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

re Application of Ohio Edison Co., Slip Opinion No. 2019-Ohio-4196.] 

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. 2019-OHIO-4196 

IN RE APPLICATION OF OHIO EDISON COMPANY, CLEVELAND ELECTRIC 

ILLUMINATING COMPANY, AND TOLEDO EDISON COMPANY FOR APPROVAL OF 

THEIR ENERGY EFFICIENCY AND PEAK DEMAND REDUCTION PROGRAM 

PORTFOLIO PLANS FOR 2017 THROUGH 2019; 

OHIO EDISON COMPANY ET AL., APPELLANTS; PUBLIC UTILITIES COMMISSION,

APPELLEE; OFFICE OF OHIO CONSUMERS’ COUNSEL, INTERVENING APPELLEE. 

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

may be cited as In re Application of Ohio Edison Co., 

Slip Opinion No. 2019-Ohio-4196.] 

Public Utilities—R.C. 4928.66—Energy-efficiency and peak-demand-reduction 

program portfolio plans—Commission’s determination that it was 

authorized to impose a cap on utilities’ recovery of costs spent 

implementing statutorily required energy-efficiency and peak-demandreduction programs was unlawful—Order reversed and cause remanded. 

(No. 2018-0379—Submitted February 20, 2019—Decided October 15, 2019.) 

APPEAL from the Public Utilities Commission, No. 16-0743-EL-POR. 

____________________ 
SUPREME COURT OF OHIO

2 

O’CONNOR, C.J.

{¶ 1} Since 2009, Ohio electric-distribution utilities have been required to 

implement programs to increase energy efficiency and reduce energy demand to 

meet specific annual targets or benchmarks. R.C. 4928.66(A)(1)(a) and (b). Under 

the statutory scheme, each electric utility must file a portfolio plan every three years 

that shows how the utility will meet its energy-efficiency and peak-demandreduction statutory benchmarks. See Ohio Adm.Code 4901:1-39-04. A portfolio 

plan uses a variety of programs in different markets that are designed to increase 

energy efficiency and reduce peak demands on the utility’s system. For example, 

a residential program in a portfolio plan may include distribution of LED lightbulbs 

or discounted “smart” thermostats to customers. 

{¶ 2} In this case, appellants Ohio Edison Company, the Cleveland Electric 

Illuminating Company, and the Toledo Edison Company (collectively, 

“FirstEnergy”) submitted an application in April 2016 for approval of their 

portfolio plans for 2017 through 2019. Appellee, the Public Utilities Commission, 

ultimately approved the plans in November 2017, but with a modification to include 

a “cost cap”—an annual cap on FirstEnergy’s recovery of costs incurred in 

implementing the energy-efficiency, peak-demand-reduction, and shared-savings 

programs1

 not to exceed 4 percent of its reported 2015 total revenues. 

{¶ 3} FirstEnergy and appellants Environmental Law & Policy Center, 

Environmental Defense Fund, Natural Resources Defense Council, and Ohio 

Environmental Council (collectively, “environmental groups”), filed this appeal 

challenging the cost cap. Appellants have demonstrated reversible error, and 

therefore, we reverse and remand for further consideration. 

 

 

1. Shared savings is an incentive payment from customers to the utility for the utility’s introduction 

of cost-effective programs that exceed the statutory mandates for energy efficiency and peakdemand reduction. 
January Term, 2019 

3 

Facts and Procedural Background 

{¶ 4} R.C. 4928.66 requires electric-distribution utilities to implement 

programs that increase energy efficiency and reduce peak demand. R.C. 

4928.66(A)(1)(a) and (b). A measure contributes to energy efficiency if it reduces 

the amount of energy required to perform a task. See Ohio Adm.Code 4901:1-39-

01(L). “Peak demand” refers to the time at which the most energy is being 

consumed simultaneously across the utility’s system.2

 Reducing peak demand 

lowers the price of power and tends to reduce the number of generation plants 

needed to meet demand. R.C. 4928.66 imposes annual benchmarks in both 

categories, and if the electric-distribution utility fails to meet the requirements, the 

law requires that the commission assess a forfeiture on the utility, R.C. 4928.66(C);

In re Application of Columbus S. Power Co., 129 Ohio St.3d 46, 2011-Ohio-2383, 

950 N.E.2d 164, ¶ 3. The requisite benchmarks are calculated from a “baseline” 

formula in the statute based on the average total kilowatt hours sold and average 

peak demand on the utility in the preceding three years. R.C. 4928.66(A)(2)(a). A 

utility may apply to the commission to amend the benchmarks if they cannot be 

“reasonably achieve[d] * * * due to regulatory, economic, or technological reasons 

beyond [the utility’s] reasonable control.” R.C. 4928.66(A)(2)(b). 

{¶ 5} On April 15, 2016, FirstEnergy filed an application seeking approval 

of three-year-program portfolio plans for each of the companies. The plans, among 

other things, described how the companies intended to meet their energy-efficiency 

and peak-demand-reduction benchmarks for 2017 through 2019. The application 

noted that the commission had already approved the cost-recovery mechanism for 

the plans as a rider in FirstEnergy’s electric-security plan. 

 

2. The commission’s rules define “peak demand” as “the average maximum hourly electricity usage 

during the highest 100 hours on the electric utility’s system in a calendar year.” Ohio Adm.Code 

4901:1-39-01(R). 
SUPREME COURT OF OHIO

4 

{¶ 6} On December 9, 2016, FirstEnergy filed a stipulation to “set forth the 

understanding and agreement of the Signatory Parties and to recommend that the 

Commission approve and adopt” the plan as modified by the stipulation. 

Intervening appellee, the Office of Ohio Consumers’ Counsel (“OCC”), and the 

commission’s staff opposed the stipulation. Relevant here, the commission’s staff 

proposed an annual cap of 3 percent of the companies’ 2015 operating revenues on 

FirstEnergy’s recovery of costs incurred in implementing the programs to meet the 

benchmarks. The commission’s staff and OCC argued that the portfolio plans 

would not benefit ratepayers or the public interest without the cost cap. 

{¶ 7} FirstEnergy and the environmental groups opposed the cap, arguing 

that the plans still benefitted ratepayers and the public interest without the 3 percent 

limitation on recovery of FirstEnergy’s costs. Specifically, they noted that the plans 

included an annual budget targeted to achieve the benchmarks in a cost-effective 

manner. They also noted that customers were protected under a bill-mitigation 

provision that the commission had approved in FirstEnergy’s fourth electricsecurity plan. Further, they argued that the plans were projected to generate 

benefits to customers that exceeded the costs of the programs. Finally, they argued 

that the cost-cap proposal did not have a basis in the applicable rules or statutory 

language. 

{¶ 8} A hearing was held over five days, after which the commission issued 

an order approving the stipulation, but with modifications, including a costrecovery cap. Although the commission rejected the staff’s recommended 3 

percent cap, it adopted a 4 percent cap. According to the commission, imposing a 

3 percent cap on FirstEnergy would be unfair in light of the 4 percent caps recently 

imposed in the other Ohio electric-distribution-utilities’ portfolio-plan cases. Pub. 

Util. Comm. No. 16-0743-EL-POR, ¶ 55 (Nov. 21, 2017). The commission also 

found that it was unclear from the record evidence whether the companies could 

meet their benchmarks with a 3 percent cost cap. Id. at ¶ 56. 
January Term, 2019 

5 

{¶ 9} FirstEnergy and the environmental groups filed applications for 

rehearing, which the commission denied on January 10, 2018. This appeal 

followed. 

Standard of Review 

{¶ 10} “R.C. 4903.13 provides that a [Public Utilities 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, modified on other grounds, Ohio Consumers’ 

Counsel v. Pub. Util. Comm., 111 Ohio St.3d 300, 2006-Ohio-5789, 856 N.E.2d 

213, ¶ 87. “A [Public Utilities Commission] order is unlawful if it is inconsistent 

with relevant statutes or with the state or federal constitutions.” Ohio Consumers’ 

Counsel v. Pub. Util. Comm., 111 Ohio St.3d 384, 2006-Ohio-5853, 856 N.E.2d 

940, ¶ 44. 

Analysis 

{¶ 11} FirstEnergy argues under its first proposition of law that the 

commission lacked statutory authority to adopt and implement a cost cap under 

R.C. 4928.66. We resolve the appeal on this issue and conclude that the 

commission lacked statutory authority to impose a cap on FirstEnergy’s recovery 

of program costs. 

{¶ 12} In its opinion and order the commission stated: 

[A]doption of a cost cap in this proceeding does not constitute a new 

legal standard or rule as defined under R.C. 111.15, but is a 

permissible exercise of this Commission’s broad authority to 

administer and enforce the provisions of R.C. Title 49, and to 

regulate a utility’s portfolio plan under R.C. 4928.66, since the 

General Assembly did not specifically prohibit a cost cap. 
SUPREME COURT OF OHIO

6 

Pub. Util. Comm. No. 16-0743-EL-POR, at ¶ 56, citing Kazmaier 

Supermarket, Inc. v. Toledo Edison Co., 61 Ohio St.3d 147, 150, 573 N.E.2d 

655 (1991). 

{¶ 13} On rehearing, the commission reiterated: 

As noted in the Commission’s decision, the 4% Cap is a reasonable 

measure to moderate the bill impacts of rising [energy 

efficiency/peak-demand reduction] rider charges on FirstEnergy 

customers under this Commission’s broad authority to administer 

and enforce the provisions of R.C. Title 49, which has been 

recognized by the Court. 

 

Pub. Util. Comm. No. 16-0743-EL-POR, Rehearing entry, ¶ 11 (Jan. 10, 2018), 

citing Kazmaier at 150. 

{¶ 14} FirstEnergy asserts that R.C. 4928.66 contains no language that 

authorizes the commission to impose a cap on the recovery of costs incurred to meet 

the statutory benchmarks under the portfolio plans. FirstEnergy cites Pike Natural 

Gas Co. v. Pub. Util. Comm., 68 Ohio St.2d 181, 183, 429 N.E.2d 444 (1981), 

quoting Dayton Communications Corp. v. Pub. Util. Comm., 64 Ohio St.2d 302, 

307, 414 N.E.2d 1051 (1980), for the proposition that the commission “ ‘is a 

creature of the General Assembly and may exercise no jurisdiction beyond that 

conferred by statute.’ ” See also Canton Storage & Transfer Co., Inc. v. Pub. Util. 

Comm., 72 Ohio St.3d 1, 5, 647 N.E.2d 136 (1995). FirstEnergy notes that R.C. 

4928.64, which sets forth renewable-energy-resource requirements, was enacted at 

the same time as R.C. 4928.66 and R.C. 4928.64 includes a cap on the maximum 

cost of compliance. See 2008 Am.Sub.S.B. No. 221; R.C. 4928.64(C)(2) and (3); 

Ohio Adm.Code 4901:1-40-07. According to FirstEnergy, the absence of a similar 
January Term, 2019 

7 

provision in R.C. 4928.66 demonstrates the General Assembly’s intent to prohibit 

the commission from limiting cost recovery under R.C. 4928.66. 

{¶ 15} We agree with FirstEnergy that the commission acted unlawfully in 

imposing a cap on cost recovery under the portfolio plans. 

{¶ 16} Neither the commission’s order nor its rehearing entry cites any 

language in R.C. 4928.66 that would authorize the commission to impose a costrecovery cap in this case. Instead, the commission states only that it can impose 

the cap because it has “broad authority to administer and enforce the provisions of 

R.C. Title 49, and to regulate a utility’s portfolio plan under R.C. 4928.66.” Pub. 

Util. Comm. No. 16-0743-EL-POR, at ¶ 56 But we find no express or implied 

authorization in the language of R.C. 4928.66 that would allow the commission to 

preemptively impose a limitation on FirstEnergy’s recovery of costs incurred in 

order to meet its statutory benchmarks. 

{¶ 17} “The [Public Utilities Commission], as a creature of statute, has no 

authority to act beyond its statutory powers.” Discount Cellular, Inc. v. Pub. Util. 

Comm., 112 Ohio St.3d 360, 2007-Ohio-53, 859 N.E.2d 957, ¶ 51. Accordingly, 

we decline to assume that the General Assembly implicitly granted authority to the 

commission to impose the cost-recovery cap here under R.C. 4928.66 without any 

clear indication in the statutory language to that effect. See Columbus S. Power Co. 

v. Pub. Util. Comm., 67 Ohio St.3d 535, 537-541, 620 N.E.2d 835 (1993); Time 

Warner AxS v. Pub. Util. Comm., 75 Ohio St.3d 229, 238-241, 661 N.E.2d 1097 

(1996). 

{¶ 18} The General Assembly’s inclusion of cost-cap language in R.C. 

4928.64(C)(2) and (3) further undermines the commission’s determination that it 

had authority to impose a cost cap under R.C. 4928.66. Under R.C. 4928.64(C)(3), 

an electric-distribution utility does not need to comply with the statutory 

benchmarks for renewable-energy-resource requirements if its “reasonably 

expected cost of that compliance exceeds its reasonably expected cost of otherwise 
SUPREME COURT OF OHIO

8 

producing or acquiring the requisite electricity by three percent or more.” This 

provision, enacted at the same time as R.C. 4928.66, demonstrates that the General 

Assembly recognized a maximum cost for a utility’s compliance with the 

renewable-energy-resource requirements. In contrast, in R.C. 4928.66, the General 

Assembly included no such provision to cap the recovery of compliance costs. 

Thus, we presume it chose not to do so. See, e.g., Indep. Ins. Agents of Ohio, Inc. 

v. Fabe, 63 Ohio St.3d 310, 314, 587 N.E.2d 814 (1992) (“It is apparent that the 

General Assembly knows how to use these words when it so chooses”). 

{¶ 19} The commission’s own rules also reflect the lack of statutory 

authority to implement a cost-recovery cap for the energy-efficiency and peakdemand-reduction programs in R.C. 4928.66. For the renewable-energy-resource 

benchmarks in R.C. 4928.64, the commission enacted a corresponding regulation 

entitled “Cost cap,” which describes the process by which a utility can apply for a 

commission determination that the cost of compliance would exceed its expected 

generation costs by 3 percent or more. Ohio Adm.Code 4901:1-40-07. There is no 

such regulatory provision for utilities engaging in energy-efficiency and peakdemand-reduction programs under R.C. 4928.66. In fact, the commission 

promulgated Ohio Adm.Code 4901:1-39-07, entitled “Recovery mechanism,” 

which describes how a utility may submit “a request for recovery of an approved 

rate adjustment mechanism” to recover costs for energy-efficiency and peakdemand-reduction programs under R.C. 4928.66. But that rule includes no 

language regarding a cost-recovery cap or a cap on a utility’s program spending. 

{¶ 20} In sum, the commission’s determination that the cost-recovery cap 

in this case is a permissible exercise of its broad authority is not supported by the 

statutory language. Thus, we conclude that the commission acted unlawfully here 

by modifying the stipulation to include the 4 percent cost cap. 

 
January Term, 2019 

9 

Conclusion 

{¶ 21} We hold that the commission lacked authority under R.C. 4928.66 

to impose a cost-recovery cap in this case. Therefore, we reverse the commission’s 

decision and remand the cause for approval of the portfolio plans without the cap 

on cost recovery. 

Orders reversed 

and cause remanded. 

KENNEDY, FRENCH, FISCHER, and DEWINE, JJ., concur. 

DONNELLY, J., dissents in part and concurs in judgment only, with an 

opinion joined by STEWART, J. 

__________________ 

DONNELLY, J., dissenting in part and concurring in judgment only. 

{¶ 22} The annual “cost cap” in this case limits the amount of costs that 

Ohio Edison Company, the Cleveland Electric Illuminating Company, and the 

Toledo Edison Company (collectively, “FirstEnergy” or “the companies”) can 

recover for implementing energy-efficiency, peak-demand-reduction, and sharedsavings programs under R.C. 4928.66(A)(1)(a) and (b). The Public Utilities 

Commission approved the cost cap under its broad authority to administer and 

enforce the provisions of R.C. Title 49, as well as its authority to regulate a utility’s 

portfolio plan under R.C. 4928.66. According to the majority, the commission 

erred because there is “no express or implied authorization in the language of R.C. 

4928.66 that would allow the commission to preemptively impose a limitation on 

FirstEnergy’s recovery of costs incurred in order to meet its statutory benchmarks.” 

Majority opinion at ¶ 16. I believe that the commission does have statutory 

authority to impose a cap on FirstEnergy’s cost recovery, but that here, the 

commission failed to provide adequate record support and reasoning for its 

decision. Thus, I concur in the judgment to reverse the commission’s order, but for 

different reasons, and I dissent from the majority’s order on remand. 
SUPREME COURT OF OHIO

10 

Imposing an annual cost cap in this case was lawful and reasonable

{¶ 23} The commission’s imposition of a cap on FirstEnergy’s recovery of 

its costs is proper for two reasons. First, R.C. 4928.66 requires electric utilities to 

achieve certain levels of energy savings and peak-demand reduction but says 

virtually nothing about the utility’s ability to recover costs from customers for 

complying with those mandates. The statute makes only general references to a 

cost-recovery mechanism. R.C. 4928.66(A)(2)(c) and (d)(i)(II).3

 When a statute 

does not prescribe a particular formula or methodology, the commission has broad 

discretion to decide how to achieve a legitimate objective, and our review of those 

decisions is deferential. See Payphone Assn. v. Pub. Util. Comm., 109 Ohio St.3d 

453, 2006-Ohio-2988, 849 N.E.2d 4, ¶ 25; In re Application of Columbus S. Power 

Co., 129 Ohio St.3d 46, 2011-Ohio-2383, 950 N.E.2d 164, ¶ 27. 

{¶ 24} In reaching its decision, the majority points to the absence of 

language in R.C. 4928.66 authorizing the commission to impose a cap on cost 

recovery. Majority opinion at ¶ 16. But that is not enough to demonstrate reversible 

error. While there is no language in R.C. 4928.66 that expressly authorizes the 

commission to impose a cap on cost recovery, the statute likewise imposes no 

restrictions on the commission’s authority over cost recovery. And this court has 

read a lack of conditions on a statutory grant of power as a grant of discretion to 

the agency. In re Application of Columbus S. Power Co., 128 Ohio St.3d 512, 

2011-Ohio-1788, 947 N.E.2d 655, ¶ 68; Util. Serv. Partners, Inc. v. Pub. Util. 

Comm., 124 Ohio St.3d 284, 2009-Ohio-6764, 921 N.E.2d 1038, ¶ 13. 

{¶ 25} Second, the commission’s decision to impose a cap on cost recovery 

in this case was reasonable and supported by the record. See R.C. 4903.09 

(requiring the commission to support its decisions with evidence and a reasoned 

 

3. R.C. 4928.66(D) also provides for a revenue-decoupling mechanism, which allows the utility to 

recover lost revenue as a result of implementing energy-efficiency or energy-conservation 

programs. But this provision is not relevant here. 
January Term, 2019 

11 

explanation). The commission cited the commission staff’s testimony in finding 

that “a cost cap on the potential [energy-efficiency/peak-demand-reduction] 

program costs and shared savings to be borne by ratepayers is [a] reasonable 

measure given the rising [energy-efficiency/peak-demand-reduction] rider amounts 

billed to customers.” Pub. Util. Comm. No. 16-0743-EL-POR, ¶ 55 (Nov. 21, 

2017). Staff witness Donlon testified that residential customers were paying 

between $1.98 and $2.90 each month through the rider. Donlon further testified 

that the commission staff believed that an annual cap on FirstEnergy’s spending on 

energy-efficiency and peak-demand-reduction programs was necessary and would 

provide “some price assurances to customers” because the rider collecting those 

costs “has become one of the highest riders on residential customers’ bills.” 

{¶ 26} In deciding whether to impose a cost cap, the commission also 

weighed the benefits of FirstEnergy’s energy-efficiency and peak-demandreduction programs against the programs’ costs over the entire three-year portfolio 

plan. Specifically, the commission found that it was necessary to “weigh the 

potential ultimate program benefits against the bill impacts to customers in the 

2017-2019 Portfolio Plan period.” Pub. Util. Comm. No. 16-0743-EL-POR, at 

¶ 55. On rehearing, the commission reiterated that it must balance the current costs 

of the companies’ riders against the potential future cost savings to customers from 

the energy-efficiency and peak-demand-reduction programs. Pub. Util. Comm. No. 

16-0743-EL-POR, Rehearing entry, ¶ 9 (Jan. 10, 2018). That is, the commission 

placed more weight on the short-term costs that customers would pay for energyefficiency and peak-demand-reduction programs than the potential long-term 

energy savings for customers from those programs. 

{¶ 27} We have consistently held that the commission possesses “broad 

discretion” over designing rates and other rate-related matters. Ohio Consumers’ 

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

¶ 20; see also Citywide Coalition for Util. Reform v. Pub. Util. Comm., 67 Ohio 
SUPREME COURT OF OHIO

12 

St.3d 531, 534, 620 N.E.2d 832 (1993). Contrary to the holding of the majority 

opinion, the commission did not abuse its discretion when it imposed the annual 

cap on cost recovery. 

R.C. 4928.64(C)(3) protects utilities and does not evince the General 

Assembly’s intent to prohibit the use of a cap on cost recovery to protect 

customers under R.C. 4928.66 

{¶ 28} The majority further maintains that the existence of a cost cap in 

R.C. 4928.64(C)(3) “undermines the commission’s determination that it had 

authority to impose a cost cap under R.C. 4928.66.” Majority opinion at ¶ 18. R.C. 

4928.64 contains renewable-energy-resource requirements for Ohio electric 

utilities. Under R.C. 4928.64(C)(3), an electric-distribution utility does not need to 

comply with the statutory benchmarks “to the extent that its reasonably expected 

cost of compliance exceeds its reasonably expected cost of otherwise producing or 

acquiring the requisite electricity by three per cent or more.” The majority finds 

that because R.C. 4928.64(C)(3) was enacted at the same time as R.C. 4928.66, the 

fact that it provides a cost cap demonstrates the General Assembly’s intent not to 

include a cost cap in R.C. 4928.66. But the majority overlooks that the cost cap 

under R.C. 4928.64 differs in purpose and operation from the cap on cost recovery 

imposed under R.C. 4928.66 in this case. 

{¶ 29} The cost cap authorized by R.C. 4928.64(C)(3) is designed 

principally to protect electric-distribution utilities. Under this provision, the utility 

can avoid costly renewable-energy mandates—and protect itself against any 

compliance penalties—if the cost of complying with the mandate is at least 3 

percent higher than the utility’s cost to generate the power itself or purchase it from 

other energy sources. Moreover, the cost cap under R.C. 4928.64(C)(3) is not 

mandatory, but can be invoked at the utility’s discretion, as set forth in the statute 

and under the corresponding administrative rule. See Ohio Adm.Code 4901:1-40-

07(B) (“An electric utility * * * may file an application requesting a determination 
January Term, 2019 

13 

from the commission that its reasonably expected cost of compliance with a 

renewable energy resource benchmark * * * would exceed its reasonably expected 

cost of generation to customers by three per cent or more”). 

{¶ 30} Conversely, the cost cap adopted by the commission under R.C. 

4928.66 is designed primarily to protect customers by limiting how much the utility 

can charge them each year for the utility’s implementation of energy-efficiency and 

peak-demand-reduction programs. Because the two cost caps operate differently 

and serve distinct purposes, the express provision of a cost cap in R.C. 

4928.64(C)(3) does not, as the majority contends, demonstrate by negative 

implication the General Assembly’s intent to prohibit the commission from 

adopting a cap on cost recovery under R.C. 4928.66 in order to protect customers 

against costly program charges. 

Reversal is appropriate on separate, narrow grounds 

{¶ 31} Although I believe the commission has statutory authority to impose 

a cap on cost recovery under R.C. 4928.66 as a general matter, it failed to justify 

its decision to adopt a 4 percent cap in this specific case. The commission’s arrival 

at a figure of 4 percent lacked evidence and a reasoned explanation, in violation of 

R.C. 4903.09. Accordingly, I would reverse the commission’s order and remand 

the case to correct this error only. 

{¶ 32} During the proceedings below, the commission staff proposed a 3 

percent cap on FirstEnergy’s program costs and shared savings. The 3 percent cap 

was calculated based on the companies’ 2015 total annual operating revenues as 

reported to the Federal Energy Regulatory Commission (“FERC”). 

{¶ 33} According to the commission staff, this baseline was chosen for two 

reasons. One, a 3 percent cap on FirstEnergy’s recovery of program costs and 

shared savings would provide price security for all customers. Two, staff projected 

that FirstEnergy would still be able to meet its energy-efficiency and peak-demandreduction benchmarks under a 3 percent cap. On the latter point, staff relied 
SUPREME COURT OF OHIO

14 

specifically on data from the companies’ 2012-2014 annual status reports, which 

showed that on average they had underspent their budgets by 21 percent and 

overachieved their benchmarks by 50 percent during that period. 

{¶ 34} The commission approved a cost cap based on the commission 

staff’s proposal, but rejected the 3 percent cap in favor of a 4 percent cap. This is 

the commission’s discussion of why it adopted a 4 percent cap: 

We agree that a 3% Cap would be unfair to impose on 

FirstEnergy in light of the caps recently approved in the other Ohio 

[electric-distribution-utility] Portfolio Plan decisions cited above. 

As noted in our recent decisions involving the other Ohio [electricdistribution-utility] Portfolio Plan cases referenced above, we find 

that a cost cap on the potential [energy-efficiency/peak-demandreduction] program costs and shared savings to be borne by 

ratepayers is [a] reasonable measure given the rising [energyefficiency/peak-demand-reduction] rider amounts billed to 

customers, as reported by [staff witness] Mr. Donlon. (Staff Ex. 1, 

at 5-7, Tr. II at 328, Tr. III at 446-447). * * * 

* * * While the evidence of record is unclear whether the 

Companies will be able to meet their statutory mandates within 

Staff’s proposed cost cap, we will raise the cap on recovery of 

[energy-efficiency/peak-demand-reduction] programs and shared 

savings to four percent of the Companies’ 2015 FERC reported 

revenues to align FirstEnergy’s cost caps with those of the other 

Ohio utilities. * * * Moreover, the Companies may request that the 

Commission amend their benchmarks pursuant to R.C. 

4928.66(A)(2)(b). 
January Term, 2019 

15 

Pub. Util. Comm. No. 16-0743-EL-POR, at ¶ 55-56. 

{¶ 35} The commission added little to this analysis on rehearing. In 

response to FirstEnergy’s argument that the 4 percent cap was unsupported by 

evidence, was inherently unfair, and resulted in significant inequities among Ohio’s 

electric-distribution utilities, the commission stated: 

These argument[s] were raised and fully considered in the 

Opinion and Order at ¶¶ 52-57. As discussed above, the 4% Cap 

was adopted as a reasonable measure to limit the rate impact on 

FirstEnergy customers in response to credible Staff testimony 

regarding the Companies’ increasing [energy-efficiency/peakdemand-reduction] riders. While the impact of the 4% Cap may 

affect each of the Ohio [electric-distribution utilities] somewhat 

differently, the application of a four percent cap based on each 

[utility’s] reported total sales to ultimate customers should mitigate 

any unfairness to FirstEnergy shareholders. 

Pub. Util. Comm. No. 16-0743-EL-POR, Rehearing entry, at ¶ 19. 

{¶ 36} R.C. 4903.09 requires the commission to explain its decisions and 

identify in sufficient detail the record evidence upon which its orders are based. 

MCI Telecommunications Corp. v. Pub. Util. Comm., 32 Ohio St.3d 306, 311-312, 

513 N.E.2d 337 (1987). The commission abuses its discretion if it decides an issue 

without adequate record support. Indus. Energy Users-Ohio v. Pub. Util. Comm., 

117 Ohio St.3d 486, 2008-Ohio-990, 885 N.E.2d 195, ¶ 30. In my view, the 

commission violated R.C. 4903.09 in two respects. 

{¶ 37} First, the commission’s order cites no evidence that would support 

the adoption of a 4 percent cap. Instead, the commission capped FirstEnergy’s 

recovery of program costs at 4 percent based solely on the fact that it had imposed 
SUPREME COURT OF OHIO

16 

a 4 percent cap on the other Ohio utilities. Although the commission cited the 

testimony of staff witness Donlon, it did so only for the purpose of showing that a 

cap was necessary “given the rising [energy-efficiency/peak-demand-reduction] 

rider amounts billed to customers.” Pub. Util. Comm. No. 16-0743-EL-POR, at 

¶ 55. 

{¶ 38} Donlon, however, testified in favor of a 3 percent cost cap, which 

the commission rejected, in part because “the evidence of record [was] unclear 

whether the companies [would] be able to meet their statutory mandates” under a 3 

percent cap on recovery. Id. at ¶ 56. But the commission inexplicably made no 

finding that the companies would be able to meet their energy-efficiency and peakdemand-reduction mandates under a 4 percent cap. Instead, the commission cited 

R.C. 4928.66(A)(2)(b), which allows it to amend benchmarks if a utility “cannot 

reasonably achieve [them] due to regulatory, economic, or technological reasons 

beyond its reasonable control.” Although invoking this provision may allow the 

companies to avoid penalties if they cannot meet their statutory mandates under the 

4 percent cost cap, it does not relieve the commission of its obligation under R.C. 

4903.09 to file “written opinions setting forth the reasons prompting the decisions 

arrived at, based upon [its] findings of fact,” which must be included with the record 

of the proceedings. In short, evidence was needed; none was provided. 

{¶ 39} Second, the commission raised the commission staff’s 3 percent cap 

to 4 percent without specifically addressing any of FirstEnergy’s challenges to the 

methodology the staff used to calculate the amount of the cap. Among other 

challenges, FirstEnergy claimed that the commission staff (1) relied on obsolete 

historical data and assumptions, i.e., the 2012-2014 annual status reports, (2) 

ignored FirstEnergy’s actual pricing data, and (3) failed to consider the impact of 

“switch rates” among all Ohio utilities when using the operating revenues to 

calculate the cap on cost recovery. The commission adopted a 4 percent cap in this 

case solely “to align FirstEnergy’s cost caps with those of the other Ohio utilities.” 
January Term, 2019 

17 

Pub. Util. Comm. No. 16-0743-EL-POR, at ¶ 56. On rehearing, the commission 

stated that “a four percent cap based on each [company’s] reported sales to ultimate 

customers should mitigate any unfairness to FirstEnergy’s shareholders.” 

(Emphasis added.) Pub. Util. Comm. No. 16-0743-EL-POR, Rehearing entry, at 

¶ 19. 

{¶ 40} R.C. 4903.09 prohibits summary rulings and conclusions that do not 

develop the supporting rationale or record. MCI Telecommunications Corp., 32 

Ohio St.3d at 312, 513 N.E.2d 337. If the order included any reasonable analysis 

of why the commission selected the staff’s methodology over FirstEnergy’s, 

FirstEnergy’s arguments would be easily dispatched. However, there is no 

explanation. And it is not self-evident how raising the cap on recovery by 1 percent 

will mitigate any unfairness to FirstEnergy, and even the commission—by using 

the word “should”—seems less than certain of that outcome. As noted, FirstEnergy 

specifically challenged the methodology used to calculate the cap on the ground 

that it was unfair to the companies, but the commission never addressed those 

arguments. 

{¶ 41} R.C. 4903.09 is mandatory, and while “strict compliance * * * is not 

required,” failure by the commission to provide record support for an opinion 

constitutes an abuse of discretion. Indus. Energy Users-Ohio., 117 Ohio St.3d 486, 

2008-Ohio-990, 885 N.E.2d 195, ¶ 30. In the end, it is impossible to make any 

determination about the reasonableness of the commission’s decision to adopt a 4 

percent cap on cost recovery without evidence and explanation in its opinion and 

order. See Ohio Consumers’ Counsel v. Pub. Util. Comm., 111 Ohio St.3d 300, 

2006-Ohio-5789, 856 N.E.2d 213, ¶ 31; In re Comm. Rev. of Capacity Charges of 

Ohio Power Co., 147 Ohio St.3d 59, 2016-Ohio-1607, 60 N.E.3d 1221, ¶ 56-57. 

{¶ 42} The error is clear and prejudicial. If the cost cap is understated, it 

results in less money for FirstEnergy to spend on programs to comply with statutory 
SUPREME COURT OF OHIO

18 

benchmarks. For these reasons, this part of the commission’s order should be 

remanded for further proceedings. 

Conclusion

{¶ 43} For the reasons stated, I would reverse the commission’s order based 

on its failure to adequately explain its decision to impose a 4 percent annual cap on 

cost recovery in this case, and I would remand for further proceedings limited to 

the commission’s decision to adopt a 4 percent cost cap. 

STEWART, J., concurs in the foregoing opinion. 

__________________ 

 Jones Day, Michael R. Gladman, and Sergio A. Tostado; and FirstEnergy 

Service Company and Joshua R. Eckert, for appellants Ohio Edison Company, 

Cleveland Electric Illuminating Company, and Toledo Edison Company. 

 Miranda R. Leppla, for appellants Environmental Law & Policy Center, 

Ohio Environmental Council, and Environmental Defense Fund. 

 Robert Dove, for appellant Natural Resources Defense Council. 

 Dave Yost, Attorney General, and William L. Wright, John H. Jones, and 

Jodi J. Bair, Assistant Attorneys General, for appellee. 

 Bruce Weston, Ohio Consumers’ Counsel, and Christopher Healey, 

Assistant Consumers’ Counsel, for intervening appellee. 

 Colleen L. Mooney, urging reversal for amicus curiae, Ohio Partners for 

Affordable Energy. 

____________________