[Cite as In re Application of Columbus S. Power Co., 134 Ohio St.3d 392, 2012-Ohio-5690.] 

IN RE APPLICATION OF COLUMBUS SOUTHERN POWER COMPANY FOR 

ADMINISTRATION OF THE SIGNIFICANTLY EXCESSIVE EARNINGS TEST;

OHIO ENERGY GROUP ET AL., APPELLANTS AND CROSS-APPELLEES;

COLUMBUS SOUTHERN POWER COMPANY, APPELLEE AND CROSS-APPELLANT;

PUBLIC UTILITIES COMMISSION OF OHIO, APPELLEE. 

[Cite as In re Application of Columbus S. Power Co., 134 Ohio St.3d 392, 

2012-Ohio-5690.] 

Public utilities—Electric distribution companies operating under electric security 

plans—R.C. 4128.143(F)—Standard of “significantly excessive earnings” 

not void for vagueness—Treatment of off-system sales and associated 

assets. 

(No. 2011-0751—Submitted March 21, 2012—Decided December 6, 2012.) 

APPEALS and CROSS-APPEAL from the Public Utilities Commission of Ohio, 

No. 10-1261-EL-UNC. 

_______________ 

CUPP, J.

{¶ 1} Electric distribution utilities that opt to provide service under an 

electric security plan (“ESP”) must undergo an annual earnings review. If their 

plan resulted in “significantly excessive earnings” compared to similar 

companies, the utility must return the excess to its customers. R.C. 4928.143(F). 

In the case below, the Public Utilities Commission found that Columbus Southern 

Power’s 2009 earnings were significantly excessive by over $42 million. 

{¶ 2} There are three appeals from the order. Columbus Southern Power 

(“CSP”) asserts that R.C. 4928.143(F) is unconstitutionally vague, and the Ohio 

Energy Group and the Office of the Ohio Consumers’ Counsel (collectively, 

“OEG”) and Industrial Energy Users-Ohio (“IEU”) raise different arguments that 
SUPREME COURT OF OHIO

2 

the commission erred in applying the statute. After careful review of these 

appeals, we find merit in none of the arguments, and we affirm. 

Factual and Procedural Background 

{¶ 3} Ohio requires electric distribution utilities to provide consumers 

with “a standard service offer of all competitive retail electric services necessary 

to maintain essential electric service to consumers, including a firm supply of 

electric generation service.” R.C. 4928.141(A). “The utility may provide the 

offer in one of two ways: through a ‘market rate offer’ under R.C. 4928.142 or 

through an ‘electric security plan’ under R.C. 4928.143.” In re Application of 

Columbus S. Power Co., 128 Ohio St.3d 512, 2011-Ohio-1788, 947 N.E.2d 655, 

¶ 5. The American Electric Power operating companies, CSP and Ohio Power, 

chose to provide service under an ESP. 

{¶ 4} The statute does not provide a detailed mechanism for establishing 

rates under an ESP. Plans may contain any number of provisions within a variety 

of categories so long as the plan is “more favorable in the aggregate” than the 

expected results of a market-rate offer. R.C. 4928.143(C)(1). But the statute does 

contain some limits, one of which is at issue in this case. 

{¶ 5} R.C. 4928.143(F) requires the commission annually to consider 

whether the ESP resulted in “significantly excessive earnings” compared to 

companies facing “comparable” risk: 

 With regard to the provisions that are included in an 

electric security plan under this section, the commission shall 

consider, following the end of each annual period of the plan, if 

any such adjustments resulted in excessive earnings as measured 

by whether the earned return on common equity of the electric 

distribution utility is significantly in excess of the return on 

common equity that was earned during the same period by publicly 
January Term, 2012 

3 

traded companies, including utilities, that face comparable 

business and financial risk, with such adjustments for capital 

structure as may be appropriate. Consideration also shall be given 

to the capital requirements of future committed investments in this 

state. 

{¶ 6} The utility bears the “burden of proof for demonstrating that 

significantly excessive earnings did not occur.” Id. If the commission “finds that 

such adjustments, in the aggregate, did result in significantly excessive earnings, 

it shall require the electric distribution utility to return to consumers the amount of 

the excess by prospective adjustments.” Id. 

{¶ 7} In the case below, the commission reviewed the companies’ 2009 

earnings. The companies had proposed to exclude from review certain revenue 

from “off-system sales,” that is, wholesale sales by the companies to nonretail 

customers. Several intervenors opposed the companies’ analysis. OEG argued 

that the statute did not permit the commission to exclude any earnings from 

review. IEU, in contrast, argued that many more items of revenue should have 

been excluded. And CSP and Ohio Power argued that the statute requiring 

earnings review was unconstitutionally vague. 

{¶ 8} The commission rejected all of these challenges. On the merits, 

the commission eliminated the off-system-sales revenue from review. Pub. Util. 

Comm. No. 10-1261-EL-UNC (Jan. 11, 2011) (the “order”) at 27-30. After 

making this adjustment, it found that Ohio Power “did not have significantly 

excessive earnings.” Id. at 35. CSP, on the other hand, was found to have had 

over $42 million in significantly excessive earnings. Id. 

{¶ 9} IEU and OEG appealed, and CSP filed a cross-appeal. The Ohio 

Partners for Affordable Energy filed an amicus brief, as did the FirstEnergy 

operating companies. 
SUPREME COURT OF OHIO

4 

Discussion 

{¶ 10} This case presents three separate appeals. CSP raises a 

constitutional, void-for-vagueness challenge; OEG and IEU raise different 

arguments, each asserting that the commission misapplied the statute. We 

consider CSP’s constitutional argument first. 

CSP’s Argument 

{¶ 11} CSP offers a single argument for overturning the order—that the 

statute requiring earnings review, R.C. 4928.143(F), is unconstitutionally vague. 

According to CSP, that section “fails to provide electric distribution utilities with 

fair notice, or the commission with meaningful standards, as to what is meant by 

‘significantly excessive earnings.’ ” CSP is incorrect, and we hold that the statute 

is constitutional. 

I. Standard of review 

{¶ 12} First, as a general matter, CSP bears a heavy burden of proof in 

challenging the constitutionality of an Ohio statute. CSP must establish beyond a 

reasonable doubt that the statute is unconstitutional. Arnold v. Cleveland, 67 

Ohio St.3d 35, 38–39, 616 N.E.2d 163 (1993). 

{¶ 13} CSP’s vagueness challenge faces an uphill climb for another 

reason. Tolerance for vagueness “depends in part on the nature of the 

enactment.” Hoffman Estates v. Flipside, Hoffman Estates, Inc., 455 U.S. 489, 

498, 102 S.Ct. 1186, 71 L.Ed.2d 362 (1982). Some statutes trigger relatively 

strict vagueness review, such as eminent-domain statutes, Norwood v. Horney, 

110 Ohio St.3d 353, 2006-Ohio-3799, 853 N.E.2d 1115, ¶ 88, statutes imposing 

criminal sanctions, Roark & Hardee L.P. v. Austin, 522 F.3d 533, 552 (5th 

Cir.2008), and statutes implicating constitutionally protected rights, Columbia 

Gas Transm. Corp. v. Levin, 117 Ohio St.3d 122, 2008-Ohio-511, 882 N.E.2d 

400, ¶ 42. 
January Term, 2012 

5 

{¶ 14} In contrast, “laws directed to economic matters are subject to a less 

strict vagueness test than laws interfering with the exercise of constitutionally 

protected rights.” Id.; see also, e.g., Hoffman Estates, 455 U.S. at 498 (“economic 

regulation is subject to a less strict vagueness test * * *”). That is, a “greater 

degree of ambiguity will be tolerated in statutes which * * * merely impose civil, 

as opposed to criminal penalties” and “when the statute regulates the conduct of 

businesses.” Big Bear Super Market No. 3 v. Immigration & Naturalization Serv., 

913 F.2d 754, 757 (9th Cir.1990). Compare United States v. Dimitrov, 546 F.3d 

409, 414 (7th Cir.2008) (upholding a statute imposing criminal sanctions when a 

defendant “operated his business in a highly regulated industry”). 

{¶ 15} R.C. 4928.143(F) is a civil statute directed to economic matters in 

a highly regulated industry, and it does not implicate any constitutionally 

protected conduct. Therefore, we apply a less strict vagueness test. 

{¶ 16} CSP rejoins that Norwood v. Horney, 110 Ohio St.3d 353, 2006-

Ohio-3799, 853 N.E.2d 1115, requires heightened scrutiny here because this case 

involves “the taking of private property rights.” We did not formulate our holding 

in Norwood so broadly, however. We held that heightened scrutiny applies 

“when a court reviews an eminent-domain statute or regulation.” Id. at ¶ 88. CSP 

makes no express argument that R.C. 4928.143(F) qualifies as “an eminentdomain statute.”

{¶ 17} Norwood does not require heightened scrutiny here. In that case, 

we analyzed a law providing for the physical appropriation of real estate for 

public use, not a law (like this one) that imposes a monetary assessment. Whether 

such a law causes a taking is a difficult question, and CSP does not address it. 

See, e.g., McCarthy v. Cleveland, 626 F.3d 280, 285 (6th Cir.2010) (“all circuits 

that have addressed the issue have uniformly found that a taking does not occur 

when the statute in question imposes a monetary assessment that does not affect a 

specific interest in property”); see also Swisher Internatl., Inc. v. Schafer, 550 
SUPREME COURT OF OHIO

6 

F.3d 1046, 1057 (11th Cir.2008), citing E. Ents. v. Apfel, 524 U.S. 498, 118 S.Ct. 

2131, 141 L.Ed.2d 451 (1998) (“Five Supreme Court Justices have expressed the 

view that the Takings Clause does not apply where there is a mere general 

liability * * * and where the challenge seeks to invalidate the statute rather than 

merely seeking compensation for an otherwise proper taking”). 

{¶ 18} We did not address that question in Norwood, but we did address 

whether heightened scrutiny applied to civil penalties, and the answer was no: 

“[R]egulations that are directed to economic matters and impose only civil 

penalties are subject to a ‘less strict vagueness test.’ ” Id., 110 Ohio St.3d 353, 

2006-Ohio-3799, 853 N.E.2d 1115, at ¶ 85, quoting Hoffman Estates, 455 U.S. at 

498, 102 S.Ct. 1186, 71 L.Ed.2d 362. This language describes R.C. 4928.143(F), 

so Norwood does not require stricter scrutiny here. 

II. R.C. 4928.143(F) is not unconstitutionally vague 

{¶ 19} Having established that a more lenient standard of review applies, 

we now address the merits of CSP’s vagueness challenge. 

{¶ 20} The void-for-vagueness doctrine is a component of the right to due 

process and is rooted in concerns that laws provide fair notice and prevent 

arbitrary enforcement. Skilling v. United States, ___ U.S. ___, 130 S.Ct. 2896, 

2933, 177 L.Ed.2d 619 (2010). To prevail, a challenging party “must show that 

the statute is vague ‘not in the sense that it requires a person to conform his 

conduct to an imprecise but comprehensible normative standard, but rather in the 

sense that no standard of conduct is specified at all.’ ” State v. Anderson, 57 Ohio 

St.3d 168, 171, 566 N.E.2d 1224 (1991), quoting Coates v. Cincinnati, 402 U.S. 

611, 614, 91 S.Ct. 1686, 29 L.Ed.2d 214 (1971). “Many statutes * * * require 

administrative and judicial construction to clarify specific language. Such statutes 

are not unconstitutionally vague.” Minnesota ex rel. Alexander v. Block, 660 F.2d 

1240, 1255 (8th Cir.1981), fn. 35. 
January Term, 2012 

7 

A. We consider CSP’s constitutional challenge as applied to the facts of 

this case 

{¶ 21} Litigants may challenge the constitutionality of a statute on its face 

or as applied. CSP claims that R.C. 4928.143(F) cannot withstand scrutiny, either 

on its face or as applied. Yet CSP does not make clear which type of challenge it 

brings. We need not determine, however, whether the challenge is facial or as 

applied, because the only challenge available to CSP in this case is an as-applied 

challenge. 

{¶ 22} Generally, a court examining a facial-vagueness challenge to a 

statute that implicates no constitutionally protected conduct will uphold that 

challenge only if the statute is impermissibly vague in all of its applications. 

Columbia Gas Transm. Corp., 117 Ohio St.3d 122, 2008-Ohio-511, 882 N.E.2d 

400, ¶ 43, citing Hoffman Estates, 455 U.S. at 494-495, 102 S.Ct. 1186, 71 

L.Ed.2d 362. CSP has not presented the arguments necessary to support a facial 

challenge. It does not argue that R.C. 4928.143(F) is “impermissibly vague in all 

of its applications.” Nor does CSP offer any argument that the statute implicates 

any constitutionally protected conduct. Moreover, where, as in this case, a 

vagueness challenge does not involve the First Amendment, the analysis must be 

examined in the light of the facts of the case at hand. United States v. Mazurie, 

419 U.S. 544, 550, 95 S.Ct. 710, 42 L.Ed.2d 706 (1975); United States v. 

Wayerski, 624 F.3d 1342, 1347 (11th Cir.2010) (“Where * * * a vagueness 

challenge does not involve the First Amendment, the analysis must be as applied 

to the facts of the case”). 

{¶ 23} That being the case, we “consider whether [the] statute is vague as 

applied to the particular facts at issue.” Holder v. Humanitarian Law Project, 

___ U.S. ___, 130 S.Ct. 2705, 2718–2719, 177 L.Ed.2d 355 (2010); see also 

Hoffman Estates at 495 (a party “who engages in some conduct that is clearly 

proscribed cannot complain of the vagueness of the law as applied to the conduct 
SUPREME COURT OF OHIO

8 

of others”); Broadrick v. Oklahoma, 413 U.S. 601, 608, 93 S.Ct. 2908, 37 L.Ed.2d 

830 (1973) (“even if the outermost boundaries of [a statute are] imprecise, any 

such uncertainty has little relevance * * * where appellants’ conduct falls squarely 

within the ‘hard core’ of the statute’s proscriptions and appellants concede as 

much”). 

B. CSP has not shown that R.C. 4928.143(F) is vague as applied to the 

facts of this case 

{¶ 24} CSP has not shown that the “statute is vague as applied to the 

particular facts at issue.” Holder, ___ U.S. ___, 130 S.Ct. at 2718–2719, 177 

L.Ed.2d 355. The company has not challenged any of the commission’s 

determinations under R.C. 4928.143(F): not the calculation of CSP’s return on 

equity, not the selection of the peer group, and not whether its return significantly 

exceeded that of the peer group. The commission in fact adopted CSP’s proposed 

return on equity and proposed peer group. And CSP does not even assert, much 

less demonstrate, that the commission erred in finding that CSP’s return on equity 

significantly exceeded that of comparable companies. CSP’s silence on these 

points is significant. CSP cannot prevail on an as-applied challenge when it does 

not argue that the statute was erroneously applied to it. 

C. R.C. 4928.143(F) provides substantial guidance to the commission

{¶ 25} And even leaving aside the lack of an as-applied argument, we find 

that the statute provides considerable guidance to the commission. The company 

asserts that R.C. 4928.143(F) gives “no notice or guidance as to what is meant by 

‘significantly excessive earning’ and how that determination is to be made.” We 

disagree. 

{¶ 26} Whether a plan “resulted in excessive earnings” must be 

“measured by whether the earned return on common equity of the electric 

distribution utility is significantly in excess of the return on common equity that 

was earned during the same period by publicly traded companies, including 
January Term, 2012 

9 

utilities, that face comparable business and financial risk, with such adjustments 

for capital structure as may be appropriate.” R.C. 4928.143(F). These are not 

meaningless words, and they provide a substantial amount of guidance on how to 

determine significantly excessive earnings. The commission must calculate 

CSP’s “earned return on common equity,” determine a comparable group of 

publicly traded companies (which itself would require numerous other analyses), 

and then compare their earned returns on equity over the same period of time. Id. 

{¶ 27} Having done all that, it must then determine whether CSP’s 

earnings are “significantly excessive.” Id. The term “significantly” also provides 

guidance. In context, “significant” denotes “weighty” or “notable,” which tells 

the commission to look for more than a mere arithmetical excess before returning 

funds to customers. Webster’s Third New International Dictionary 2116 (2002). 

{¶ 28} Despite fixing its argument on the term “significantly,” CSP cites 

no case law evaluating its use. But many courts have upheld the term against 

vagueness challenges. E.g., VIP of Berlin, L.L.C. v. Berlin, 593 F.3d 179, 186–

191 (2d Cir.2010) (rejecting claim that “significant portion” is unconstitutionally 

vague); Williams v. Astrue, D.Kansas No. 09-1341-SAC, 2010 WL 4291918, at 

*4 (Oct. 26, 2010) (holding in review of benefits order that “the word ‘significant’ 

is not unduly vague”); PrimeCo Personal Communications, L.P. v. Illinois 

Commerce Comm., Ill.Cir.Ct., Cook Cty. No. 98 CH 05500, 2000 WL 34016430, 

at *17 (Jan. 11, 2000) (the phrase “no significant impact on the net income” is not 

vague); Pennsylvania v. Fahy, 512 Pa. 298, 315, 516 A.2d 689 (1986) (rejecting 

claim that the term “significant history” is vague and overbroad); F. Ronci Co., 

Inc. v. Narragansett Bay Water Quality Mgt. Dist. Comm., R.I. Sup.Ct. No. C.A. 

NO. 87-0428, 1988 WL 1016804, at *4 (Feb. 9, 1988) (“The Court concludes that 

the use of the term ‘significant quantities’ does not render the statutory language 

unconstitutionally vague”); but see, e.g., Knoxville v. Entertainment Resources, 

L.L.C., 166 S.W.3d 650, 652, 658 (Tenn.2005) (holding in case involving First 
SUPREME COURT OF OHIO

10 

Amendment concerns that “the phrase ‘substantial or significant portion of its 

stock and [sic] trade’ is impermissibly vague”). 

{¶ 29} All of these required determinations limit the scope of the 

commission’s analysis. Further, they provide numerous points that may be 

litigated below and challenged on appeal to provide a check on arbitrary 

enforcement by the commission. See Skilling, ___ U.S. ___, 130 S.Ct. at 2933, 

177 L.Ed.2d 619. In making its argument, CSP repeatedly quotes only two or 

three words of the statute (“significantly excessive earnings”) as though it 

provided none of the foregoing guidance. But the statute says much more, and we 

cannot say that “ ‘no standard of conduct is specified at all.’ ” Anderson, 57 Ohio 

St.3d at 171, 566 N.E.2d 1224, quoting Coates, 402 U.S. at 614, 91 S.Ct. 1686, 29 

L.Ed.2d 214. 

D. There are no “fair notice” concerns in this case

{¶ 30} We also hold that this case presents no concerns about fair notice. 

A primary concern underpinning the vagueness doctrine is that “ ‘[v]ague laws 

may trap the innocent by not providing fair warning.’ ” Hoffman Estates, 455 

U.S. at 498, 102 S.Ct.1186, 71 L.Ed.2d 362, quoting Grayned v. Rockford, 408 

U.S. 104, 108, 92 S.Ct. 2294, 33 L.E.2d 222 (1972). CSP cannot credibly 

complain that it lacked notice; it not only had notice of R.C. 4928.143(F), but 

chose to be subject to it. Under R.C. 4928.141, CSP was required to provide a 

standard service offer “in accordance with section 4928.142 or 4928.143 of the 

Revised Code.” Only the latter section requires excessive-earnings review; the 

former establishes market-based rates. The law has contained the earnings-review 

provision from the beginning, so CSP was on notice that it faced such review if it 

opted for an ESP. Presumably, the potential reward outweighed the risk. Thus, 

CSP’s choice to subject itself to earnings review undermines any argument that it 

lacked fair notice. 
January Term, 2012 

11 

III. CSP’s counterarguments 

{¶ 31} CSP raises several counterarguments, but we find them 

unpersuasive. First, it cites no cases reviewing public-utility-regulatory statutes, 

but depends entirely on cases that involved relatively strict scrutiny and thus are 

not on point. Most of the cited cases reviewed statutes imposing criminal 

penalties, and all required a stricter standard of review than applicable here. See 

Cline v. Frink Dairy Co., 274 U.S. 445, 453–454, 47 S.Ct. 681, 71 L.Ed. 1146 

(1927); Belle Maer Harbor v. Charter Twp. of Harrison, 170 F.3d 553, 557 (6th 

Cir.1999); Carter v. Welles-Bowen Realty, Inc., 719 F.Supp.2d 846, 852 

(N.D.Ohio, 2010); Norwood v. Horney, 110 Ohio St.3d 353, 2006-Ohio-3799, 

853 N.E.2d 1115, ¶ 88. 

{¶ 32} CSP also argues that the administrative process employed by the 

commission is evidence of the vagueness of the statute. But this point is 

unavailing. Courts have often recognized that a “process of interpretation” should 

be allowed to flesh out statutory standards. E.g., Bauer v. Shepard, 620 F.3d 704, 

717 (7th Cir.2010) (the Supreme Court is “chary of holding laws unconstitutional 

‘on their face’ precisely because they have recognized that vagueness will be 

reduced through a process of interpretation”); Minnesota ex rel. Alexander v. 

Block, 660 F.2d at 1254, fn. 35 (“Many statutes * * * require administrative and 

judicial construction to clarify specific language. Such statutes are not 

unconstitutionally vague”). 

{¶ 33} Finally, CSP concludes its argument by asserting that several 

features of R.C. 4928.143(F) compound the vagueness of the statute. But CSP 

provides no legal authority or argument suggesting that any of these features are 

unlawful or otherwise relevant to the void-for-vagueness analysis. 

{¶ 34} In sum, we reject CSP’s argument that R.C. 4928.143(F) is 

unconstitutionally vague. 
SUPREME COURT OF OHIO

12 

IEU’s and OEG’s Arguments 

{¶ 35} We turn to the remaining two appeals from OEG and IEU. Both 

concern the commission’s ability to adjust the utility’s earnings before 

considering whether those earnings are significantly excessive. The commission 

removed certain revenue from off-system sales from CSP’s earnings. Although 

OEG and IEU raise different (and in some ways opposite) arguments, we must 

reject both of them. 

I. We defer to the commission’s reasonable 

interpretation of R.C. 4928.143(F) 

{¶ 36} While we generally review questions of law de novo, we will defer 

to the commission’s interpretation of a statute “where there exists disparate 

competence between the respective tribunals in dealing with highly specialized 

issues.” Ohio Consumers’ Counsel v. Pub. Util. Comm., 58 Ohio St.2d 108, 110, 

388 N.E.2d 1370 (1979). One area in which we have “consistently deferred to the 

expertise of the commission” is in determining rate-of-return matters. Ohio 

Edison Co. v. Pub. Util. Comm., 63 Ohio St.3d 555, 561, 589 N.E.2d 1292 (1992), 

fn. 3. 

{¶ 37} “Limited judicial review of a rate of return determination is sound” 

because “ ‘cost of capital analyses * * * are fraught with judgments and 

assumptions.’ ” Ohio Consumers’ Counsel v. Pub. Util. Comm., 64 Ohio St.2d 

71, 79, 413 N.E.2d 799 (1980), quoting In re Dayton Power & Light Co., Pub. 

Util. Comm. No. 78-92-EL-AIR, at 26, 29 P.U.R.4th 145 (Mar. 9, 1979). Thus, if 

a related determination is “fraught with similar judgments and assumptions,” it is 

“appropriate to apply a similar limited standard of review.” Id.; see also, e.g.,

Ohio Fuel Gas Co. v. Pub. Util. Comm., 174 Ohio St. 585, 602, 191 N.E.2d 347 

(1963) (“In the end, the increase in earnings and rate of return allowed is a 

judgment figure established by the Public Utilities Commission in the exercise of 

its administrative expertise” [emphasis sic]). 
January Term, 2012 

13 

{¶ 38} The statute under review is essentially a rate-of-return statute, and 

it requires numerous judgments regarding rate-of-return issues, so we review the 

commission’s interpretations deferentially. Although R.C. 4928.143(F) does not 

require the commission to actually set the utility’s rate of return, it does require 

the commission to make numerous related determinations, and the statute as a 

whole entrusts the commission with regulating “the increase in earnings and rate 

of return [to be] allowed.” Ohio Fuel Gas Co., 174 Ohio St. at 602. Thus, in 

accordance with the cases cited above, we will defer to the commission’s 

interpretation of R.C. 4928.143(F) if it is reasonable. 

{¶ 39} We hold that it was. The commission explains in its brief that it 

understands R.C. 4928.143(F) as requiring it to “do three things.” “First it needs 

to determine what level of earnings is ‘excessive.’ ” Second, “it must decide how 

high the excessive earnings must be to be considered ‘significantly excessive.’ ” 

Finally, it “must eliminate” from earnings any portion that the utility “has shown 

not to be tied to the ESP that is being reviewed.” 

{¶ 40} This is a reasonable interpretation of R.C. 4928.143(F). The 

statute expressly requires the first two determinations. And the third point 

(eliminating earnings not shown “to be tied to the ESP”) finds support in the 

statutory language. The statute requires the commission to find whether “such 

adjustments”—referring to “the provisions that are included in an electric security 

plan”—“resulted in excessive earnings.” (Emphasis added.) R.C. 4928.143(F). 

This implies that earnings not caused by the plan may be excluded from 

consideration. This statutory language supports the commission’s reading, and no 

other part of the statute expressly contradicts it. 

II. OEG’s alternative interpretation of R.C. 4928.143(F) 

does not compel reversal 

{¶ 41} In its appeal, OEG argues that contrary to the commission’s 

interpretation, the commission cannot eliminate any earnings before conducting 
SUPREME COURT OF OHIO

14 

the earnings review. As noted above, the commission eliminated from CSP’s 

earnings certain revenue from “off-system sales,” that is, wholesale sales by CSP 

to nonretail customers. Order at 27-30. According to OEG, this lowered CSP’s 

excess earnings by $22.24 million.1 OEG argues that “R.C. 4928.143(F) requires 

the [commission] to compare all of a utility’s earnings to all of the earnings of 

companies with comparable risk.” (Emphases sic.) In its view, “the statutory 

language does not permit the [commission] to selectively exclude certain utility 

earnings for purposes of the [excessive-earnings] comparison.” 

{¶ 42} But as just discussed, the statutory language does allow such an 

inference and does not definitively prohibit it. It does not expressly forbid 

adjustments for non-ESP earnings, nor does it use the phrase “all earnings” or 

some equivalent. OEG’s interpretation is not necessarily unreasonable, but unlike 

the commission’s, OEG’s is not entitled to deference. 

{¶ 43} We must reject OEG’s challenge to the order. 

III. IEU’s counterarguments also lack merit 

{¶ 44} IEU raises two basic arguments, but neither compels reversal. 

A. In its first argument, IEU fails to show prejudice 

{¶ 45} Whereas OEG argues that the commission should not have 

excluded any earnings from review, IEU argues that the commission should have 

excluded more. As IEU sees it, the commission may consider the companies’ 

earned return on equity only “from the ESP” and not “for all lines of regulated 

and unregulated businesses that reside within [the companies].” Therefore, IEU 

 

1. In agreeing to eliminate the off-system sales, the commission also noted, but did not resolve, 

arguments raised by CSP that federal law prohibited the commission from counting the off-system 

sales. Order at 27, 30. Such sales are regulated by the Federal Energy Regulatory Commission 

under the Federal Power Act, and CSP argued that federal law prohibited Ohio “from interfering 

with the Companies’ ability to realize revenue rightfully received from wholesale power sales 

pursuant to contracts or rates approved by FERC.” Id. at 27. CSP also argued that counting the 

off-system sales would violate the Commerce Clause of the United States Constitution. Id. The 

commission did not reach these issues, and under our holding, we need not either. 
January Term, 2012 

15 

argues, CSP should have prepared “a comprehensive jurisdictional allocation 

study” showing what earnings resulted from the ESP and what did not. 

{¶ 46} IEU has failed to show prejudice, as it must to warrant reversal. 

Ohio Consumers’ Counsel v. Pub. Util. Comm., 121 Ohio St.3d 362, 2009-Ohio604, 904 N.E.2d 853, ¶ 12 (“this court will not reverse a commission order absent 

a showing by the appellant that it has been or will be harmed or prejudiced by the 

order”). In this proposition, IEU neither explains nor provides evidence of which 

adjustments the commission should have made but did not. This lack of evidence 

and explanation makes it impossible to know whether IEU was prejudiced by the 

alleged failure to “jurisdictionalize” CSP’s earnings. Consequently, we must 

reject IEU’s first argument. 

B. IEU’s second argument—that the commission should have 

eliminated CSP’s transmission assets from review—also fails to 

demonstrate error 

{¶ 47} IEU’s second argument alleges that the commission should have 

excluded transmission assets when it excluded CSP’s revenue from off-system 

sales. For any revenue excluded from review, it would be necessary to exclude 

the related portion of equity (i.e., the assets that earned the excluded return). 

Failing to do so would skew the rate of return too low. The commission did 

exclude some of CSP’s equity to reflect the exclusion of off-system sales, order at 

30, but IEU asserts that the commission did not remove enough equity—that it did 

not “include[] an adjustment to equity to transmission plant.” 

{¶ 48} Because this argument is also speculative, we must reject it. IEU’s 

argument turns on two questions of fact, both demanding substantial expertise in 

utility operations, accounting, and finance to answer: Should any of CSP’s 

transmission assets have been excluded to reflect the exclusion of earnings from 

off-system sales? And if so, how much? Yet IEU does not point to any testimony 
SUPREME COURT OF OHIO

16 

or other evidence suggesting that such an exclusion would have been appropriate. 

Without this factual support, its argument cannot succeed. 

{¶ 49} In fact, the testimony that IEU does cite cuts against its argument 

on both points. As to the first point—whether there should even be any exclusion 

of transmission assets—the witness cited by IEU stated on cross-examination, 

“[T]here’s no way I could even begin to imagine how I would say that 

[transmission] is a component of off-system sales,” and also stated that he 

suspected that “transmission costs are * * * netted out of the profits from offsystem sales.” As to the second point—what specific exclusion would be 

appropriate—the same witness suggested that calculating an adjustment would 

not be workable: he “could not figure out a way of cleanly * * * utilizing other 

aspects of the company’s assets,” such as transmission assets, in excluding the 

assets from consideration. 

{¶ 50} IEU also cites the testimony of an American Electric Power 

witness who acknowledged that the company had not “exclude[d] the earnings 

associated with the transmission business.” This says nothing about whether such 

an exclusion should have been made and, if so, the amount. Thus, it provides no 

support for IEU’s argument. 

{¶ 51} To overturn the commission on a question of fact, IEU must show 

that the order is “so clearly unsupported by the record as to show 

misapprehension, mistake, or willful disregard of duty.” AT&T Communications 

of Ohio, Inc. v. Pub. Util. Comm., 88 Ohio St.3d 549, 555, 728 N.E.2d 371 

(2000). IEU has not shown that the order lacked record support; indeed, the only 

evidence IEU cites contradicts its own argument. Therefore, we reject it. 

Conclusion 

{¶ 52} For the foregoing reasons, we affirm the order. Contrary to CSP’s 

assertion, the statute is not unconstitutionally vague. And neither OEG nor IEU 
January Term, 2012 

17 

has shown that the commission unreasonably interpreted or applied R.C. 

4928.143(F). 

Order affirmed. 

O’CONNOR, C.J., and LUNDBERG STRATTON, O’DONNELL, LANZINGER,

and MCGEE BROWN, JJ., concur. 

PFEIFER, J., dissents. 

_____________ 

PFEIFER, J., dissenting. 

{¶ 53} This case presents this court’s first opportunity to address the 

Public Utilities Commission of Ohio’s application of the significantly-excessiveearnings test (“SEET”) established by R.C. 4928.143(F). Through the SEET, the 

commission is to determine how much is too much for electric utilities to charge 

Ohio consumers pursuant to an electric security plan (“ESP”). It is a 

determination made after the fact, after consumers have paid their bills, in 

seeming adherence to the aphorism “It is better to beg forgiveness than ask 

permission.” But the return on investment that the commission allows in this case 

is not forgivable. It should not be ratified by this court. 

{¶ 54} This case tests whether the commission’s discretion on SEET 

matters is truly susceptible of meaningful judicial review. This court cannot 

allow its deference to the commission’s discretion to become an abdication of our 

duty to provide appellate review of the commission’s orders. The commission’s 

outrageous order in this case indicates that the commission believes that its orders 

have no requirement of reasonableness and that it has carte blanche to interpret 

statutes as it sees fit. But it is answerable to this court in applying laws passed by 

the General Assembly and is ultimately statutorily responsible to consumers to 

provide electric service for reasonable rates. 

{¶ 55} Columbus Southern Power (“CSP”) requests that this court 

overturn the commission’s order in this case because, it argues, R.C. 4928.143(F) 
SUPREME COURT OF OHIO

18 

is unconstitutionally vague. We should overturn the commission’s entire order, 

but not for the reason CSP suggests. Instead, we should hold that the commission 

abused its discretion in establishing a SEET threshold of 17.6 percent and, further, 

misapplied R.C. 4928.143(F) by removing off-system sales from its calculation of 

CSP’s income. The commission should start from scratch in this case. 

The Reasonableness of 17.6 Percent 

{¶ 56} In this case, the commission determined CSP’s SEET threshold to 

be 17.6 percent. That is, only a return on investment of more than 17.6 percent in 

2009, a year when the United States’ economy was in a recession, would be 

considered significantly excessive in comparison to other similarly situated 

entities. Only at that number would CSP’s profit be enough to trigger a refund to 

consumers. 

{¶ 57} How did the commission get to 17.6 percent? By employing the 

highly complex statistical analysis known as “splitting the baby.” As the 

commission points out in its order, AEP-Ohio argued for a SEET threshold of 

22.51 percent. The customer parties in the case put forth a proposed SEET 

threshold in the range of 11.58 percent to 13.58 percent, an average of 12.58 

percent. With those numbers to work with, the commission apparently raced to 

the middle: the halfway point between the proposed SEETs of the customer 

parties and AEP-Ohio is 17.545 percent. AEP-Ohio got the .055 percent roundup. 

{¶ 58} This might be all well and good were the numbers reflective of 

equally valid methodologies. But the commission’s judgments before and after 

the case at issue support the number put forth by the customer parties. 

{¶ 59} After the passage of Am.Sub.S.B. No. 221, the commission sought 

input from stakeholders to determine the methodology for determining what 

constitutes significantly excessive earnings. After a long process from October 

2009 through April 2010 that included a workshop, a comment period, a period to 
January Term, 2012 

19 

reply to comments, and a question-and-answer period before the commission, the 

commission produced In re Investigation into the Development of the 

Significantly Excessive Earnings Test Pursuant to Amended Substitute Senate Bill 

for Electric Utilities, Pub. Util. Comm. No. 09-786-EL-UNC, a finding and order 

intended to provide guidance on the interpretation and application of R.C. 

4928.142(D)(4), 4928.143(E), and 4928.143(F). After reviewing the input from 

interested parties, the commission came to the following conclusion regarding 

how to determine whether a utility’s earnings are significantly excessive: 

Having fully considered all the comments regarding establishing 

the threshold and in consideration of the discretion afforded the 

Commission in SB 221, the Commission concludes that 

“significantly excessive earnings” should be determined based on 

the reasonable judgment of the Commission on a case-by-case 

basis. 

09-786-EL-UNC Finding and Order, 28-29. So much for predictability. 

{¶ 60} Despite leaving the matter up to itself and its own judgment, the 

commission did set one important marker: 

[T]he Commission is willing to recognize a “safe harbor” of 200 

basis points above the mean in the comparable group. To that end, 

any electric utility earning less than 200 basis points above the 

mean of the comparable group will be found to not have 

significantly excessive earnings. 

Id. at 28-29. 
SUPREME COURT OF OHIO

20 

{¶ 61} It was that 200 basis points “safe harbor” that the customer parties 

based their excessive-earnings conclusion upon. Taking their calculation of a 

relevant return on investment of 9.58 percent for a comparable group of 

companies, they argued that significantly excessive earnings should run from the 

safe-harbor amount of 200 basis points up to 400 basis points. This would mean 

that significantly excessive earnings would fall somewhere between 11.58 and 

13.58 percent. Instead, the commission established a figure 800 basis points 

above the figure that the customer parties determined as the mean of the 

comparable group of companies. 

{¶ 62} Even accepting the commission’s return-on-investment figure of 

11 percent for comparable companies, the commission’s 17.6 percent figure is 

over 600 basis points above the mean in the comparable group. The commission 

blew its safe harbor out of the water. 

{¶ 63} And in a case announced in August of this year, In re Columbus S. 

Power Co., Pub. Util. Comm. Nos. 11-346-EL-SSO, 11-348-EL-SSO, 11-349-

EL-AAM, and 11-350-EL-AAM, 2012 WL 3542177, *30 (Aug. 8, 2012), the 

commission prospectively set a SEET threshold at 12 percent for AEP-Ohio, 

finding it “appropriate to establish a significantly excessive earnings test (SEET) 

threshold to ensure that the Company does not reap disproportionate benefits from 

the ESP. The evidence in the record demonstrates that a 12 percent [return on 

equity] would be at the high end of a reasonable range for return on equity * * *. 

Accordingly, for purposes of this ESP, the Commission will establish a SEET 

threshold for AEP-Ohio of 12 percent.” 

{¶ 64} That lower rate of return is appropriate for an industry with 

minimal risk, with built-in methods to recover costs from their customers. In In 

re Columbus S. Power Co. (Aug. 8, 2012), for instance, built-in protections for 

the utility include an alternative-energy rider, a generation-resource rider, a retailstability rider, a distribution-investment rider, a pool-modification rider, a phase-
January Term, 2012 

21 

in recovery rider, a transmission-cost-recovery rider, an enhanced-service 

reliability rider, an energy-efficiency and peak-demand reduction rider, an 

economic-development rider, and a storm-damage-recovery mechanism. 

{¶ 65} Most importantly, the lower SEET is consistent with the policy of 

this state to “[e]nsure the availability to consumers of adequate, reliable, safe, 

efficient, nondiscriminatory, and reasonably priced retail electric service.” R.C. 

4928.02(A). 

Off-System Sales 

{¶ 66} The commission also erred in excluding CSP’s off-system sales 

from the calculation of its return on investment, without any statutory authority. 

This court has “complete and independent power of review as to all questions of 

law” in appeals from the commission. Ohio Edison Co. v. Pub. Util. Comm., 78 

Ohio St.3d 466, 469, 678 N.E.2d 922 (1997). We should not forget that. This 

court has held that in matters of statutory interpretation, “we may rely on the 

expertise of a state agency in interpreting a law where ‘highly specialized issues’ 

are involved and ‘where agency expertise would, therefore, be of assistance in 

discerning the presumed intent of our General Assembly.’ ” Ohio Consumers’ 

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

213, ¶ 12, quoting Consumers’ Counsel v. Pub. Util. Comm., 58 Ohio St.2d 108, 

110, 388 N.E.2d 1370 (1979). 

{¶ 67} This is not a case in which this court needs to rely on the 

commission’s interpretation of a statute. Indeed, we should not simply assume 

that any statute involving public utilities concerns “highly specialized issues.” 

Here, the General Assembly spells out in plain English what it means by 

“excessive earnings.” Excessive earnings are “measured by whether the earned 

return on common equity of the electric distribution utility is significantly in 

excess of the return on common equity that was earned during the same period by 
SUPREME COURT OF OHIO

22 

publicly traded companies, including utilities, that face comparable business and 

financial risk, with such adjustments for capital structure as may be appropriate.” 

{¶ 68} I would hold that CSP’s off-system sales should have been 

included in the determination of whether CSP’s earnings were significantly 

excessive. They were, after all, earnings. The statute does not allow for 

removing any amount of income—either from the utility at issue or from the 

comparable publicly traded companies—from the assessment. The statute seeks 

an “apples to apples” comparison; taking a few slices out of the Ohio utility’s 

apples skews the evaluation. 

{¶ 69} Our deference to—or, too often, our reliance on—the 

commission’s interpretation of statutes diminishes this court’s role in reviewing 

the commission’s determinations and shifts the balance too far in favor of the 

executive branch in the separation of powers. Ultimately, Ohio consumers pay 

the price for that deference. Judging from Ohio utilities’ status at the top of the 

heap in profits nationwide—CSP had the highest equity return of 143 investorowned regulated electric utilities in the United States in 2009—that price is steep. 

___________________ 

 McNees, Wallace & Nurick, L.L.C., Samuel C. Randazzo, Frank P. Darr, 

and Joseph E. Oliker, for appellant and cross-appellee Industrial Energy UsersOhio. 

 Boehm, Kurtz & Lowry, David F. Boehm, and Michael L. Kurtz, for 

appellant and cross-appellee Ohio Energy Group. 

 Bruce J. Weston, Ohio Consumers’ Counsel, Maureen R. Grady, Melissa 

R. Yost, and Kyle L. Verrett, for appellant and cross-appellee Ohio Consumers’ 

Counsel. 

 Steven T. Nourse and Matthew J. Satterwhite; and Porter, Wright, Morris 

& Arthur, L.L.P., Kathleen M. Trafford, and Daniel R. Conway, for appellee and 

cross-appellant Columbus Southern Power Company. 
January Term, 2012 

23 

 Michael DeWine, Attorney General, William L. Wright, Section Chief, 

and Thomas W. McNamee, Assistant Attorney General, for appellee Public 

Utilities Commission of Ohio. 

 Arthur E. Korkosz and Carrie M. Dunn, for amici curiae Ohio Edison 

Company, Cleveland Electric Illuminating Company, and Toledo Edison 

Company. 

 Colleen L. Mooney, for amicus curiae Ohio Partners for Affordable 

Energy. 

___________________________