to the bargaining 

table, were allowed the opportunity to circulate settlement proposals, and were 

represented by competent counsel and technical experts. Nor does it follow that 

the stipulation approved by the commission is legally defective merely because 

appellants’ proposals did not carry the day. Moreover, because we are not privy to 

the contents of the parties’ settlement discussions, we decline the invitation to draw 

an adverse inference about how the commission’s staff conducted itself during the 

settlement process. See Bailey v. United States, 721 F.2d 357, 361 (Fed.Cir.1983) 

(“Courts are, of course, traditionally hesitant to inquire into the give and take of the

negotiations leading to a settlement”).

2. The commission did not err in concluding that the settlement, as a 

package, benefits ratepayers and the public interest

{¶ 47} Appellants assert that the settlement, as a package, does not benefit 

ratepayers and the public interest. They assert that the settlement departs from this 

aspect of the three-part test for evaluating the reasonableness of a settlement 

because it was joined by only two parties, which, they say, relaxed Dominion’s 
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burden of proof to justify approval of its application and permitted the commission 

to evade appellants’ objections to the settlement. In their view, these flaws amount 

to a due-process violation.

{¶ 48} To begin with, appellants appear to have confused a question of 

substance with one of procedure. In any event, appellants’ arguments are 

unpersuasive for several reasons.

{¶ 49} First, the settlement did not foreclose appellants from raising 

objections. Among other things, appellants objected to the settlement with

documentary and testimonial evidence—including cross-examination of 

Dominion’s regulatory and pricing director, Vicki Friscic, who sponsored and 

testified in support of the settlement—briefs, and a rehearing application. The 

commission plainly discussed the analysis of appellants’ witness, Dr. Duann, in its 

order, but ultimately decided not to adopt his recommendations. That alone does 

not establish error. See Consumers’ Counsel v. Pub. Util. Comm., 114 Ohio St.3d 

340, 2007-Ohio-4276, 872 N.E.2d 269, ¶ 28 (“The commission did not ignore the 

evidence offered by OCC; the commission rejected it”).

{¶ 50} Second, the commission did not relieve Dominion of its burden of 

proof. “When the commission reviews a contested stipulation, the requirement of 

evidentiary support remains operative.” In re Application of Columbus S. Power 

Co., 129 Ohio St.3d 46, 2011-Ohio-2383, 950 N.E.2d 164, ¶ 19. As noted above, 

the 9.91 percent rate of return approved by the commission is supported by 

evidence in the record. Appellants discount this on their assertion that Dominion 

should have calculated a new rate of return based on current market conditions. But 

as explained above, their argument finds no support in the cited authorities.

{¶ 51} Third, appellants cite no authority to support their due-process 

argument. The analysis in Ohio Edison Co. v. Pub. Util. Comm., 63 Ohio St.3d 

555, 589 N.E.2d 1292 (1992), which is the only decision they cite, does not mention 

the phrase “current market conditions” at all.
January Term, 2023

21

{¶ 52} Appellants also argue that the 9.91 percent rate of return is a sign 

that the settlement, as a package, does not benefit ratepayers and the public interest,

because the rate of return is too high in light of current market conditions. But the 

question is not whether one feature of the settlement viewed in isolation is 

unreasonable; rather, this court must consider the reasonableness of the settlement 

as a package. On this point, the commission found that based on Friscic’stestimony 

and the settlement’s terms, the settlement benefits ratepayers and the public interest 

because, among other things, it promotes safe and reliable service through the 

replacement of Dominion’s aging facilities, institutes rate caps on customers’ bills, 

limits the impact to customers’ utility bills by incorporating a $310 million offset 

to depreciation expenses reflected in Dominion’s base rates, and contributes 

$750,000 in shareholder funds to Dominion’s heating-assistance program. 

Viewing the settlement package in this light, we cannot conclude that the 

commission erred in determining that the settlement, as a package, benefits 

ratepayers and the public interest. Constellation NewEnergy, Inc., 104 Ohio St.3d 

530, 2004-Ohio-6767, 820 N.E.2d 885, at ¶ 49 (rejecting claim that a settlement, as 

a package, did not benefit ratepayers and the public interest).

III. CONCLUSION

{¶ 53} The commission’s orders are neither unreasonable nor unlawful. We 

therefore affirm them.

Orders affirmed.

KENNEDY, C.J., and FISCHER, BRUNNER, and EPLEY, JJ., concur.

DEWINE, J., concurs in part and concurs in judgment only in part, with an 

opinion joined by DONNELLY, J.

CHRIS EPLEY, J., of the Second District Court of Appeals, sitting for 

DETERS, J.

__________________
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DEWINE, J., concurring in part and concurring in judgment only in 

part.

{¶ 54} I concur in the majority’s decision to affirm the orders of the Public 

Utilities Commission of Ohio (“PUCO”) in this case. I write separately because I 

disagree with the majority’s treatment of the first proposition of law. I worry that 

the majority opinion will cause confusion in future alternative-rate-plan cases. And 

I fear that it will be read to mean that PUCO need not consider current market 

conditions when setting a rate of return in alternative-rate-plan cases. In my view, 

current market conditions are an appropriate consideration. But here, PUCO did 

take into account current market conditions when it ordered Dominion Energy of 

Ohio to advance its filing of a new base-rate case to October of this year. In view 

of all the circumstances, I do not find its orders to be unreasonable.

PUCO Approves Dominion’s Alternative Rate Plan but Modifies the 

Stipulation to Require that Dominion File a New Base-Rate Case by October 

2023

{¶ 55} At issue is PUCO’s decision to approve an alternative rate plan, 

allowing Dominion to charge customers for capital investments that it made in the 

past. No one disputes that Dominion should be able to recover for these 

investments. The question is the appropriate rate of return that Dominion should 

receive from ratepayers on these investments.

{¶ 56} In simplified terms, the rate of return is the percentage return that a 

utility receives on its assets.2 Cleveland v. Pub. Util. Comm., 164 Ohio St. 442, 

444, 132 N.E.2d 216 (1956). It is essentially the amount that a utility may charge 

customers over and above its operating costs. So if a utility had a $100 capital base 

and a 10 percent rate of return, it would be entitled to collect a $10 return from 

2. See Phillips, The Regulation of Public Utilities 375-376 (3d Ed.1993) (“the rate of return is the 

amount of money earned by a public utility, over and above operating costs, expressed as a 

percentage of the rate base”).
January Term, 2023

23

customers on those assets. Two components are generally used to calculate the rate 

of return: the cost of long-term debt and the return on equity. See Babbit v. Pub. 

Util. Comm., 59 Ohio St.2d 81, 90-91, 391 N.E.2d 1376 (1979). In essence, a rate 

of return needs to be set at a level that is high enough that the utility can borrow 

money in capital markets and attract equity investment, thereby allowing the 

company to make necessary investments in facilities and equipment. See 1 Priest, 

Principles of Public Utility Regulation 195-196 (1969). But, of course, if the rate 

of return is set too high, there will be a perverse incentive for the utility to 

overinvest in—or “gold plate”—its own facilities.3

{¶ 57} An alternative rate plan is a statutory alternative to traditional rate 

setting. R.C. 4929.01(A). In a traditional rate case, PUCO establishes rates based 

upon a statutorily prescribed formula that requires PUCO to make a complex set of 

determinations about such things as the valuation of the utility’s property on a date 

certain, the utility’s costs in rendering services over a defined test period, taxes, and 

“a fair and reasonable rate of return.” R.C. 4909.15. The process for approval of 

an alternative rate plan is much simpler. The applicant need establish only that the 

plan (1) accords with state law prohibiting discrimination in the supply of natural 

gas to its customers, (2) is in “substantial compliance with the policy of this state” 

set forth in R.C. 4929.02, and (3) is “just and reasonable.” R.C. 4929.05(A).

{¶ 58} In its application for an alternative rate plan, Dominion proposed a 

9.91 percent pretax rate of return. Dominion represented that that rate of return 

reflected the gross-up of the current federal-income-tax rate and the rate-of-return 

components authorized in its last base-rate case. Dominion said that it used this 

number because it was PUCO’s regular practice to use the rate of return established 

in the utility’s last base-rate case when considering an application for approval of 

3. See 2 Goodman, The Process of Ratemaking 849 (1998) (“ ‘Gold plating’ refers to a company’s 

investing in the most expensive equipment or producing the most expensive service regardless of 

the need or efficiency of the operation to maximize returns without diminishing sales”).
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24

an alternative rate plan. PUCO’s staff and Dominion entered into a stipulation to 

approve the alternative rate plan using Dominion’s proposed rate of return.

{¶ 59} The Ohio Consumers’ Counsel and the Northeast Ohio Public 

Energy Council (collectively, “the consumers”) objected, arguing that a 9.91 

percent rate of return was unreasonably high in light of current market conditions. 

They introduced testimony from Dr. Daniel Duann, assistant director of analytical 

services for the Office of the Ohio Consumers’ Counsel. Dr. Duann explained that 

in Dominion’s last base-rate case, PUCO had imposed a stipulated rate of return of 

8.49 percent,4 which was imputed from a capital structure of 48.66 percent longterm debt and 51.34 percent equity, a cost of debt of 6.50 percent, and a return on 

equity of 10.38 percent.

{¶ 60} Dr. Duann opined that the 9.91 percent rate of return is inconsistent 

with current market conditions. He noted that Dominion’s cost of debt as of June 

2020 was only 2.29 percent, and asserted that that figure should be used for the debt 

component of the rate-of-return calculation. He also opined that the 10.38 percent 

return on equity established in Dominion’s last base-rate case was out of step with 

the return on equity authorized in recent rate cases across the country. Based on 

other utilities’ rate cases and his assessment that Dominion faces less risk than other 

gas-distribution utilities, Duann proposed that a return on equity of 9.36 percent 

should be used. He applied these figures to the capital structure determined in 

Dominion’s 2008 base-rate case (48.66 percent long-term debt and 51.34 percent 

equity), made an adjustment to account for changes in federal-income-tax laws 

since 2008, and arrived at a proposed pretax rate of return of 7.2 percent.

{¶ 61} PUCO overruled the consumers’ objections and approved a 

stipulated settlement between PUCO’s staff and Dominion. In re Application of E. 

4. The variance between the 8.49 percent pretax rate of return calculated in the 2008 base-rate case 

and the 9.91 percent rate of return at issue here is due to changes in federal tax law. Both Dominion 

and the consumers’ expert, Duann, agree that a gross-up factor of 1.2658 is appropriate to account 

for the tax-law changes.
January Term, 2023

25

Ohio Gas Co., Pub. Util. Comm. No. 19-468-GA-ALT, 2020 Ohio PUC LEXIS 

1857, *85-87 (Dec. 30, 2020). In authorizing the 9.91 percent rate of return, PUCO 

cited its “long-standing practice” of applying the rate of return approved in a 

utility’s most recent base-rate case to the utility’s later alternative-rate-plan and 

rider proceedings. Id. at *62-63. It further explained that it had recently used this 

practice when calculating credits for Dominion’s customers in another case and that 

fairness dictated that the same practice be employed for calculating Dominion’s 

cost recovery. Id. at *62. It also pointed out that Dominion’s cost of capital was 

tied to its capital structure and that modifying the long-term-debt rate “would 

necessarily involve ‘cherry picking,’ while ignoring any cost increases that have 

occurred since the [2008 base-rate case].” Id. It noted further that while the 

consumers focused on Dominion’s current cost of debt, Dominion’s investments 

from 2011 through 2018 were made at higher costs. Id. at *64. In addition, it 

explained that it was compelled to consider the stipulation “as a package” and that 

the stipulation provided numerous benefits to Dominion’s customers, including 

residential caps on rates, which limited Dominion’s ability to pass on capital 

expenses to its customers. Id. at *59-60.

{¶ 62} The consumers filed for rehearing. As one of its arguments, 

Northeast Ohio Public Energy Council asserted that if it was PUCO’s position that 

a rate of return could only be calculated in a base-rate case, PUCO should direct 

Dominion to file a new base-rate case by the end of 2021. PUCO partly agreed 

with the suggestion. See In re Application of E. Ohio Gas Co., Pub. Util. Comm. 

No. 19-468-GA-ALT, 2022 Ohio PUC LEXIS 216, *20 (Feb. 23, 2022). It ordered 

Dominion to file a new base-rate case no later than October 2023, instead of the 

October 2024 date set forth in the stipulation. Id. PUCO explained:

In the pending case, [the consumers] argued, and Dominion cannot 

deny, that, since the approval of its last base rate case in 2008, the 
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26

Company’s cost of debt initially dropped from 6.50 percent to 4.23 

percent and, currently, its cost of debt is 2.25 percent. * * * [I]t has 

been the Commission’s long-standing practice to utilize the cost of 

capital and capital structure approved in the utility’s last base rate 

case in subsequent alternative rate plan and rider cases. However, 

in consideration of the significant decrease in the Company’s 

current cost of debt rate since its last rate case, and considering that 

Dominion refinanced all of its long-term outstanding debt at the 

current lower rate, as well as that the agreed upon date for Dominion 

to file its next base rate case is nearly three years away, the 

Commission finds that a more expedient alignment of the 

Company’s cost of capital and capital structure with market 

conditions is appropriate and necessary. This is particularly so 

given that it has been more than a decade since the Company’s last 

base rate case. Accordingly, upon further consideration of the issues 

raised by [the consumers] regarding the cost of capital, rate of return, 

and capital structure, the Commission finds that the Stipulation 

should be modified to require Dominion to file its next base rate case 

application by October 2023 * * *.

(Citations omitted.) Id. at *21-22. With this modification, PUCO approved the 

alternative rate plan.

The Majority Affirms PUCO’s Approval of the Alternative Rate Plan

{¶ 63} The consumers appealed. In their first proposition of law, they take 

aim at the rate of return. The crux of their argument is that PUCO acted unlawfully 

in using a 12-year-old rate of return instead of one based on current market 

conditions. The consumers cite the requirement that in evaluating a proposed 

stipulation, PUCO must consider whether the stipulation “violates any important 
January Term, 2023

27

regulatory principle or practices.” Babbit, 59 Ohio St.2d 81, 391 N.E.2d 1376. 

They also cite R.C. 4929.05 and other statutes and regulations that they contend 

require PUCO to consider current market conditions. PUCO argues that there is no 

such regulatory principle, and that nothing in the relevant statutory or 

administrative provisions requires consideration of current market conditions.

{¶ 64} The majority agrees with PUCO. In disposing of the consumers’ 

arguments, it goes through relevant statutory provisions, noting that the phrase 

“current market conditions” is not explicitly written into any of them. From this, it 

infers that PUCO need not consider current market conditions in the approval of an 

alternative rate plan.

{¶ 65} The majority begins its analysis with R.C. 4929.05(A), which 

requires as a condition for approval of an alternative rate plan that PUCO determine 

that the plan is “just and reasonable,” R.C. 4929.05(A)(3). It then jumps to its 

conclusion:

[N]othing in the statute requires that a just and reasonable rate of 

return be based on current market conditions as [the consumers] 

argue. The absence of the phrase “current market conditions” from 

the statute—as well as the other statutes and the rule discussed 

below—is significant. In matters of statutory interpretation, this 

court cannot insert or delete words. In re Application of Columbus 

S. Power Co., 138 Ohio St.3d 448, 2014-Ohio-462, 8 N.E.3d 863, ¶ 

26.

Majority opinion, ¶ 13.

{¶ 66} The majority performs a nearly identical analysis for other statutory 

provisions, treating its review like a game of word search. It looks through the 

relevant statutory provisions, fails to find the phrase “current market conditions,” 
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28

and announces that the matter is settled. In my view, such an analysis is overly 

simplistic and will cause problems in future cases. As I will explain, a much more 

robust review is required.

Current Market Conditions Are an Appropriate Consideration in 

Determining the Reasonableness of an Alternative Rate Plan

{¶ 67} A reader could easily conclude from the majority opinion that PUCO 

need not even consider current market conditions when deciding whether to 

approve an alternative rate plan. I don’t think that’s a fair account of the law of this 

state.

{¶ 68} The criteria PUCO must use to approve an alternative rate plan is 

established by statute. See R.C. 4929.05(A)(1). Before it may approve an 

alternative rate plan, PUCO must find that three substantive criteria are met. First, 

that the natural-gas company is in compliance with the statutory policy prohibiting 

discrimination in the supply of natural gas to its customers. R.C. 4929.05(A)(1), 

citing R.C. 4905.35. Second, that the natural-gas company is in “substantial 

compliance with the policy of this state” set forth in R.C. 4929.02. R.C. 

4929.05(A)(1) and (2). Finally, and most relevant here, that the alternative rate 

plan is “just and reasonable.” R.C. 4929.05(A)(3).

{¶ 69} This third requirement—that the plan be “just and reasonable”—

necessarily implicates the current market conditions for obtaining capital. The rate 

of return is a key element of the amount that customers will pay for natural gas 

under a plan. And the rate of return is based on the cost of obtaining money in 

equity and capital markets. So “current market conditions”—i.e., what it costs to 

obtain money in those markets today—is obviously a relevant consideration in 

determining whether a rate is just and reasonable.

{¶ 70} The majority dismisses any consideration of current debt and equity 

markets on the basis that the words “current market conditions” are not found 

anywhere in the text of the relevant statutes. But that makes little sense. No one 
January Term, 2023

29

disputes that the words “current market conditions” aren’t in the statutory text. But 

a utility’s costs obviously affect whether its rates are “just and reasonable.” See 

generally Bluefield Waterworks & Improvement Co. v. Pub. Serv. Comm. of West 

Virginia, 262 U.S. 679, 693, 43 S.Ct. 675, 67 L.Ed. 1176 (1923) (“A rate of return 

may be reasonable at one time and become too high or too low by changes affecting 

opportunities for investment, the money market and business conditions 

generally”). Current market conditions, of course, are not the only determinant of 

whether a rate is “just and reasonable.” But they are certainly something that bears 

on the analysis.

{¶ 71} The same goes for the requirement that PUCO find that the naturalgas company is in “substantial compliance with the policy of this state” set forth in 

R.C. 4929.02, R.C. 4929.05(A)(1) and (2). Among other things, the policy of the 

state is to “[p]romote the availability to consumers of adequate, reliable, and 

reasonably priced natural gas services.” R.C. 4929.02(A)(1). The majority 

dismisses any claim that this provision is implicated, saying simply, “[N]othing in 

R.C. 4929.02 requires that a rate of return be based on current market conditions.” 

Majority opinion at ¶ 14. But again, while nothing in R.C. 4929.02 requires that a 

rate of return be based on current market conditions, current market conditions are 

certainly something that factors into the analysis of whether natural-gas services 

are “reasonably priced.” Few people would think that an item is “reasonably 

priced” if it is priced so high that its producer receives profits that are 

disproportionate to what other producers earn in the same market.

{¶ 72} Other policies of this state with which PUCO must determine the 

utility is in substantial compliance include “encourag[ing] * * * market access for 

cost-effective supply- and demand-side natural gas services and goods,” R.C. 

4929.02(A)(4), and “facilitat[ing] the state’s competitiveness in the global 

economy,” R.C. 4929.02(A)(10). The utility’s compliance with each of these 

policies fundamentally depends on current market conditions. What is “cost 
SUPREME COURT OF OHIO

30

effective” or what “facilitates competitiveness” will vary widely depending on the 

market. And allowing Ohio’s utilities to receive a rate of return that is higher than 

what out-of-state utilities receive, and thus charge higher prices, will not facilitate 

the state’s competitiveness.

{¶ 73} The majority is, of course, correct that nothing in the statutory 

scheme explicitly requires PUCO to set a rate of return for an alternative rate plan 

that precisely matches the company’s most recent costs of acquiring capital. But 

the statutory scheme does task PUCO with determining that an alternative rate plan 

complies with broad statutory criteria—like whether it is reasonable. In my view, 

these criteria will almost always necessarily require some consideration by PUCO 

of current market conditions, as well as a myriad of other factors.

PUCO’s Orders Were Not Unreasonable or Unlawful

{¶ 74} Our standard of review for PUCO orders is set by statute. We may 

reverse, modify, or vacate a PUCO order only when, upon consideration of the 

record, we conclude that the order was “unlawful or unreasonable.” R.C. 4903.13. 

Unlawfulness and unreasonableness are distinct concepts within our standard of 

review. See In re Application of Firelands Wind, L.L.C., __ Ohio St.3d __, 2023-

Ohio-2555, __ N.E.3d __, ¶ 11. A PUCO order is unlawful if it rests on an 

erroneous interpretation of the law or if PUCO fails to follow procedures prescribed 

by statute or its own regulations. See id. at ¶ 12 (collecting cases construing the 

“unlawful” part of the standard of review). An order is “unreasonable” when 

PUCO’s exercise of its discretion in making determinations within broad statutory 

criteria falls outside the “zone of permissible statutory construction,” id. at ¶ 15. 

We have also found an order of a state administrative agency to be unreasonable 

when the decision is “manifestly contrary to the evidence in the record or when the 

evidence clearly isn’t enough to support the decision” or when the order is 

“internally inconsistent.” Id. at ¶ 16. Our review of such questions of law is de 

novo. Id. at ¶ 13.
January Term, 2023

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{¶ 75} The consumers focus mostly on the “unlawful” part of the standard 

of review, suggesting that various statutes and caselaw establish a rule that a rate 

of return always must be based on the most current market data. But as the majority 

points out, none of the cited authorities say exactly that. And in contrast to the 

statutory formula for a base-rate case, there is no explicit requirement for the 

calculation of a rate of return in the alternative-rate-plan statute. See R.C. 4929.05. 

Unlike the majority, I read the relevant statutes to make current market conditions 

a consideration in determining the reasonableness of a rate of return. But I don’t 

read them to mandate that the rate of return must always replicate the most recent 

market data. So I don’t think PUCO acted unlawfully by not calculating the rate of 

return in the manner that the consumers proposed.

{¶ 76} Moreover, PUCO did consider current market conditions. It 

explicitly modified its order on rehearing to require that Dominion advance the 

filing of its next base-rate case because of its concern that the rate of return 

established in Dominion’s last rate case may no longer be reflective of market 

conditions. See In re Application of E. Ohio Gas, Pub. Util. Comm. No. 19-468-

GA-ALT, 2022 Ohio PUC LEXIS 216, *1. Thus, I have little difficulty in 

concluding that PUCO’s orders are not unlawful. The consumers have failed to 

identify any statute that was violated or any legal error that was committed by 

PUCO.

{¶ 77} The “unreasonable” part of the standard of review comes into play 

for our review of PUCO’s determination that Dominion’s alternative rate plan 

comported with the broad statutory criteria established by the legislature in R.C. 

4929.05—most notably, is the plan “just and reasonable”? By using this kind of 

open-textured language, the legislature has necessarily granted to PUCO a degree 

of discretion in its implementation of the statute. See In re Application of Firelands 

Wind, L.L.C., __ Ohio St.3d __, 2023-Ohio-2555, __ N.E.3d __, at ¶ 11, 15. Our 
SUPREME COURT OF OHIO

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task is to determine whether PUCO’s exercise of its implementation authority fell 

within the zone of permissible statutory construction. See id. at ¶ 15.

{¶ 78} In my view, it did. First, PUCO relied upon its regular practice of 

using the rate of return established in a utility’s most recent base-rate case. There 

are good reasons for that practice. The legislature created “alternative rate plans” 

to allow for a proceeding that is faster and less evidence-intensive than a traditional 

base-rate case. See Am.Sub.H.B. No. 476, 146 Ohio Laws, Part III, 5244, 5254-

5259. The rate-of-return analysis is a complex procedure that requires not just a 

determination of the cost of debt, but also the cost of equity of the company’s capital 

structure. PUCO rightfully noted the “cherry-picking” concern of focusing on one 

element of the rate-of-return analysis without also considering the capital 

structure.5

{¶ 79} PUCO also cited fairness reasons for using its regular practice here, 

explaining that it had used the same rate-of-return analysis when calculating credits 

for Dominion customers. See In re Application of E. Ohio Gas, Pub. Util. Comm. 

19-468-GA-ALT, 2020 Ohio PUC LEXIS 1857, at *61. It also pointed out that 

much of Dominion’s debt had initially been incurred at a time when borrowing 

costs were higher. Id. at *64. Further, PUCO’s responsibility was to determine 

whether the package as a whole was “just and reasonable.” The rate of return was 

one element of the alternative rate plan. But PUCO identified other elements that 

it found to benefit Dominion’s customers, including rate caps. Id. at *59-60.

{¶ 80} This is not to say the consumers did not make a strong argument that 

Dominion’s current rate of return is out-of-whack with its current cost of debt. 

They did. And had PUCO simply affirmed the stipulation, I might well agree that 

PUCO acted unreasonably.

5. Because the return on equity is traditionally higher than the cost of debt, a change in the 

debt/equity ratio will necessarily affect the rate of return. See generally Bonbright, Danielsen & 

Kamerschen, Principles of Public Utility Rates, Chapter 14: The Fair Rate of Return (2d Ed.1988).
January Term, 2023

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{¶ 81} But PUCO did not affirm the stipulation. It imposed an additional 

requirement that Dominion advance its next base-rate case, ensuring that the rate 

of return is recalculated at an earlier date than it otherwise would have been. In my 

view, PUCO reasonably adhered to its consistent practice of deferring rate-ofreturn determinations to base-rate cases while at the same time addressing the 

consumers’ concerns that Dominion’s rate of return should be reviewed. Thus, I 

do not find its orders to be unreasonable.

Conclusion

{¶ 82} I agree with the majority’s conclusion that PUCO did not act 

unreasonably or unlawfully in approving Dominion’s application for an alternative 

rate plan. But I disagree with much of the majority’s analysis of the consumers’ 

first proposition of law. So I concur in judgment only as to its resolution of that 

proposition. I concur in the rest of the majority’s opinion.

DONNELLY, J., concurs in the foregoing opinion.

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Bruce Weston, Ohio Consumers’ Counsel, and John Finnigan and William 

J. Michael, Assistant Consumers’ Counsel, for appellant Office of the Ohio 

Consumers’ Counsel.

Bricker & Eckler, L.L.P., and Dane Stinson; and Glenn S. Krassen, General 

Counsel, for appellant Northeast Ohio Public Energy Council.

Dave Yost, Attorney General, and John H. Jones, Werner L. Margard III, 

Shaun P. Lyons, and Rhiannon D. Plant, Assistant Attorneys General, for appellee.

Dominion Energy Services, Inc., and Andrew J. Campbell; Whitt 

Sturtevant, L.L.P., Christopher T. Kennedy, and Albert D. Sturtevant; and McGuire 

Woods, L.L.P., and Robert W. Loftin, for intervening appellee.

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