[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-2401.] 

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-2401

IN RE APPLICATION OF OHIO EDISON COMPANY, CLEVELAND ELECTRIC 

ILLUMINATING COMPANY, AND TOLEDO EDISON COMPANY FOR AUTHORITY TO 

PROVIDE FOR A STANDARD SERVICE OFFER PURSUANT TO R.C. 4928.143 IN 

THE FORM OF AN ELECTRIC SECURITY PLAN; 

SIERRA CLUB ET AL., APPELLANTS; PUBLIC UTILITIES COMMISSION,

APPELLEE; OHIO EDISON COMPANY ET AL., INTERVENING APPELLEES. 

[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-2401.] 

Public utilities—Electric-security plan—R.C. 4928.143—Commission’s 

determination that distribution modernization rider constituted an incentive 

under R.C. 4928.(B)(2)(h) was unlawful and unreasonable—Order 

affirmed in part and reversed in part and cause remanded. 

(Nos. 2017-1444 and 2017-1664—Submitted January 9, 2019—Decided June 19, 

2019.) 

APPEAL from the Public Utilities Commission, No. 14-1297-EL-SSO. 
SUPREME COURT OF OHIO

2

____________________ 

DONNELLY, J.

{¶ 1} This cause originates from an order of the Public Utilities 

Commission of Ohio (“commission” or “PUCO”) that modified and approved an 

electric-security plan (“ESP”) for the FirstEnergy Companies (Ohio Edison 

Company, The Cleveland Electric Illuminating Company, and The Toledo Edison 

Company) (collectively “FirstEnergy” or the “companies”). The central issue 

before this court is the commission’s modification of the ESP to add a distribution 

modernization rider1

 (“DMR”) that was not part of the original application and 

allows the companies to collect what they estimate to be $168 to 204 million in 

extra revenue per year. The commission concluded that the DMR was valid under 

R.C. 4928.143(B)(2)(h) because the revenue it generated would purportedly serve 

as an incentive for the companies to modernize their distribution systems. Nineteen 

parties appealed,2

 challenging the addition of the DMR and other aspects of the 

commission’s order approving the ESP. 

{¶ 2} For the reasons that follow, we affirm the commission’s order in part, 

reverse it in part as it relates to the DMR, and remand with instruction to remove 

the DMR from FirstEnergy’s ESP. 

I. Facts and Procedural History 

{¶ 3} R.C. 4928.141(A) requires electric-distribution utilities to make a 

“standard service offer” of generation service to consumers in one of two ways: 

through a “market rate offer” (under R.C. 4928.142) or an ESP (under R.C. 

4928.143). In early 2016, the commission approved the fourth ESP of the 

 

1

 A rider is a temporary, additional charge that is separate from the basic monthly rates. 

2

 Appellants include the Northeast Ohio Public Energy Council (“NOPEC”), Sierra Club (“Sierra”), 

Ohio Manufacturers’ Association Energy Group (“OMAEG”), Ohio Environmental Council, 

Environmental Defense Fund, and Environmental Law and Policy Center (collectively the 

“Environmental Groups”), and the Office of the Ohio Consumers’ Counsel, Northwest Ohio 

Aggregation Coalition, and its individual member communities (collectively “OCC”).
January Term, 2019 

3

companies. In re Application of Ohio Edison Company, Pub. Util. Comm. No. 14-

1297-EL-SSO (March 31, 2016) (“ESP Order”). As part of the ESP, the 

commission authorized a Retail Rate Stability Rider (“Rider RRS”). Rider RRS 

was proposed as a generation charge that was intended to protect ratepayers from 

price volatility. Specifically, it was designed to stabilize retail customer rates by 

providing a financial hedge—a type of insurance—against fluctuating wholesale 

power prices. 

{¶ 4} Less than a month after the commission issued the ESP Order, the 

Federal Energy Regulatory Commission (“FERC”) rescinded a waiver on affiliate 

power-sales restrictions previously granted to FirstEnergy Solutions, an affiliate of 

the companies. Elec. Power Supply Assn. v. FirstEnergy Solutions Corp., 155 

FERC ¶ 61, 101 (April 27, 2016). As a result, several parties filed applications for 

rehearing in the ESP case requesting the commission to, among other things, 

consider the impact of the FERC order on Rider RRS. See R.C. 4903.10. The 

commission granted rehearing. 

{¶ 5} On June 29, 2016, the commission’s staff proposed that the 

commission adopt the DMR as an alternative to Rider RRS. The commission’s 

staff was concerned that Rider RRS could be construed as an unlawful transition 

charge and could also conflict with FERC’s authority over wholesale power 

markets. In addition, staff believed that the DMR would serve as an incentive for 

the companies to upgrade and modernize their distribution systems. 

{¶ 6} By October 12, 2016, the commission had issued its fifth rehearing 

entry, which eliminated Rider RRS from the ESP. In its place, the commission 

authorized the companies to implement the DMR. The commission initially 

authorized the companies to collect $132.5 million annually for three years under 

the DMR. The commission then ordered that the DMR be adjusted upward to 

account for federal corporate income taxes, which raised the annual recovery to 

approximately $204 million. With the passage of the Tax Cuts and Jobs Act of 
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4

2017—which reduced the federal corporate income tax rate from 35 percent to 21 

percent—this amount was ultimately lowered to an estimated $168 million for 2018 

and 2019. In re Application of Ohio Edison Co., Pub. Util. Comm. No. 17-2280-

EL-RDR, 2018 Ohio PUC LEXIS 203 (Feb. 28, 2018). 

{¶ 7} After four more rounds of rehearing, the commission issued a final, 

appealable order on October 11, 2017. Appellants then filed these appeals, 

challenging the commission’s decision to approve the ESP. FirstEnergy and Ohio 

Energy Group have intervened as appellees in support of the commission’s 

decision. 

II. Standard of Review 

{¶ 8} “R.C. 4903.13 provides that a PUCO 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. 

We will not reverse or modify a PUCO 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. Monongahela Power Co. v. Pub. Util. Comm., 104 Ohio St.3d 

571, 2004-Ohio-6896, 820 N.E.2d 921, ¶ 29. The “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. 

{¶ 9} Although the court has “complete and independent power of review 

as to all questions of law” in appeals from the PUCO, Ohio Edison Co. v. Pub. Util. 

Comm., 78 Ohio St.3d 466, 469, 678 N.E.2d 922 (1997), we may rely on the 

expertise of a state agency in interpreting a law when “highly specialized issues” 

are involved and when “agency expertise would, therefore, be of assistance in 
January Term, 2019 

5

discerning the presumed intent of our General Assembly,” Consumers’ Counsel v. 

Pub. Util. Comm., 58 Ohio St.2d 108, 110, 388 N.E.2d 1370 (1979). 

III. Analysis 

{¶ 10} Together, appellants raise 25 propositions of law. The main 

challenges are to the DMR, so we address them first. 

A. Whether the commission erred in approving the DMR under 

R.C. 4928.143(B)(2)(h): 

Sierra Propositions of Law Nos. 1-3; Environmental Groups Propositions of 

Law Nos. 1-3; OCC Proposition of Law No. 1; OMAEG Proposition of Law 

No. 4; NOPEC Propositions of Law Nos. 1-2 

{¶ 11} As noted, during the rehearing process, the commission’s staff 

proposed the DMR as an alternative to Rider RRS. The staff intended the DMR to 

provide FirstEnergy Corporation, through the companies, with funds to improve its 

credit rating and assure continued access to credit on reasonable terms, which 

would then allow FirstEnergy Corporation to borrow adequate capital to support 

the companies’ grid-modernization initiatives. According to its staff, the 

commission could approve the DMR under R.C. 4928.143(B)(2)(h), which allows 

for: 

Provisions regarding the utility’s distribution service, including, 

without limitation and notwithstanding any provision of Title XLIX 

of the Revised Code to the contrary, * * * provisions regarding 

distribution infrastructure and modernization incentives for the 

electric distribution utility. 

{¶ 12} The commission agreed with its staff and found that this section 

authorized the DMR as a “provision[] regarding distribution infrastructure and 

modernization incentives for the electric distribution utility.” Pub. Util. Comm. 
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6

No. 14-1297-EL-SSO, Fifth rehearing entry, ¶ 127 (Oct. 12, 2016). The 

commission found that the “testimony demonstrates that Staff intends for Rider 

DMR to jump start the Companies’ grid modernization efforts.” Id. at ¶ 190. 

According to the commission, “the record demonstrates that Rider DMR is intended 

to stimulate the Companies to focus their innovation and resources on modernizing 

their distribution systems.” Id.

{¶ 13} Appellants collectively raise several challenges to the commission’s 

determination that the DMR is a lawful component of an ESP under R.C. 

4928.143(B)(2)(h). The following two of appellants’ arguments are well-taken. 

1. The DMR does not qualify as an incentive under R.C. 4928.143(B)(2)(h) 

{¶ 14} Appellants argue that the DMR does not qualify as a proper incentive 

under R.C. 4928.143(B)(2)(h) because it does not require the companies to take any 

action in exchange for receiving the DMR funds. According to appellants, the 

DMR does not jump-start the companies’ grid-modernization efforts because it 

does not compensate the companies for investing in distribution-modernization 

projects, require them to undertake any modernization projects, or require them to 

complete any such projects within a specified time period. After review, we find 

that the DMR does not serve as an incentive within the meaning of the statute. 

{¶ 15} The commission relied on a dictionary definition of “ ‘incentive,’ ” 

as “ ‘something that stimulates one to take action, work harder, etc.; stimulus; 

encouragement.’ ” Pub. Util. Comm. No. 14-1297-EL-SSO, Fifth rehearing entry, 

¶ 190 (Oct. 12, 2016), quoting Webster’s New World Dictionary 682 (3d College 

Ed.1988). The commission found that under its preferred definition, the DMR 

qualified as an incentive under R.C. 4928.143(B)(2)(h) because the rider “is 

intended to stimulate the Companies to focus their innovation and resources on 

modernizing their distribution systems.” Id. at ¶ 190. 

{¶ 16} Although the commission defined incentive, it did not explain how 

the DMR operates as an incentive. An incentive generally serves to induce 
January Term, 2019 

7

someone to take some action that otherwise would not be taken but for the 

incentive. Moreover, the DMR is a financial incentive and “it is inherent in an 

incentive payment that the recipient must do something to be paid.” Len Stoler, 

Inc. v. Volkswagen Group of America, Inc., 232 F.Supp.3d 813, 822 (E.D.Va.2017). 

That is, the payment of a monetary incentive is generally conditioned upon 

completion of a particular action. 

{¶ 17} In the context of public-utility regulation, cost-based ratemaking 

already ensures that the utility will recover its prudently incurred costs of providing 

service plus a fair rate of return on its capital investments (such as power plants or 

distribution systems). R.C. 4909.15(A); Babbit v. Pub. Util. Comm., 59 Ohio St.2d 

81, 90, 391 N.E.2d 1376 (1979). In contrast, incentive ratemaking uses rewards 

and penalties that link utility revenues to various standards or goals. For instance, 

in the ESP Order, the commission had originally approved a 50-basis-point adder 

to the return on equity in another rider, the Advanced Metering Infrastructure Rider 

(“Rider AMI”). The commission approved Rider AMI as the mechanism through 

which FirstEnergy would recover capital expenditures and other distributioninfrastructure investments. The 50-basis-point adder would have provided 

additional recovery above the companies’ incurred costs as an incentive for any 

investments made for grid modernization in Ohio. The commission also required 

each company to include a timeline for when it would achieve full smart-meter 

installation as part of its grid-modernization efforts. 

{¶ 18} On rehearing, the commission replaced the 50-point adder with the 

DMR. As noted, the DMR was designed to provide credit support for the 

FirstEnergy Corporation—through the companies—so it could borrow capital on 

more reasonable terms in order to support its grid-modernization initiatives. In 

finding that the DMR is an incentive, the commission relied solely on its staff’s 

intent “for Rider DMR to jump start the Companies’ grid modernization efforts.” 

But the commission pointed to nothing in the record that demonstrates how this 
SUPREME COURT OF OHIO

8

cash infusion incentivizes FirstEnergy to accomplish that goal. The companies will 

already recover the costs of any future grid-modernization projects under Rider 

AMI, so the DMR would provide additional revenue beyond what the companies 

would recover for modernizing their distribution systems. The critical problem is 

that the companies are not required to make any investments to modernize the 

distribution grid in exchange for DMR revenues. Unlike the 50-point adder, the 

DMR includes no directives or timelines regarding specific distributionmodernization projects. And in fact, the commission made it clear that there are no 

plans for FirstEnergy to take on any modernization projects in the immediate future. 

Nor did the commission place any effective condition or penalty on the companies’ 

receipt of revenues if the DMR funds did not serve the intended purpose. The 

commission simply authorized the companies to receive DMR funds up front before 

any infrastructure-improvement projects were undertaken or completed, removing 

any effective incentive for FirstEnergy to use the DMR funds to modernize its 

infrastructure. 

{¶ 19} We generally defer to the commission’s interpretations on raterelated statutory provisions, but only if they are reasonable. In re Application of 

Columbus S. Power Co., 138 Ohio St.3d 448, 2014-Ohio-462, 8 N.E.3d 863, ¶ 29. 

The commission’s finding that the DMR operates as an incentive under R.C. 

4928.143(B)(2)(h) is both unlawful and unreasonable because it lacks evidence and 

sound reasoning. The commission relied solely on rehearing testimony 

demonstrating that its staff intends for the DMR to jump-start the companies’ gridmodernization efforts. But the PUCO staff’s intent does not explain how the DMR 

will encourage the companies to invest in distribution modernization. Utility 

companies can be expected to respond to financial motivations, but not if the 

commission awards them money up front with no meaningful conditions attached. 

Although the DMR may make it possible for FirstEnergy to obtain capital for future 

infrastructure investment on more favorable credit terms, the evidence cited does 
January Term, 2019 

9

not support the commission’s finding that the DMR qualifies as an incentive under 

R.C. 4928.143(B)(2)(h). The PUCO staff’s wishful thinking cannot take the place 

of real requirements, restrictions, or conditions imposed by the commission for the 

use of DMR funds. 

2. The conditions placed on the recovery of DMR revenue are not sufficient 

to protect ratepayers

{¶ 20} The commission conditioned recovery of DMR revenue on (1) 

FirstEnergy Corporation keeping its corporate headquarters and nexus of 

operations in Akron, (2) no change in the “control” of the companies as that term 

is defined in R.C. 4905.402(A)(1), and (3) a demonstration of sufficient progress 

in implementing and deploying grid-modernization programs approved by the 

commission. 

{¶ 21} Appellants challenge those conditions as meaningless and failing to 

protect ratepayers. FirstEnergy counters that the conditions placed on the receipt 

and use of DMR revenue ensure that it will be used to jump-start distribution-gridmodernization initiatives. As FirstEnergy sees it, these conditions ensure that the 

DMR operates as an incentive and not a gift to the companies. 

{¶ 22} We agree with appellants that there are no discernable consequences 

or repercussions if FirstEnergy fails to comply with the conditions imposed for 

receiving DMR funds. Ostensibly, FirstEnergy would forfeit the DMR if it failed 

to comply with any of the conditions. But FirstEnergy has been recovering DMR 

revenue since January 1, 2017, and the commission did not make the DMR subject 

to refund if FirstEnergy does not meet the required conditions. 

{¶ 23} Moreover, despite our finding that the DMR is unlawful, no refund 

is available to ratepayers for money already recovered under the rider. R.C. 

4905.32 bars any refund of recovered rates unless the tariff applicable to those rates 

sets forth a refund mechanism. In re Rev. of Alternative Energy Rider Contained 

in Tariffs of Ohio Edison Co., 153 Ohio St.3d 289, 2018-Ohio-229, 106 N.E.3d 1, 
SUPREME COURT OF OHIO

10 

¶ 15-20. FirstEnergy’s tariffs for the DMR, however, contain no refund 

mechanism. 

a. The commission’s audit review of DMR expenditures is not helpful 

{¶ 24} The commission did direct its staff to periodically review how the 

companies and FirstEnergy Corporation use the DMR funds to ensure that such 

funds are used, directly or indirectly, in support of grid modernization. On 

rehearing, the commission clarified that its review will be “ongoing and conducted 

in real time.” And to assist in this review, the commission directed its staff to retain 

a third-party monitor to ensure that DMR funds are expended appropriately. Those 

reviews, however, do not sufficiently protect ratepayers from possible misuse of 

DMR funds. 

{¶ 25} On December 11, 2017, the commission opened up a docket to 

review FirstEnergy’s DMR charges and expenditures. The commission appointed 

Oxford Advisors, L.L.C., as the third-party monitor to review FirstEnergy’s use of 

DMR funds. The commission directed Oxford to submit periodic reports 

documenting whether the companies have implemented the DMR in compliance 

with its prior orders. Specifically, Oxford is required to submit quarterly updates 

to the PUCO staff on the use of DMR funds, a midterm report in the event that the 

companies seek to extend the DMR beyond its initial three-year term, and a final 

report within 90 days of the termination of the DMR. 

{¶ 26} Although the commission authorized any participant in the 

proceeding to examine Oxford’s conclusions, results, and recommendations, those 

reports will not be available to the parties until they are filed with the commission. 

This will not occur, however, until FirstEnergy seeks to either extend or terminate 

the DMR, and so it appears that the parties will not be able to challenge Oxford’s 

findings until well after the DMR funds have been recovered and spent. Thus, it is 

not clear what remedy would be available should the commission (or this court on 

appeal) find that FirstEnergy has misused DMR funds. 
January Term, 2019 

11 

b. The commission’s PowerForward initiative delays the implementation of 

FirstEnergy’s grid-modernization plan 

{¶ 27} The commission also conditioned FirstEnergy’s receipt of DMR 

funds on a demonstration of sufficient progress in the implementation and 

deployment of commission-approved grid-modernization programs. But this 

condition is essentially meaningless because the commission set up a process in 

which no projects will be approved until after the commission has completed its 

PowerForward initiative. PowerForward is a roadmap for the future of electric 

distribution utility service in Ohio and includes grid modernization as a key 

component. The commission completed the PowerForward roadmap on August 

29, 2018, and is in the process of implementing it through partnerships with Ohio 

stakeholders and national experts. See www.puco.ohio.gov/industryinformation/industry-topics/powerforward/ (accessed June 17, 2019). 

{¶ 28} The companies did file an application on February 29, 2016, opening 

up the FirstEnergy Grid Modernization Business Plan, Pub. Util. Comm. No. 16-

481-EL-UNC. But the commission will take no action in this docket until after it 

completes the PowerForward initiative. Because the DMR was initially approved 

for only three years—ending in 2019 unless extended—it is possible, if not likely, 

that the companies will recover most, if not all, of the DMR revenue before the 

commission approves any modernization projects for the companies. 

{¶ 29} In the end, these conditions on the DMR contain no consequences—

and offer no protection to ratepayers—if FirstEnergy fails to honor them. Given 

the foregoing, we reverse the commission’s determination that the DMR constitutes 

an incentive under R.C. 4928.143(B)(2)(h). On remand, the commission should 

remove the DMR from FirstEnergy’s ESP. 

 
SUPREME COURT OF OHIO

12 

B. Whether the commission erred in approving the DMR on additional 

grounds: 

OMAEG Propositions of Law Nos. 5, 6, and 8; NOPEC Proposition of Law 

No. 3; Environmental Groups Proposition of Law No. 1 

{¶ 30} Appellants raise several other challenges to the commission’s 

determination that the DMR is lawful under R.C. 4928.143. Appellants contend 

that the DMR is unlawful because its purpose of providing credit support is not 

contemplated in any of the nine permissible categories under R.C. 4928.143(B)(2) 

and it lacks an adequate nexus to the provision of distribution service as required 

by R.C. 4928.143(B)(2)(h). Appellants also maintain that the DMR violates the 

prohibition against unlawful transition revenue under R.C. 4928.38, fails to 

advance state electric policies under R.C. 4928.02, and imposes unjust, 

unreasonable, and unlawful rates in violation of R.C. 4905.22. 

{¶ 31} In view of our decision to reverse the commission on the incentiveratemaking finding and DMR conditions, we need not reach these other matters. 

Accordingly, we dismiss these arguments as moot. See In re Application of 

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

¶ 39. 

C. Whether the commission erred in excluding the DMR from the 

significantly-excessive-earnings test, R.C. 4928.143(F): 

OCC Proposition of Law No. 2; OMAEG Proposition of Law No. 7 

{¶ 32} Appellants argue that the commission erred when it excluded DMR 

revenues from the significantly-excessive-earnings test (“SEET”). Electricdistribution utilities that opt to provide service under an ESP must undergo an 

annual earnings review. R.C. 4928.143(F) requires the commission to consider 

annually whether the plan resulted in significantly excessive earnings compared to 

companies facing comparable risk. If the ESP resulted in significantly excessive 

earnings, the utility must return the excess to its customers. R.C. 4928.143(F). In 
January Term, 2019 

13 

the proceedings below, the commission found that “DMR revenues should be 

excluded from SEET calculations.” Pub. Util. Comm. No. 14-1297-EL-SSO, Fifth 

rehearing entry, ¶ 212 (Oct. 12, 2016). 

{¶ 33} The commission stated on rehearing that the challenges to the SEET 

determination in this case are premature, implying that they can be raised in the 

next SEET proceeding. The fact that there is “ample opportunity later to bring [a] 

legal challenge at a time when harm is more imminent and more certain,” Ohio 

Forestry Assn., Inc. v. Sierra Club, 523 U.S. 726, 734, 118 S.Ct. 1665, 140 L.Ed.2d 

921 (1998), supports withholding review at this time. See also Elyria Foundry Co. 

v. Pub. Util. Comm., 114 Ohio St.3d 305, 2007-Ohio-4164, 871 N.E.2d 1176, ¶ 32 

(finding no prejudice stemming from commission’s order when the order had no 

ratemaking effect and parties could challenge the recovery of deferred expenses in 

next rate case). 

{¶ 34} Further, utility customers will not be prejudiced by the failure to 

immediately address the issue. R.C. 4928.143(F) expressly provides for customer 

refunds if the ESP resulted in significantly excessive earnings, but that 

determination can be made only in a SEET proceeding. Appellants have failed to 

demonstrate that deferring review at this time will result in real harm. Accordingly, 

we decline to address the SEET issue at this time. 

D. Whether the commission properly conducted the statutory test for 

approving an ESP under R.C. 4928.143(C)(1): 

OCC Proposition of Law No. 4; NOPEC Proposition of Law No. 4 

{¶ 35} R.C. 4928.143(C)(1) requires the commission to approve an ESP if 

it is “more favorable in the aggregate” than the expected result of a market-rate 

offer. The statute, however, “does not bind the commission to a strict price 

comparison.” In re Application of Columbus S. Power Co., 128 Ohio St.3d 402, 

2011-Ohio-958, 945 N.E.2d 501, ¶ 27. Instead, “in evaluating the favorability of a 
SUPREME COURT OF OHIO

14 

plan, the statute instructs the commission to consider ‘pricing and all other terms 

and conditions.’ ” (Emphasis deleted.) Id., quoting R.C. 4928.143(C)(1). 

{¶ 36} Appellants argue that the commission improperly applied the 

statutory test by excluding the costs of the DMR and another ESP rider—the 

Government Directive Recovery Rider—when it weighed the ESP against the 

market-rate offer. We affirm the commission on this issue for the following 

reasons. 

1. We need not decide whether the commission erred in refusing to consider 

DMR revenues under the statutory test 

{¶ 37} Appellants first argue that the commission unlawfully failed to 

consider the costs of the DMR when it conducted the statutory test under R.C. 

4928.143(C)(1). The commission did not weigh the costs of the DMR to ratepayers 

under the statutory test because it determined that the same amount of revenue 

could be recovered by the companies from ratepayers had the companies sought a 

market-rate offer under R.C. 4928.142 rather than an ESP. Although we question 

the commission’s interpretation of R.C. 4928.142 to exclude the DMR revenues 

under the ESP-versus-market-rate-offer test, our decision holding that the DMR is 

unlawful renders this issue moot. 

2. The commission did not err in refusing to consider the costs of the 

Government Directive Recovery Rider under the statutory test 

{¶ 38} Appellants also fault the commission for not considering the costs of 

the Government Directive Recovery Rider when it conducted the ESP-versusmarket-rate-offer test. The purpose of the Government Directive Recovery Rider 

was to allow the companies to recover future unforeseen costs that were required 

by federal or state mandates. No costs were to be included in the rider until (1) the 

companies incurred actual costs for complying with the government mandates, and 

(2) the commission deemed the costs were prudently incurred in a separate 

proceeding. 
January Term, 2019 

15 

{¶ 39} We have upheld the commission’s decision to exclude no-cost or 

placeholder riders from the statutory test when, as here, no costs are recovered 

under the rider during the ESP term. In re Application of Ohio Power Co., 155 

Ohio St.3d 326, 2018-Ohio-4698, 121 N.E.3d 320, ¶ 37. Accordingly, we reject 

appellants’ argument. 

E. Whether the commission erred when it found that the companies could 

withdraw the ESP in response to a mandate from this court: 

OCC Proposition of Law No. 3 

{¶ 40} OCC argues that the commission erred in finding that R.C. 

4928.143(C) allowed FirstEnergy to withdraw and terminate its ESP in response to 

a court-ordered modification on appeal. R.C. 4928.143(C)(1) requires the 

commission to “approve,” “modify and approve,” or “disapprove” an ESP 

application. “If the commission modifies and approves an application,” the “utility 

may withdraw the application, thereby terminating it, and may file a new standard 

service offer.” R.C. 4928.143(C)(2)(a). On rehearing, the commission found that 

the companies’ right to withdraw and terminate an ESP application does not lapse 

until the conclusion of the rehearing process and appellate review. OCC maintains 

that the companies have a limited right to withdraw under R.C. 4928.143(C)(2)(a) 

and that allowing an electric utility to withdraw and terminate the ESP in response 

to a court decision reversing a commission order would circumvent this court’s 

authority to review commission orders under R.C. 4903.13. 

{¶ 41} FirstEnergy, however, has not withdrawn its ESP at this time. 

Hence, whether the companies may collect ESP rates for some period of time and 

then withdraw the ESP following an adverse ruling on appeal is a hypothetical 

question. Because the question is purely hypothetical, we decline to address OCC’s 

third proposition of law. In re Application of Columbus S. Power Co., 128 Ohio 

St.3d 512, 2011-Ohio-1788, 947 N.E.2d 655, at ¶ 44-49. 
SUPREME COURT OF OHIO

16 

F. Whether the commission approved the Government Directive Recovery 

Rider in violation of commission precedent: 

OMAEG Proposition of Law No. 10 

{¶ 42} OMAEG claims that the commission departed from its own 

precedent without sufficient explanation when it approved the placeholder 

Government Directive Recovery Rider. OMAEG maintains that in a prior ESP 

proceeding the commission rejected a placeholder rider that recovered the same 

type of government-mandated costs. See In re Application of Ohio Power 

Company, Pub. Util. Comm. No. 13-2385-EL-SSO (Feb. 25, 2015), at ¶ 59-62. 

{¶ 43} Contrary to OMAEG’s assertion, the commission explained that the 

Government Directive Recovery Rider is different because in the prior ESP case 

AEP Ohio had an existing mechanism to recover government-mandated costs. In 

contrast, FirstEnergy is operating under an eight-year base distribution rate freeze, 

so the Government Directive Recovery Rider was approved as the mechanism to 

allow for recovery of any future government mandated costs. In sum, the 

commission adequately explained why it did not follow the case cited by OMAEG. 

As this is the only basis upon which OMAEG attacks the rider, we reject OMAEG’s 

tenth proposition of law. See In re Application of Columbus S. Power Co. at ¶ 50-

54. 

G. Whether the commission’s approval of the Delivery Capital Recovery 

Rider lacked record support: 

OMAEG Proposition of Law No. 9 

{¶ 44} OMAEG challenges the commission’s decision to approve the 

Delivery Capital Recovery Rider as part of the ESP. The Delivery Capital 

Recovery Rider allows the companies to accelerate the recovery of distribution 

investments when compared to recovery through a distribution-base-rate case. 

{¶ 45} OMAEG first claims that the commission erred when it approved the 

Delivery Capital Recovery Rider without record support in violation of R.C. 
January Term, 2019 

17 

4903.09. But OMAEG overlooks that the commission did cite evidence to support 

the approval of the Delivery Capital Recovery Rider. Pub. Util. Comm. No. 14-

1297-EL-SSO, Fifth rehearing entry, ¶ 248-250 (Oct. 12, 2016). 

{¶ 46} OMAEG also claims that the commission allowed the companies to 

recover through this rider the costs associated with general maintenance of the 

distribution system, as opposed to only capital investments. OMAEG claims this 

is error because general-maintenance expenses can be recovered only through a 

distribution-rate case, not through a distribution rider in an ESP proceeding. 

OMAEG, however, cites no evidence that the companies are recovering generalmaintenance expenses under the Delivery Capital Recovery Rider. OMAEG cites 

the direct testimony of OCC witness James Williams, but Williams never testified 

to this. Instead, Williams testified that the Delivery Capital Recovery Rider 

recovers no distribution-maintenance or operation expenses. Accordingly we reject 

OMAEG’s argument. 

H. Whether the decision to allow FirstEnergy to recover lost distribution 

revenues under the Customer Action Program violated R.C. 4928.66(D): 

Environmental Groups Proposition of Law No. 4 

{¶ 47} The Environmental Groups argue that the commission violated R.C. 

4928.66(D), which authorizes the “recovery of revenue that otherwise may be 

foregone by the utility as a result of or in connection with the implementation by 

the electric distribution utility of any energy efficiency or energy conservation 

programs.” According to the Environmental Groups, FirstEnergy measured energy 

saved by the conservation actions of consumers rather than from FirstEnergy’s own 

conservation programs. The Environmental Groups maintain FirstEnergy cannot 

recover lost distribution revenues under R.C. 4928.66(D) because the revenues 

were not lost as a result of any programs implemented by FirstEnergy. 

{¶ 48} The Environmental Groups, however, never alleged in an 

application for rehearing that the commission violated R.C. 4928.66(D) by 
SUPREME COURT OF OHIO

18 

allowing FirstEnergy to recover lost distribution revenue under this program. It is 

well settled that setting forth specific grounds for rehearing is a jurisdictional 

prerequisite for our review. Consumers’ Counsel v. Pub. Util. Comm., 70 Ohio 

St.3d 244, 247, 638 N.E.2d 550 (1994); Akron v. Pub. Util. Comm., 55 Ohio St.2d 

155, 161-162, 378 N.E.2d 480 (1978). Moreover, we have strictly construed the 

specificity test set forth in R.C. 4903.10. Discount Cellular, Inc. v. Pub. Util. 

Comm., 112 Ohio St.3d 360, 2007-Ohio-53, 859 N.E.2d 957, ¶ 59. Because the 

Environmental Groups failed to specifically allege a violation of R.C. 4928.66(D) 

on rehearing, we lack jurisdiction to consider the argument now. 

{¶ 49} The Environmental Groups further contend that the commission 

violated R.C. 4903.09 when it offered no reason on rehearing why lost distribution 

revenues for the Customer Action Program are justified under R.C. 4928.66(D). 

Although it is true that R.C. 4903.09 requires the commission to explain its 

decisions, the Environmental Groups’ failure to specifically allege error under R.C. 

4928.66(D) in an application for rehearing left the commission with nothing to 

explain. 

I. Whether the commission erred when it approved Rider RRS: 

OMAEG Propositions of Law Nos. 1 and 2 

{¶ 50} OMAEG argues in its first proposition of law that the commission 

erred when it approved Rider RRS in the ESP Order. In its second proposition of 

law, OMAEG challenges the commission’s approval of tariffs implementing Rider 

RRS. 

{¶ 51} We decline to decide these issues. Although the commission 

originally approved Rider RRS in the ESP Order, it later eliminated the rider on 

rehearing and directed the companies to file compliance tariffs removing the rider 

from their rate schedules. Because Rider RRS is no longer part of the ESP, the 

arguments challenging it are moot. See Cincinnati Gas & Elec. Co. v. Pub. Util. 
January Term, 2019 

19 

Comm., 103 Ohio St.3d 398, 2004-Ohio-5466, 816 N.E.2d 238, ¶ 15-18. Therefore, 

OMAEG’s first and second propositions of law are rejected. 

J. Whether the commission violated R.C. 4903.10 when it considered 

FirstEnergy’s modified Rider RRS proposal and other alternatives on 

rehearing: 

OMAEG Proposition of Law No. 3 

{¶ 52} As a final matter, OMAEG claims that the commission violated R.C. 

4903.10 when it granted rehearing to consider FirstEnergy’s proposed changes to 

Rider RRS. We reject OMAEG’s arguments for lack of merit. 

{¶ 53} First, OMAEG claims that the commission erred because 

FirstEnergy’s application for rehearing did not specifically allege in what respect 

Rider RRS was unlawful or unreasonable as required by R.C. 4903.10. On 

rehearing, FirstEnergy challenged the commission’s modifications to Rider RRS 

that were made in the ESP Order and offered alternative modifications to Rider 

RRS in response to those modifications. According to OMAEG, because 

FirstEnergy failed to set forth specifically the grounds on which the ESP was 

unlawful and unreasonable, the commission was required to deny the rehearing 

application and compel the companies to open a new ESP filing to introduce the 

modified Rider RRS proposal. In turn, OMAEG argues that because the 

commission did not have jurisdiction to consider Rider RRS on rehearing, it did not 

have authority to approve the DMR. 

{¶ 54} Contrary to OMAEG’s assertions, FirstEnergy did set forth specific 

grounds on which the commission erred in modifying Rider RRS in the ESP Order. 

For instance, FirstEnergy alleged that the modifications to the original Rider RRS 

proposal improperly prohibited the recovery of certain costs of the rider, thereby 

increasing the companies’ risk. The companies objected to the risk transfer as 

unreasonable, unsupported by the record, and upsetting the balance of interests 

supporting the ESP stipulation. FirstEnergy also alleged that Rider RRS had been 
SUPREME COURT OF OHIO

20 

rendered unreasonable by a recent FERC order that required a review of the powerpurchase agreements underlying Rider RRS. 

{¶ 55} Second, OMAEG maintains that the commission violated R.C. 

4903.10(B) when it allowed FirstEnergy to introduce new evidence on rehearing in 

support of its alternative Rider RRS proposal. R.C. 4903.10(B) allows the 

commission to take additional evidence on rehearing, but only if the evidence “with 

reasonable diligence, could [not] have been offered upon the original hearing.” 

OMAEG asserts that nothing precluded FirstEnergy from offering this new 

evidence during the original hearing. But as noted, the commission modified Rider 

RRS on rehearing, which is what prompted FirstEnergy to introduce evidence to 

support its alternative Rider RRS proposal. Notwithstanding, OMAEG argues that 

it was prejudiced by having to expend additional time and resources to respond to 

the alternative Rider RRS proposals on rehearing. But OMAEG overlooks that it 

would have had to expend additional time and resources if the commission had 

opened up a new ESP case, which is what OMAEG claims the commission should 

have done instead of considering the modified Rider RRS proposal on rehearing. 

Therefore, we reject OMAEG’s third proposition of law. 

IV. Conclusion 

{¶ 56} For the foregoing reasons, we affirm the commission’s order in part 

and reverse in part. On remand, the commission is instructed to immediately 

remove the DMR from the ESP. 

Order affirmed in part 

and reversed in part, 

and cause remanded. 

FRENCH and STEWART, JJ., concur. 

DEWINE, J., concurs in judgment only, with an opinion. 

KENNEDY, J., dissents, with an opinion. 

FISCHER, J., dissents, with an opinion joined by O’CONNOR, C.J. 
January Term, 2019 

21 

_________________ 

DEWINE, J., concurring in judgment only. 

{¶ 57} I agree with the plurality that the distribution modernization rider 

(“DMR”) at issue in this case is not an incentive and hence is not authorized under 

R.C. 4928.143(B)(2)(h). I write separately to explain that this result is reached 

simply by affording the word “incentive” its commonly understood meaning. 

We should not give deference to PUCO’s interpretation of “incentive” 

{¶ 58} This case turns on the meaning of the word incentive. In the view of 

the Public Utilities Commission of Ohio (“PUCO”), the DMR constitutes an 

incentive for grid modernization because improving the financial health of 

FirstEnergy would place FirstEnergy in a position where it could more readily 

obtain capital that might be used to modernize its grid. To reach this determination, 

PUCO relied upon a definition of the word incentive as “ ‘something that stimulates 

one to take action, work harder, etc.; stimulus; encouragement.’ ” Pub. Util. 

Comm. No. 14-1297-EL-SSO, Fifth rehearing entry, ¶ 190 (Oct. 12, 2016), quoting 

Webster’s New World Dictionary 682 (3d College Ed.1988). It concluded that the 

DMR “is intended to stimulate the Companies to focus their innovation and 

resources on modernizing their distribution systems” and that, therefore, the DMR 

constitutes an incentive. Id.

{¶ 59} The challengers in this case argue that PUCO misconstrued the 

meaning of the word incentive and that simply providing more money to 

FirstEnergy did not constitute an incentive for it to modernize its grid. Before we 

can answer the question of whether the DMR constitutes an incentive, it is 

necessary to determine what weight we should give to PUCO’s interpretation. 

{¶ 60} The FirstEnergy companies contend that PUCO’s understanding of 

the DMR as an incentive “ ‘is entitled to deference as an interpretation of a raterelated statutory provision,’ ” quoting In re Application of Columbus S. Power Co., 

138 Ohio St.3d 448, 2014-Ohio-462, 8 N.E.3d 863, ¶ 29. The plurality accepts this 
SUPREME COURT OF OHIO

22 

premise, saying “we generally defer to the commission’s interpretations on raterelated statutory provisions, but only if they are reasonable.” Plurality opinion at 

¶ 19, citing In re Application of Columbus S. Power Co. at ¶ 29. Thus, under the 

plurality’s mode of analysis we start with PUCO’s reading of the term incentive 

and ask if that reading is reasonable. If we think that PUCO’s interpretation is 

reasonable, then we must defer to it even if we think another interpretation is better 

supported by the statutory text.3

{¶ 61} As I’ve mentioned before, I’m skeptical of our deference doctrines 

generally and think the court ought to take a hard look at those doctrines in an 

appropriate case. See, e.g., State ex rel. McCann v. Delaware Cty. Bd. of Elections, 

155 Ohio St.3d 14, 2018-Ohio-3342, 118 N.E.3d 224, ¶ 34 (DeWine, J., concurring 

in judgment only). But even without such a wholesale examination, it is clear to 

me that we ought not defer to PUCO’s interpretation in this case. 

{¶ 62} The principal practical arguments for deferring to an agency 

interpretation revolve around the specialized expertise that administrative agencies 

are sometimes thought to possess. See Consumers’ Counsel v. Pub. Util. Comm., 

58 Ohio St.2d 108, 110, 388 N.E.2d 1370 (1979); Pension Benefit Guar. Corp. v. 

LTV Corp., 496 U.S. 633, 651-652, 110 S.Ct. 2668, 110 L.Ed.2d 579 (1990); 

Skidmore v. Swift & Co., 323 U.S. 134, 140, 65 S.Ct. 161, 89 L.Ed. 124 (1944). 

But here, the question revolves around the meaning of a widely used and commonly 

understood word. No particular expertise is required to understand what an 

incentive is, and nothing about the surrounding statutory context raises any doubt 

that the word is being used in its ordinary sense. In such a case, if a court is to do 

 

3

 Whether we accept the invitation to defer to PUCO’s interpretation is not simply an academic 

question in this case. As I explain below, I conclude that under the ordinary meaning of the term, 

the DMR does not constitute an incentive. But it is not obvious that PUCO’s interpretation is wholly 

unreasonable. Because I think the ordinary meaning of the word should prevail, I do not address 

the reasonableness of PUCO’s interpretation. 
January Term, 2019 

23 

its duty and give effect to the legislature’s intent as expressed in the statute’s text, 

it must first look to the ordinary meaning of the statute’s words. 

{¶ 63} Thus, rather than accepting PUCO’s interpretation of the word 

incentive and asking whether it is reasonable, I start my analysis without any 

deference to PUCO’s interpretation. The question is simply whether the DMR 

constitutes an incentive under the plain and ordinary meaning of that word. I 

conclude that it does not. 

The DMR is not an incentive

{¶ 64} As the word is commonly used, something is an incentive to perform 

an act only if it would push a party toward performing that act. As the plurality 

rightly notes, there are no meaningful conditions on FirstEnergy’s access to the 

DMR funds, nor does the DMR in any way push FirstEnergy to spend the additional 

money on grid modernization as opposed to using the funds in some other way. 

Hence the DMR cannot be a distribution infrastructure and modernization incentive 

because it in no way incents the company to modernize or improve its distribution 

infrastructure. 

{¶ 65} In concluding that the DMR constitutes an incentive, PUCO relied 

upon the dictionary definition cited above, and based on that definition it equated 

the word incentive with the word stimulus. It found the DMR to be an incentive 

because improving FirstEnergy’s financial situation would “stimulate the 

Companies to focus their innovation and resources on modernizing their 

distribution systems,” Pub. Util. Comm. No. 14-1297-EL-SSO, Fifth rehearing 

entry, ¶ 190 (Oct. 12, 2016). 

{¶ 66} By predicating its analysis solely on a single word in a definition 

from a single dictionary, PUCO provides a good example of how dictionaries can 

be misused. Except in cases where words have specialized or technical meanings, 

when interpreting a statute one must look to how words are typically used by 

ordinary speakers of the English language. See Great Lakes Bar Control, Inc. v. 
SUPREME COURT OF OHIO

24 

Testa, __ Ohio St.3d __, 2018-Ohio-5207, __ N.E.3d __, ¶ 9-10. This is because 

the ordinary meaning of a word is not just any meaning that might be supported by 

some dictionary definition or other but rather what that word ordinarily connotes. 

See Smith v. United States, 508 U.S. 223, 242, 113 S.Ct. 2050, 124 L.Ed.2d 138 

(1993) (Scalia, J., dissenting). By failing to take stock of how words are actually 

used, one runs the risk of making a “ ‘fortress out of the dictionary,’ ” and thereby 

achieving results that are contrary to the intent of the legislature as expressed in the 

statutory text. See United States v. Costello, 666 F.3d 1040, 1043– 44 (7th 

Cir.2012), quoting Cabell v. Markham, 148 F.2d 737, 739 (2d Cir. 1945). 

{¶ 67} Here, PUCO appears to be playing the old dictionary definition 

matching game. According to the rules of that game, one chooses a single 

definition or part of a definition. Then one squints at the chosen words in isolation 

until one’s sense of the colloquial use of language is sufficiently dulled, and one 

concludes that the matter at hand could (just maybe) be covered by that definition. 

From this, a player of the game leaps to the conclusion that this is what the statute 

means. 

{¶ 68} Instead of playing this game, one should stop and take stock of how 

the word or words are actually used by ordinary speakers of the English language. 

And it should be plain that an incentive cannot be anything that might stimulate an 

outcome. Rather, it must direct and motivate a party toward that outcome. Indeed, 

this goal-directed requirement is evident in the definitions picked out by one of the 

dissents. Among those definitions are (1) “something that incites or has a tendency 

to incite to determination or action,” (2) “a motive or spur,” and (3) “serving to 

encourage, rouse, or move to action : STIMULATIVE : motivative in a particular 

direction or course.” (Capitalization sic and emphasis added.) Webster’s Third 

New International Dictionary 1141 (2002). That dissent suggests that nothing in 

these definitions requires an incentive “to be conditioned or restricted or even 

related to the action being encouraged.” Dissenting opinion of Kennedy, J., at 
January Term, 2019 

25 

¶ 82. But that can’t be right. If an incentive must motivate the company in a 

particular direction or course, it must be related to that direction or course. 

{¶ 69} In mistakenly treating “incentive” and “stimulus” as 

interchangeable, PUCO failed to realize that there are a great many things that we 

might properly describe as a stimulus but which we would not call an incentive. 

Sunlight might stimulate plant growth, but we would not say sunlight is an incentive 

for plant growth. A cut to base tax rates might stimulate economic development, 

but we would not call the tax cut an incentive for economic development. And 

while a cringe-worthy joke might stimulate a groan, it’s not an incentive for 

anything. The problem with PUCO’s treating incentive as interchangeable with 

stimulus is that the word stimulus can be used to describe anything that might have 

an effect on a system. But an incentive is understood more narrowly, as something 

that affects a system in a particular way—by motivating and directing a party 

toward a certain course of action. Where PUCO and both dissents err is in failing 

to distinguish between something that might make an outcome more likely and 

something that serves as an incentive—that is, something that directs and motivates 

a party toward an outcome. 

{¶ 70} Given how the word incentive is ordinarily used, it is no surprise that 

in other contexts an incentive must be related to a desired act so as to direct and 

motivate a party to perform it. For instance, under Federal Energy Regulation 

Commission policy, an incentive program must be prospective and there “must be 

a connection between the incentive and the conduct meant to be induced,” 

California Pub. Util. Comm. v. Fed. Energy Regulatory Comm., 879 F.3d 966, 977 

(9th Cir.2018). For an incentive plan to be prospective, it must be conditioned on 

some future behavior. A payment of money without any conditions related to future 

acts is not prospective and lacks any connection with the conduct meant to be 

induced. 
SUPREME COURT OF OHIO

26 

{¶ 71} In sum, something cannot be an incentive if it does not direct the 

utility toward a particular desired outcome. Merely giving the utility more money 

does nothing to direct it toward improving its infrastructure, even if the utility might 

choose to use the money in that way. With extra money, a utility might increase 

employee salaries, pay its investors a higher dividend, redecorate its offices, or 

perhaps, modernize its infrastructure. But because the DMR does not place any 

meaningful constraints on the money, it does not direct the utility toward 

infrastructure improvements rather than any of these other things. And the fact that 

the utility may not be able to do any of these things without the extra money does 

not change this analysis; more money, in and of itself, does not motivate the utility 

to do any particular thing at all. 

{¶ 72} In contrast, if the money had conditions—if the company had to pay 

it back if it were not used for grid modernization or if the company only got the 

money after it started a modernization project—then the DMR would count as an 

incentive. It would do so, because it would guide the utility toward a particular 

course of action. But here the DMR does nothing to motivate the utility to spend 

the additional funds to improve its infrastructure or modernize its grid. It is, 

therefore, not a distribution infrastructure and modernization incentive under any 

plausible understanding of that phrase. R.C. 4928.143(B)(2)(h) allows for 

“provisions regarding distribution infrastructure and modernization incentives”—

that is, programs that direct and motivate a utility to modernize or improve its 

infrastructure. The DMR is no such thing. 

{¶ 73} I agree with the plurality’s resolution of the remaining propositions 

of law set forth in sections III.B through III.J of the plurality opinion. 

_________________ 

KENNEDY, J., dissenting. 

{¶ 74} It may be true, as one member of our court has remarked, that “R.C. 

Chapter 4928 is a labyrinthian scheme that governs Ohio’s retail electric service,” 
January Term, 2019 

27 

In re Application of Columbus S. Power Co., 147 Ohio St.3d 439, 2016-Ohio-1608, 

67 N.E.3d 734, ¶ 72 (O’Connor, C.J., concurring in part and dissenting in part). 

This case, however, presents only a straightforward question of statutory 

interpretation: does R.C. 4928.143(B)(2)(h) permit inclusion of the Distribution 

Modernization Rider (“DMR”) in the electric-security plan for the FirstEnergy 

Companies? 

{¶ 75} The answer is yes. R.C. 4928.143(B)(2)(h) provides that an electricsecurity plan may include provisions regarding the utility’s distribution service, 

including distribution infrastructure and modernization incentives for the utility. 

The DMR is a provision that relates to the utility’s distribution service, and because 

it is designed to encourage and enable FirstEnergy Companies (Ohio Edison 

Company, The Cleveland Electric Illuminating Company, and The Toledo Edison 

Company) (collectively “FirstEnergy” or the “companies”) to modernize its 

electrical grid, it is a distribution infrastructure and modernization incentive. 

Further, nothing in R.C. 4928.143(B)(2)(h) requires the commission to impose any 

conditions or restrictions on an incentive in order for it to be included in the electricsecurity plan. 

{¶ 76} For these reasons, the commission did not act unlawfully or 

unreasonably in including the DMR in FirstEnergy’s electric-security plan, and I 

would affirm its decision. 

R.C. 4928.143(B)(2)(h) 

{¶ 77} R.C. 4928.143(B)(2) provides that an electric-security plan 

may provide for or include, without limitation, * * * 

* * * 

(h) Provisions regarding the utility’s distribution service, 

including, without limitation and notwithstanding any provision of 

Title XLIX of the Revised Code to the contrary, * * * provisions 
SUPREME COURT OF OHIO

28 

regarding distribution infrastructure and modernization incentives 

for the electric distribution utility. * * * As part of its determination 

as to whether to allow in an electric distribution utility’s electric 

security plan inclusion of any provision described in division 

(B)(2)(h) of this section, the commission shall examine the 

reliability of the electric distribution utility’s distribution system and 

ensure that customers’ and the electric distribution utility’s 

expectations are aligned and that the electric distribution utility is 

placing sufficient emphasis on and dedicating sufficient resources 

to the reliability of its distribution system. 

(Emphasis added.) 

{¶ 78} In construing this statute, our duty is to determine and give effect to 

the intent of the General Assembly as expressed in the language it enacted. Griffith 

v. Aultman Hosp., 146 Ohio St.3d 196, 2016-Ohio-1138, 54 N.E.3d 1196, ¶ 18, 23; 

Fisher v. Hasenjager, 116 Ohio St.3d 53, 2007-Ohio-5589, 876 N.E.2d 546, ¶ 20. 

R.C. 1.42 guides our analysis, providing that “[w]ords and phrases shall be read in 

context and construed according to the rules of grammar and common usage.” In 

conducting this analysis, a court may not add or delete words. In re Application of 

Ohio Power Co., 140 Ohio St.3d 509, 2014-Ohio-4271, 20 N.E.3d 699, ¶ 24. 

Rather, “ ‘[t]he preeminent canon of statutory interpretation requires us to 

“presume that [the] legislature says in a statute what it means and means in a statute 

what it says there.” ’ ” State ex rel. Lee v. Karnes, 103 Ohio St.3d 559, 2004-Ohio5718, 817 N.E.2d 76, ¶ 27, quoting BedRoc Ltd., L.L.C. v. United States, 541 U.S. 

176, 183, 124 S.Ct. 1587, 158 L.Ed.2d 338 (2004), quoting Connecticut Natl. Bank 

v. Germain, 503 U.S. 249, 253-254, 112 S.Ct. 1146, 117 L.Ed.2d 391 (1992). And 

if the language of the statute is clear and unambiguous, then we must apply it as 

written, Pelletier v. Campbell, 153 Ohio St.3d 611, 2018-Ohio-2121, 109 N.E.3d 
January Term, 2019 

29 

1210, ¶ 14, and may not rewrite it in the guise of statutory interpretation, Doe v. 

Marlington Local School Dist. Bd. of Edn., 122 Ohio St.3d 12, 2009-Ohio-1360, 

907 N.E.2d 706, ¶ 29. 

{¶ 79} The plurality concludes that “[a]n incentive generally serves to 

induce someone to take some action that otherwise would not be taken but for the 

incentive.” Plurality opinion at ¶ 16. It asserts that the DMR is not an incentive 

because it lacks “real requirements, restrictions, or conditions,” id. at ¶ 19, and it 

suggests that an incentive must include “rewards and penalties that link utility 

revenues to various standards or goals,” id. at ¶ 17. However, these requirements 

do not appear in the statute. Our role is to apply the statute as enacted by the 

General Assembly, the sole arbiter of public policy in this state. We may not read 

words into the statute that the legislature could have written. After all, the 

judiciary’s function is to say what the law is, not what it should be. 

{¶ 80} Moreover, the only authority cited in support of the plurality’s view 

is the decision of a single federal district court construing the meaning of an 

incentive program incorporated in a car-dealer franchise agreement, a contract that 

included express conditions for receiving a bonus. See Len Stoler, Inc. v. 

Volkswagen Group of America, Inc., 232 F.Supp.3d 813, 817 (E.D.Va.2017). 

{¶ 81} The plurality’s analysis runs counter to the plain language of the 

statute. First, R.C. 4928.143(B)(2)(h) permits the electric-security plan to include 

any “[p]rovisions regarding the utility’s distribution service.” The commission 

expressly found that the DMR relates to FirstEnergy’s distribution service (rather 

than generation). It explained that there was “a demonstrated need for credit 

support for the [FirstEnergy] Companies in order to ensure that the Companies have 

access to capital markets in order to make investments in their distribution system.” 

Pub. Util. Comm. No. 14-1297-EL-SSO, Fifth rehearing entry, ¶ 185 (Oct. 12, 

2016). The DMR seeks to satisfy this need by imposing a charge on customers of 

FirstEnergy’s distribution service in order to enable the utility to maintain and 
SUPREME COURT OF OHIO

30 

modernize that service. The DMR is therefore directly related to FirstEnergy’s 

distribution services. 

{¶ 82} Second, the word “incentive” is broader than a promise of 

compensation in exchange for action. The word “incentive” means “something that 

incites or has a tendency to incite to determination or action.” Webster’s Third New 

International Dictionary 1141 (2002). It also means “a motive or spur,” 

“INDUCEMENT,” and “serving to encourage, rouse, or move to action : STIMULATIVE

: motivative in a particular direction or course.” (Capitalization sic.) Id. Nothing 

prohibits the offer of an incentive when there might be a preexisting duty to 

perform, because parties are free to create incentives to perform the act sooner or 

with more fervor or to prevent nonperformance. Nor does the definition of 

“incentive” indicate that an incentive has to be conditioned or restricted or even 

related to the action being encouraged. Rather, an incentive only has to tend to 

encourage or spur performance. Therefore, a provision in an electric-security plan 

is a distribution infrastructure and modernization incentive if it tends to encourage 

or spur the electric distribution utility to modernize its distribution infrastructure. 

{¶ 83} The commission found the DMR to advance the policy of this state 

to encourage innovation and market access for cost-effective retail electric service, 

including the use of smart grid programs and implementation of advanced metering 

infrastructure, by encouraging and enabling FirstEnergy to modernize its grid. See

R.C. 4928.02(D). The commission also found that “the record demonstrates that 

Rider DMR is intended to stimulate the Companies to focus their innovation and 

resources on modernizing their distribution systems.” Pub. Util. Comm. No. 14-

1297-EL-SSO, Fifth rehearing entry, ¶ 190 (Oct. 12, 2016). The rider, the 

commission pointed out, is needed to allow FirstEnergy to access credit markets to 

obtain the funds to jump-start grid modernization, while a downgrade in its 

investment rating could lead to a reduction in funds available for modernization, 

jeopardizing those efforts. Essentially, the commission examined FirstEnergy’s 
January Term, 2019 

31 

financial situation and found that without the DMR, grid modernization might not 

occur. It then decided to provide the rider as an incentive to spur and speed up the 

utility’s efforts to modernize the grid. The DMR therefore gives FirstEnergy an 

incentive to modernize its grid by providing the support needed to make it possible. 

{¶ 84} Further, R.C. 4928.143(B)(2)(h) is devoid of language conditioning 

payment of a distribution infrastructure and modernization incentive on any 

particular action by the utility. Contrary to the plurality’s premise, implementation 

of a distribution infrastructure and modernization incentive under R.C. 

4928.143(B)(2)(h) does not require the commission to impose directives, timelines, 

or penalties related to the receipt of the incentive payments. Nor does the statute 

preclude the payment of an incentive that would “provide additional revenue 

beyond what the companies would recover for modernizing their distribution 

systems.” Plurality opinion at ¶ 18. And the statute does not prohibit payment of 

a distribution infrastructure and modernization incentive “up front before any 

infrastructure-improvement projects were undertaken or completed.” Plurality 

opinion at ¶ 18. 

{¶ 85} Rather than dictating any specific conditions on the form that an 

incentive may take, R.C. 4928.143(B)(2)(h) broadly authorizes an electric-security 

plan to include a provision regarding a distribution infrastructure and 

modernization incentive “without limitation and notwithstanding any provision of 

Title XLIX of the Revised Code to the contrary.” The only requirement of the 

commission included in R.C. 4928.143(B)(2)(h) is that it “shall examine the 

reliability of the electric distribution utility’s distribution system and ensure that 

customers’ and the electric distribution utility’s expectations are aligned and that 

the electric distribution utility is placing sufficient emphasis on and dedicating 

sufficient resources to the reliability of its distribution system,” id. The commission 

satisfied that requirement when it found that “Staff has completed an examination 

of the reliability of the Companies’ distribution system and ensured that the 
SUPREME COURT OF OHIO

32 

customers’ and the Companies’ expectations are aligned.” Pub. Util. Comm. No. 

14-1297-EL-SSO, Fifth rehearing entry, ¶ 191 (Oct. 12, 2016). 

{¶ 86} The plurality faults the commission for “point[ing] to nothing in the 

record that demonstrates how this cash infusion incentivizes FirstEnergy to 

accomplish [the] goal” of grid modernization. Plurality opinion at ¶ 18. However, 

the commission’s order pointed to the testimony of Hisham M. Choueiki, Ph.D., 

P.E., the commission’s expert on utility rates, that the DMR “will enable” the 

companies to obtain funds to “jumpstart” grid modernization. Pub. Util. Comm. 

No. 14-1297-EL-SSO, Fifth rehearing entry, ¶ 192 (Oct. 12, 2016). Choueiki 

further testified that the DMR was an incentive designed to speed up the utility’s 

efforts at grid modernization. The commission also cited the testimony of Eileen 

M. Mikkelsen, the person responsible for rate and regulatory activities for all of 

FirstEnergy Corp.’s utility subsidiaries, who explained that the DMR would enable 

the utility to fund significant investments to modernize the distribution system. 

{¶ 87} “Our function is not to weigh the evidence or to choose between 

alternative, fairly debatable rate structures.” Cleveland Elec. Illum. Co. v. Pub. 

Util. Comm., 46 Ohio St.2d 105, 108, 346 N.E.2d 778 (1976). We do not set rates 

but only ensure that the rates set are not unlawful or unreasonable. Ohio 

Consumers’ Counsel v. Pub. Util. Comm., 127 Ohio St.3d 524, 2010-Ohio-6239, 

941 N.E.2d 757, ¶ 13. “A decision is unreasonable if there is no sound reasoning 

process that would support that decision. It is not enough that the reviewing court, 

were it deciding the issue de novo, would not have found that reasoning process to 

be persuasive.” AAAA Ents., Inc. v. River Place Community Urban Redevelopment 

Corp., 50 Ohio St.3d 157, 161, 553 N.E.2d 597 (1990). And this court will not 

reverse the commission’s findings “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 
January Term, 2019 

33 

Columbus S. Power Co., 147 Ohio St.3d 439, 2016-Ohio-1608, 67 N.E.3d 734, 

¶ 10. 

{¶ 88} Here, the DMR is lawful because it is authorized by R.C. 

4928.143(B)(2)(h) as a provision regarding distribution service and as a distribution 

infrastructure and modernization incentive. And it is reasonable because the 

commission, after reviewing the evidence, determined that FirstEnergy would not 

be able to modernize its grid without access to affordable financing, so to prevent 

higher rates for customers in the future, the commission spurred FirstEnergy’s gridmodernization effort by ensuring that financing would be available to pay for it. 

These findings are not so clearly unsupported by the record as to show 

misapprehension, mistake, or willful disregard of duty, nor are they unreasonable, 

and the court should not substitute its judgment for the commission’s in this matter. 

Conclusion 

{¶ 89} Justice Oliver Wendell Holmes Jr. once remarked that “[g]reat cases, 

like hard cases, make bad law.” N. Secs. Co. v. United States, 193 U.S. 197, 400, 

24 S.Ct. 436, 48 L.Ed. 679 (1904) (Holmes, J., dissenting). And the case before us 

today is no doubt great and hard—great, because a utility on which numerous Ohio 

businesses and households depend is at risk of a credit-rating downgrade that would 

bring with it considerable financial difficulties, and hard, because the means 

suggested to avert that downgrade—called “credit support” by some and a “bailout” 

by others—will be borne by ratepayers. 

{¶ 90} But no matter how great the case or how hard the facts, our duty here 

is the same—to interpret and apply the words of the statute. R.C. 

4928.143(B)(2)(h) authorizes FirstEnergy’s electric-security plan to include a 

provision relating to its distribution service, including distribution infrastructure 

and modernization incentives. Acting on that authority and upon review of the 

evidence presented by the parties, the commission designed the DMR and included 

it in FirstEnergy’s electric-security plan to jump-start investment in grid 
SUPREME COURT OF OHIO

34 

modernization. Because that decision is neither unlawful nor unreasonable, I would 

affirm the commission’s decision. 

_________________ 

 FISCHER, J., dissenting. 

{¶ 91} R.C. 4928.143, which outlines the process for an electricdistribution utility to obtain approval of an electric-security plan (“ESP”), 

establishes that an ESP may include “[p]rovisions regarding the utility’s 

distribution service, including, without limitation and notwithstanding any 

provision of Title XLIX of the Revised Code to the contrary, * * * provisions 

regarding distribution infrastructure and modernization incentives.” R.C. 

4928.143(B)(2)(h). In my view, we can resolve the issue presented in this case 

simply by applying this clear statutory language. 

{¶ 92} The statute permits the type of rider at issue in this case. The 

distribution modernization rider (“DMR”) relates to the utility’s distribution 

service, and because it is designed to foster modernization of Ohio’s electrical grid, 

it is an incentive for modernization. I would affirm on the bases that the DMR is 

permissible under R.C. 4928.143 and the Public Utilities Commission of Ohio (“the 

commission”) acted under law and with reason. 

{¶ 93} We must give effect to the intent of the General Assembly, which is 

embodied in the statutes of the Revised Code. Hulsmeyer v. Hospice of Southwest 

Ohio, Inc., 142 Ohio St.3d 236, 2014-Ohio-5511, 29 N.E.3d 903, ¶ 21. When the 

language of a statute is unambiguous, we must apply it as written. Id. at ¶ 23. This 

court “must give effect to the words used, making neither additions nor deletions 

from words chosen by the General Assembly.” Id., citing Columbia Gas Transm. 

Corp. v. Levin, 117 Ohio St. 3d 122, 2008-Ohio-511, 882 N.E.2d 400, ¶ 19, citing 

Cline v. Ohio Bur. of Motor Vehicles, 61 Ohio St.3d 93, 97, 573 N.E.2d 77 (1991). 

{¶ 94} The plurality opinion is premised upon a conclusion that the DMR 

does not constitute an incentive under R.C. 4928.143(B)(2)(h). I would conclude 
January Term, 2019 

35 

that the commission’s finding that the rider is an incentive was neither unlawful nor 

unreasonable. The word “incentive” is not defined in the statute. An undefined 

term used in a statute is to be given its common, everyday meaning. State v. Dorso, 

4 Ohio St.3d 60, 62, 466 N.E.2d 449 (1983); Am. Fiber Sys., Inc. v. Levin, 125 Ohio 

St.3d 374, 2010-Ohio-1468, 928 N.E.2d 695, ¶ 24. It is clear from the statute that 

the word has a common-sense meaning of inducing an action. 

{¶ 95} The commission specifically noted that the DMR relates to 

distribution service. Pub. Util. Comm. No. 14-1297-EL-SSO, Fifth rehearing entry, 

¶ 190 (Oct. 12, 2016). And the commission found that the DMR was added to 

encourage innovation and modernization to the system. Id. Thus, the commission 

made a determination, supported by evidence, that the DMR induces an action. 

Based on the language of R.C. 4928.143(B)(2)(h), the commission’s findings are 

neither unlawful or unreasonable. 

{¶ 96} Moreover, R.C. 4928.143(B)(2)(h) does not impose any additional 

requirements related to the receipt of the incentive payments. This broad statute 

does not prevent an upfront payment of that incentive and it does not specify any 

conditions or the type of incentive that may be designed. The single requirement 

found in R.C. 4928.143(B)(2)(h) is for the commission to examine the reliability of 

the utility and ensure aligned expectations and sufficient resources: 

As part of its determination as to whether to allow in an electric 

distribution utility’s electric security plan inclusion of any provision 

described in division (B)(2)(h) of this section, the commission shall 

examine the reliability of the electric distribution utility’s 

distribution system and ensure that customers’ and the electric 

distribution utility’s expectations are aligned and that the electric 

distribution utility is placing sufficient emphasis on and dedicating 

sufficient resources to the reliability of its distribution system. 
SUPREME COURT OF OHIO

36 

Id. According to the record, the commission complied with this statutory 

requirement, as it specifically noted that its staff completed an examination of the 

reliability of the distribution system and ensured that the relevant expectations are 

aligned. Pub. Util. Comm. No. 14-1297-EL-SSO, Fifth rehearing entry, ¶ 191 (Oct. 

12, 2016). 

{¶ 97} This court historically has affirmed the commission whenever the 

record contains probative evidence sufficient to show that the commission did not 

act against the manifest weight of the evidence. See Monongahela Power Co. v. 

Pub. Util. Comm., 104 Ohio St.3d 571, 2004-Ohio-6896, 820 N.E.2d 921, ¶ 29. 

The applicable statute in this case, R.C. 4928.143(B)(2)(h), specifically authorizes 

an ESP to include provisions relating to modernization incentives. The commission 

simply created a rider to do just that. As the commission acted under law by 

fulfilling and following the applicable statute and acted within reason, I conclude 

that the record contains probative evidence sufficient to show that the commission 

did not act against the manifest weight of the evidence, and I would accordingly 

affirm. 

 O’CONNOR, C.J., concurs in the foregoing opinion. 

_________________ 

 Walter Haverfield, L.L.P., and Mark I. Wallach; and Shannon Fisk, for 

appellant Sierra Club. 

 Bruce J. Weston, Consumers’ Counsel, Maureen R. Willis and William 

Michael, Assistant Consumers’ Counsel, for appellant Ohio Consumers’ Counsel. 

 Thomas R. Hays, Leslie Kovacik, and John Borell, for appellants Northwest 

Ohio Aggregation Coalition, City of Maumee, City of Northwood, City of Oregon, 

City of Perrysburg, City of Toledo, City of Waterville, Lake Township Board of 

Trustees, Lucas County Board of Commissioners, Perrysburg Township Board of 

Trustees, Village of Holland, and Village of Ottawa Hills. 
January Term, 2019 

37 

 Bricker & Eckler, L.L.P., Glenn S. Krassen, and Dane Stinson, for appellant 

Northeast Ohio Public Energy Council. 

 Carpenter Lipps & Leland, L.L.P., and Kimberly W. Bojko, for appellant 

Ohio Manufacturers’ Association Energy Group. 

 Gupta Wessler, P.L.L.C., and Rachel Bloomekatz, for appellants Ohio 

Environmental Council, Environmental Defense Fund, and Environmental Law & 

Policy Center. 

 John Finnigan, for appellant Environmental Defense Fund. 

 Trent Dougherty and Miranda Leppla, for appellant Ohio Environmental 

Council. 

 Madeline Fleisher, for appellant Environmental Law & Policy Center. 

 Dave Yost, Attorney General, Thomas W. McNamee, William L. Wright, 

Thomas G. Lindgren, and Steven L. Beeler, Assistant Attorneys General, for 

appellee, Public Utilities Commission of Ohio. 

 Calfee, Halter & Griswold, L.L.P., James F. Lang, and N. Trevor 

Alexander; Jones Day, and Yvette McGee Brown; and Scott J. Castro, for 

intervening appellees Ohio Edison Company, Cleveland Electric Illuminating 

Company, and Toledo Edison Company. 

 Boehm, Kurtz & Lowry, Michael L. Kurtz, and Jody Kyler Cohn, for 

intervening appellee Ohio Energy Group. 

_________________