Court Opinion

ID: 6756546
Source: CourtListenerOpinion
Date Created: 2022-07-21 00:27:35.205517+00
Date Added: 2024-06-11T16:01:58.814675
License: Public Domain

Locher, J.,
concurring in part and dissenting in part. I concur in the portion of the majority opinion which holds that the Public Utilities Commission erred in failing to deduct customer deposits from the rate base pursuant to R. C. 4909.05(1) and (J), or, alternatively, by failing to offset working capital with customer deposits as required by paragraph five of the svllabus in Cincinnati v. Pub. Util. Comm. (1954), 161 Ohio St. 395.
As for the remaining portion of the majority opinion, I respectfully dissent.
"With the passage of Am. Sub. S. B. No. 94, we enter into a new era of rate regulation in Ohio for electric utilities. The cause sub judice, which primarily concerns itself with the inclusion of CWTP, presents a novel question which will be the guide for future applications of rate base increases. In the instant cause approximately $20,000,000 of the $28,682,000 increase in revenue is attributable to the commission’s decision to include $100,531,000 of CWTP in the rate base.
This case has great significance not only in the total amount of money involved in this case; and in future cases, but more importantly because the commission so cavalierly authorized the inclusion of the CWTP in the rate base, which represents a suspect exodus from traditional regulatory principles. The commission noted the significant, precedential nature of this case when it stated:
* * [T]he Commission is still gaining experience in. applying the new law and it is obvious that the parties to this proceeding perceive the importance of their role as *118the Commission begins formulating new policies and examining-the' applicability of existing precedent.”
Admitting the importance of this case, the commission awarded an unprecedented $100,531,000 in CWIP in the rate base, which was approximately $90,000,000 more than the staff had recommended. The great disparity between the' amount ultimately awarded and the amount recommended by the staff coupled with the lack of enunciated standards by which the commission determined the amount to be awarded is a clear abuse of discretion by the commission.
Both the staff and the intervenor suggest that a cash flow problem must exist or that there must be a financial stress to justify the inclusion of CWIP in the rate base. The applicant’s own witness, John P. Utley, testified that the utility company should only be permitted to include that amount of CWTP in the rate base which is sufficient to improve the cash flow. Consideration of a cash flow is admittedly a fundamental factor in allowance of CWIP in the rate base. Thus, the utility is not entitled to an automatic inclusion of CWTP in the rate base, but instead the commission should permit this inclusion only if the utility demonstrates the requisite need for the increase. This need should not be absolute upon a showing of financial stress. Financial deficiency, standing alone, should not become a carte blanche authorization for the utility to pass the increase on to its tariff customers. This is especially true when, as herein, policies and decisions caused the company to be in a financially deficient position and where the company can alleviate the situation without necessitating higher consumer rates.
Public utilities because of their monopolistic nature should be held to a higher standard in managing the affairs of the company. They, in effect, have a fiduciary duty to the public as well as to the shareholders. The public interest increases with a monopoly.
As Commissioner David Sweet so aptly discloses in his dissenting opinion:
*119“The Staff Report clearly documents the failure of C&SOE to obtain-optimal levels of output from its capital stock — the company has the worst performance record of any Ohio eledric utility in utilizing its capital or labor efficiently (both in terms of net generation per employee and net generation per dollar of net plant in service).”
The commission has a duty to require the company to justify its decisions before allowing the utility to pass the increase on to its tariff customers. The commission realized that the need for CWIP inclusion in the rate base was promulgated by questionable management policies and decisions, because its own staff brief noted that:
“If it is true that the Company faces a situation where it needs revenue relief to finance additional capacity construction, the past decisions of the company under its capacity planning philosophy have contributed significantly to this economic problem.”
The commission is applying the “band-aid to the deep wound” in order to stop the more serious deep-rooted problems that will continue to plague the company. This “band-aid” remedy, which is the $100,531,000 inclusion of CWIP in the rate base, is but a mere forestalling of future rate increases. Commissioner Sweet states that the applicant has gone on record that it has the intention of filing additional increases-in the near future.
The commission must promulgate criteria and standards that will force the utilities to justify their decisions and correct any judgmental error prior to raising the consumers’ rates by the inclusion of CWIP in the rate base. A well-recognized' legal standard is that “predictability * * * is essential in all areas of the law, including administrative law.” Cleveland Elec. Illuminating Co. v. Pub. Util. Comm. (1975), 42 Ohio St. 2d 403, 431.
The commission claims its decision is based upon relevant facts in the record. However, the record is void of any guidance as to what those factors might be for future cases. It is well established that discretion is abused if it is exercised without rational explanation, inexplicably de*120parting from established policies. Wong Wing Hang v. Immigration & Naturalization Serv. (C. A. 2, 1966), 360 F. 2d 715, 719.
The commission has a two-fold duty to perform. First, it must establish standards for future decisions on issues of allowing CWIP in the rate base. Furthermore, the commission must initiate and direct the utility in the areas of capacity planning and utilization prior to allowing rate increases in the future.
This is especially crucial because this case will serve as a guide for future R. C. Chapter 4909 rate increases. I would remand this cause to the commission to establish standards as outlined above.