Court Opinion

ID: 6774536
Source: CourtListenerOpinion
Date Created: 2022-07-21 00:48:08.405082+00
Date Added: 2024-06-11T16:02:46.948494
License: Public Domain

Moyer, C.J.,
dissenting. Because the majority decision applies Section 4, Article XVIII of the Ohio Constitution and the Certified Territory Act (“Act”) in violation of plain language and certain intent, I must respectfully dissent.
CEI acknowledges that the commission has no jurisdiction over either the Ohio Power/CPP contract or the CPP/MedCo contract. Yet CEI asked the commission, and now this court, to look beyond this lack of jurisdiction and recognize a cause of action under the Act. Simply put, MedCo’s artful compliance with the plain words in the Act to reduce its energy costs does not violate the Act and does not create an actionable claim under the facts presently before the commission or this court. The majority decision reaches beyond the allegations contained in CEI’s complaint to create an allegation that there actually is a contract *529between Ohio Power and MedCo: the only possible factual circumstance which could violate the Act and give rise to a cause of action between these parties.
Section 4, Article XVIII of the Ohio Constitution provides:
“Any municipality may acquire, construct, own, lease and operate within or without its corporate limits, any public utility the product or service of which is or is to be supplied to the municipality or its inhabitants, and may contract with others for any such product or service. * * *” (Emphasis added.)
Until today this provision meant that a municipality could choose to contract with any wholesale energy provider for the provision of energy to the municipal inhabitants. This is the situation no longer.
Moreover, the Act expressly provides:
“ * * * In the event that a municipal corporation refuses to grant a franchise or contract for electric service within its boundaries to an electric supplier whose certified territory is included within the municipality, any other electric supplier may serve the municipal corporation under a franchise or contract with the municipal corporation. ” (Emphasis added.) R.C. 4933.83(A).
The plain words of the statute have, until today, meant that a home-rule municipality could elect not to contract with its local public utility to supply the municipality’s energy requirements but, instead, could contract with any other energy provider of its choice to supply those needs.
The majority decision will have the effect of diminishing these rights of the municipality. It will discourage municipalities from contracting with the Ohio electrical supplier of their choice to satisfy the energy needs of the municipality. If a municipality wishes to purchase energy competitively to supply the needs of its citizens, it must either buy from the local public utility or go outside the state of Ohio to satisfy its energy needs. Home-rule municipalities will be unlikely to satisfy their energy requirements from a nonlocal Ohio energy producer, such as Ohio Power in this case, because such a purchase would create the very real threat of possible Act litigation at the commission by the aggrieved local public utility.
Additionally, Ohio’s low-cost energy producers will lose the opportunity to sell large blocks of electric energy in the wholesale market to Ohio’s home-rule municipalities. These sales will likely be forced out of state in the face of potential Act litigation by local public utilities. Neither municipal inhabitants nor Ohio’s low-cost energy producers benefit from such a circumstance.
The commission is a creature of statute, and, as such, may exercise only that jurisdiction conferred upon it by statute. Time Warner AxS v. Pub. Util. Comm. (1996), 75 Ohio St.3d 229, 234, 661 N.E.2d 1097, 1101; Canton Storage & Transfer Co. v. Pub. Util. Comm. (1995), 72 Ohio St.3d 1, 5, 647 N.E.2d 136, 141; *530Columbus S. Power Co. v. Pub. Util. Comm. (1993), 67 Ohio St.3d 535, 537, 620 N. E.2d 835, 838. A complaint that fails to trigger the commission’s jurisdiction is subject to dismissal. See Cincinnati v. Pub. Util. Comm. (1992), 64 Ohio St.3d 279, 595 N.E.2d 858; Dayton Communications Corp. v. Pub. Util. Comm. (1980), 64 Ohio St.2d 302, 18 O.O.3d 478, 414 N.E.2d 1051.
The General Assembly has narrowly prescribed the commission’s statutory authority over home-rule municipal utility operations. The commission has express authority over the voluntary and forced abandonment of utility facilities and services inside municipal limits under the Miller Act, R.C. 4905.20 and 4905.21 (State ex rel. Klapp v. Dayton Power & Light Co. [1967], 10 Ohio St.2d 14, 39 O.O.2d 9, 225 N.E.2d 230), and the state has the authority to control municipal utility actions in situations involving statewide public health and safety, for example, water fluoridation (Canton v. Whitman [1975], 44 Ohio St.2d 62, 73 O.O.2d 285, 337 N.E.2d 766), and approval of sewage projects (Delaware Cty. Bd. of Commrs. v. Columbus [1986], 26 Ohio St.3d 179, 184, 26 OBR 154, 158-159, 497 N.E.2d 1112, 1117).
But the commission has no authority over a municipal decision to purchase power from a public utility. Section 4, Article XVIII of the Ohio Constitution provides that municipalities have the right to choose their wholesale energy suppliers. This right is not subject to statutory restriction or to commission review or control. Link v. Pub. Util. Comm. (1921), 102 Ohio St. 336, 131 N.E. 796, paragraph two of the syllabus; In re Complaint of Residents of Struthers (1989), 45 Ohio St.3d 227, 543 N.E.2d 794, paragraphs one and three of the syllabus. Accord Lucas v. Lucas Local School Dist. (1982), 2 Ohio St.3d 13, 2 OBR 501, 442 N.E.2d 449; Columbus v. Pub. Util. Comm. (1979), 58 Ohio St.2d 427, 12 O.O.3d 361, 390 N.E.2d 1201; Columbus v. Ohio Power Siting Comm. (1979), 58 Ohio St.2d 435, 12 O.O.3d 365, 390 N.E.2d 1208. Thus, CPP had the constitutional authority to contract with Ohio Power to purchase electrical energy. Moreover, the terms of that contract are not subject to commission review. Link, supra, at paragraph two of the syllabus; In re Complaint of Residents of Struthers, supra, at paragraph three of the syllabus. See, also, Wooster v. Graines (1990), 52 Ohio St.3d 180, 181, 556 N.E.2d 1163, 1164-1165.
CPP also had the exclusive right to contract with and sell electrical energy to MedCo, a retail customer within CPP’s service territory. This unfettered right is expressly recognized by the Act:
“[N]othing in [the Certified Territory Act] shall impair the power of municipal corporations to require franchises or contracts for the provision of electric services within their boundaries * * *.” R.C. 4933.83(A).
“Nothing contained in [the Act] shall be construed to affect the right of municipal corporations to generate, transmit, distribute, or sell electric energy. *531The rights and powers of municipal corporations as they exist on or after the effective date of this section to acquire, construct, own, lease, or operate in any manner a public utility or to supply the service or product * * * under Section 4, Article XVIII, Ohio Constitution in any portion of the state is not affected by [the Act].” R.C. 4933.87.
Thus, the commission had no authority to regulate or otherwise control the CPP/MedCo power agreement.
More important, jurisdiction over wholesale power purchases like the Ohio Power/CPP agreement has expressly been preempted by federal law. Under the Federal Power Act, Section 824, Title 16, U.S.Code, the FERC has exclusive jurisdiction over the sale of wholesale electric energy. The United States Supreme Court has long ago established the preemptive effect of the Federal Power Act:
“ * * * Congress meant to draw a bright line easily ascertained, between state and federal jurisdiction * * *. This was done in the [Federal] Power Act by making [FERC] jurisdiction plenary and extending it to all wholesale sales in interstate commerce except those which Congress has made explicitly subject to regulation by the States.” Fed. Power Comm. v. S. California Edison Co. (1964), 376 U.S. 205, 215-216, 84 S.Ct. 644, 651, 11 L.Ed.2d 638, 646. Intrastate wholesale transactions, like the one at bar, are also considered to be made in interstate commerce and preempted by the Federal Power Act. Fed. Power Comm. v. Florida Power & Light Co. (1972), 404 U.S. 453, 92 S.Ct. 637, 30 L.Ed.2d 600.
The majority holds that the commission has concurrent jurisdiction over an alleged sham transaction under the Act. I disagree. If preemption retains any force whatsoever, then the commission cannot have concurrent jurisdiction over this situation. Pursuant to Section 824K(h), Title 16, U.S.Code, the “sham transaction” of which CEI complains is subject to the FERC’s jurisdiction. Only the FERC has the authority over this contract. Cf. Marketing Research Services, Inc. v. Pub. Util. Comm. (1987), 34 Ohio St.3d 52, 517 N.E.2d 540. In fact, CEI has, understanding this, initiated a FERC proceeding under this section to invalidate the Ohio Power/CPP power contract. Petition of CEI (Nov. 2, 1995), FERC Docket No. EL 96-9-000, at 4, 14.
That is not to say that the commission might not have jurisdiction over this matter at some later date. If the FERC agrees with CEI that this situation constitutes a “sham transaction,” the FERC has the authority to strike down the Ohio Power/CPP wholesale power contract. Armed with the FERC’s “sham transaction” finding, the commission would then have jurisdiction to determine CEI’s damages under the Act. However, absent such a FERC finding, the commission correctly held that it has no right to render any decision related to *532the substance of a contract that is exclusively within FERC’s domain. Cf. Marketing Research Services, Inc., supra.
Even if we could put aside the determinative issue of jurisdiction, the question at the heart of this case is whether Ohio Power and MedCo contracted to sell 50 MW of power in violation of the Act. If CEI alleged that they did, then the complaint was not subject to being dismissed, because the complaint would have alleged a prima facie violation of CEI’s certified territory under the Act. However, the complaint contains no such allegation.
The complaint alleges in count one that:
(1) Ohio Power “has arranged to furnish electric service to [MedCo] by selling 50 MW of capacity and associated energy to [CPP]”;
(2) Ohio Power “negotiated directly with [MedCo] * * * regarding the 50 MW sale and purchase”;
(3) CPP will bill MedCo under the same method that Ohio Power was billing CPP for the 50 MW of power;
(4) the Ohio Power/CPP and CPP/MedCo power agreements “are two halves of the same transaction”;
(5) these two transactions “are sham transactions” structured to circumvent the Act; and
(6) Ohio Power will violate the Act by selling power through CPP to MedCo.
Neither the commission nor the court is required to accept allegations in a complaint as true which are contradicted by documents attached to the complaint. See State ex rel. Edwards v. Toledo City School Dist. Bd. of Edn. (1995), 72 Ohio St.3d 106, 109, 647 N.E.2d 799, 802. The two contracts before us today are totally independent of each other, and fully effectuate the power transfer in question. These contracts do not impose reciprocal obligations upon each other. As a matter of fact, Article 10.3 of the CPP/MedCo agreement specifically states that it creates no third-party beneficiaries and that the only parties to the agreement are CPP and MedCo. CPP is not required to use Ohio Power as the source of its energy under the CPP/MedCo contract. Additionally, CPP is obligated to provide MedCo with all of its energy needs under Article 1.1 of the CPP/MedCo agreement, including any amounts over 50 MW, while Ohio Power, on the other hand, is obligated only to provide 50 MW to CPP. Moreover, Article 5.8 of the CPP/MedCo agreement specifically contemplates interconnection with wholesale electric providers other than Ohio Power. Two halves of a whole? The documents clearly state otherwise.
Further, changes in billing practices and methods between a municipality and its retail customers have no meaning under the Act. Nor do negotiations between MedCo and Ohio Power without some type of contract. Additionally, *533every party to this litigation agrees that these two power contracts are not subject to the commission’s jurisdiction. The fact that this alleged “arrangement” is regulated by and subject to a remedy at FERC, under Section 824K(h), Title 16, U.S.Code does not vest the commission with jurisdiction to hear CEI’s complaint.
Under these circumstances, the commission was free to question the allegations in CEI’s complaint and determine that this complaint did not set forth “reasonable grounds for a complaint.” The allegations in count one do not trigger commission jurisdiction.
In count two, CEI alleges that:
(1) although CEI never raised the issue before this complaint, MedCo is an electric light company under Ohio law because it sells the power that it buys from CEI to its member/owners;
(2) MedCo intends at some point in the future to build additional facilities to take power at transmission voltages, change its billing methodology regarding its member/owners, and sell electricity to non-member/owners;
(3) these changes will make MedCo, if it is not already, an electric light company under Ohio law; and
(4) after the changes, MedCo will be selling electricity to its member/owners in violation of the Act.
Speculative future changes in billing methods to member/owners, the construction of facilities to take power at transmission voltages, and speculation that MedCo may provide electricity to new member/owners do not violate the Act. Nor do they convert a retail customer of over sixty years into an electric supplier that is subject to the Act. Simply stated, speculative future activity which may or may not occur is not the basis for a valid complaint at the commission. Cleveland v. Pub. Util. Comm. (1980), 64 Ohio St.2d 209, 216-217, 18 O.O.3d 418, 422-423, 414 N.E.2d 718, 723.
Additionally, the commission properly stated that electric suppliers (if that is what MedCo is in this case) in existence before January 1, 1977 are exempt from the Act. In re CEI, case No. 954158-EL-UNC, Entry at 7, 1995 WL 735634. Therefore, even if MedCo were considered an electric supplier under the Act, MedCo is exempt from the Act until it actually provides energy to new customers or otherwise violates that Act. The commission did not err in determining that there were no reasonable grounds for CEI’s complaint. CEI argues here and in its FERC complaint that there is a contract between MedCo and Ohio Power for the sale of 50 MW of electricity and associated power. CEI’s complaint simply does not support these arguments. Absent that specific allegation, the commission has no jurisdiction over the Ohio Power/CPP/MedCo power transfer. Even *534if the complaint included that specific allegation, I seriously question whether the commission has jurisdiction over this power transfer in light of the Federal Power Act’s jurisdiction over “sham transactions” under Section 824K(h), Title 16, U.S.Code, and the acknowledged lack of jurisdiction by the commission over either power contract.
For the foregoing reasons, I respectfully dissent.
Resnick, J., concurs in the foregoing dissenting opinion.