Court Opinion

ID: 6757031
Source: CourtListenerOpinion
Date Created: 2022-07-21 00:28:01.214755+00
Date Added: 2024-06-11T16:02:28.434419
License: Public Domain

Locher, J.,
dissenting. Since I am of the opinion that the December 12,1979, order of the Public Utilities Commission (“commission”) is unreasonable, unlawful, and unsupported by the evidence adduced at hearings, I respectfully dissent from the majority opinion.
I.
A review of the pertinent factual pattern herein is necessary to fully comprehend the situation that this case presents.
On May 23, 1977, the city of Columbus (“city”) enacted Ordinance No. 881-77 for the purpose of setting the rates to be charged for electric service by Columbus & Southern Ohio Electric Co. (“C&SOE”) to Columbus consumers for the two-year period, June 27, 1977, through June 26, 1979. C&SOE filed with the commission a complaint and appeal from Ordinance No. 881-77, pursuant to R. C. 4909.34. On March 31, 1978, the commission issued its opinion and order in which *84rates fixed by the commission were substituted for those in Ordinance No. 881-77.12 Thus, by the terms of R. C. 4909.39, this rate shall remain in effect “***during the period so fixed by ordinance, which period shall not be less than two years* * *.”
Adding two years on to the effective date of these rates, the ordinance should remain in effect until March 30, 1980. This interpretation is not only buttressed, but mandated, by previous decisions of this court. State, ex rel. Brainard, v. McConnaughey (1940), 137 Ohio St. 431; Ohio Edison Co. v. Pub. Util. Comm. (1977), 52 Ohio St. 2d 123. We stated in Ohio Edison Co., at page 126: “In construing the language ‘which shall not be less than two years,’ this court explained that it meant merely that a Commission order fixing a rate in substitution for that fixed by ordinance would be effective for not less than two years.” Further, this has been the interpretation that the commission itself has used. See, e.g., Re Columbia Gas of Ohio (July 26, 1978), case No. 78-1008-GA-AIR.
Now, in an apparent turnaround of this long-accepted interpretation, both this court and the commission hold that the R. C. 4909.39 two-year limitation applies only to a municipality’s attempt to have utility rates altered and not to a utility company’s desire to increase the rates.
At least since 1940, it has been assumed that rates fixed under the terms of R. C. 4909.39 shall remain in effect for at least two years. It has been unquestioned by this court, by the commission, and, most importantly, by the General Assembly. The General Assembly never changed the language in R. C. 4909.39 which would create any impression that the terms of the statute should be limited in the fashion that' the majority opinion does. The law, as enacted by the General Assembly and interpreted by this court, has remained constant for years with regard to R. C. 4909.39. There is no clear justification for this court’s failure to hold the commission order unlawful, when the order is in direct conflict with the law as enacted by the General Assembly and interpreted by this court.
After today’s decision, the role of a municipality in the set*85ting of utility rates within its boundaries is diminished, if not completely eradicated. Pursuant to both constitutional and statutory authority, municipalities possess regulatory powers regarding utility rates. See Section 3 of Article XVIII of the Ohio Constitution; R. C. 743.26. Such powers are a matter of the police power, State, ex rel. Brainard, supra, and are subject to the limitations placed thereon by the General Assembly in R. C. 4909.34 to 4909.40.
The General Assembly gave municipalities the power to fix utility rates by ordinance. R. C. 4909.34. After such an ordinance is enacted, the usual scenario continues as it did in the instant cause. The utility company will contest the rate and the commission will approve a higher rate than that enacted by ordinance. Subsequently, there is a “hands-off” order imposed upon the municipality. This, allegedly, is intended to diminish the “ploys” of municipalities regarding rate-making. Nevertheless, the utility company can at any time during the two-year period try, and usually be successful, in getting a rate increase. There is no protection from the “ploys” of the utility company and from the unnecessary intrusions by the commission. Certainly, to place the same rules on the utility companies as the municipalities have to conform to will not create the “regulatory inflexibility” with which this court’s majority is concerned. Even if that were a real problem, the General Assembly is quite capable of correcting it and the legislative body is better equipped than this court to implement such a charge.
II.
In numerous recent cases, this court has agreed with the commission that the grant of an allowance for attrition was not proper. See, e.g., Dayton Power & Light Co. v. Pub. Util. Comm. (1980), 61 Ohio St. 2d 215; Masury Water Co. v. Pub. Util. Comm. (1979), 58 Ohio St. 2d 147; C&SOE v. Pub. Util. Comm. (1979), 58 Ohio St. 2d 120; Franklin Co. Welfare Rights Org. v. Pub. Util. Comm. (1978), 55 Ohio St. 2d 1.
In Masury Water Co., supra, at page 151, this court stated: “[T]he commission has demonstrated that in causes such as the present one, where the cost of capital approach is related to the actual or net investment of***[the utility’s] *86capital structure and is utilized to determine***the ‘fair and reasonable’ return of book equity, this approach by definition includes a component which represents a realization by investors in the market place that future inflationary pressures may have an adverse effect on the profitability of the enterprise.”
Further, this court in Masury Water, approvingly quoted the commission’s statement that, “The magnitude of such an adjustment would, of course, be difficult to quantify and the record does not provide a proper basis for defining the size of any such adjustment.***[A]djustments of this nature may well serve to diminish the incentive for prudent management and for efficiency in operation.”
With a disregard to our past concerns, the majority opinion gives the commission the authority to grant an attrition allowance, even in the absence of evidence to support such a finding since these allowances are “fraught with judgments and assumptions.” To grant attrition allowances based on this loose evidentiary standard will invite utility companies to request large amounts for this new rate element. Even if they are granted only a fraction of their requests, they may be able to be compensated for errors caused by their imprudent management.
The evidence that the majority relies on to justify its position is tenuous at best. Indeed, the commission decided the issue against the explicit recommendation of the commission staff. Although the amount granted for an attrition allowance is not substantial here, the estimates propounded by the experts were void of exactitude, as conceded by the majority. On that basis alone, we should refrain from approving this allowance until the estimates are able to be ascertained with more precision and a more clearly defined methodology.
III.
The majority further holds that the allocation methods used by the commission were reasonable and lawful. The commission based the rate increase on all of the C&SOE’s jurisdictional customers, without taking into account any possible differences between Columbus customers and those living outside Columbus’ boundaries. For the reasons given in my dis*87sent in Columbus v. Pub. Util. Comm. (1979), 58 Ohio St. 2d 103, 106, I dissent on this issue. In that case, similar on its facts, involving the same parties as here, decided on a four-to-three basis (one judge concurring in my dissent and another dissenting generally), I wrote as follows:
“I dissent from the majority opinion in the instant cause because the utility company has failed to meet the requisite burden of proof pursuant to R. C. 4909.39 and 4909.15. It is axiomatic that a utility has the burden of proof that the property which is sought to be included in its statutory rate base is used and useful. Mt. Vernon Telephone Corp. v. Pub. Util. Comm. (1955), 163 Ohio St. 381.
“In the cause suhjudiee, the majority opinion admits that the crux of the commission’s adoption of the allocation formula was based upon a ‘non-verifiable assumption’ that the relationship between the average and peak demands of the city and non-city residents is the same.
“The staff, in its Report of Investigation, recognized that, if the load factor for residential, small and medium general service customers is reasonably equal, then the allocation to Columbus would be acceptable.
“The commission mechanically adopted this ‘non-verifiable load factor assumption,’ even though individual demand meters could have been used to determine the load factors. Demand meters were not used for the purpose of sampling Columbus customers vis-a-vis other Columbus & Southern Ohio Electric Company (C&SOE) customers. Thus, by the use of demand meters, this ‘non-verifiable assumption’ could easily have been verified.
“It is well known, and should be especially applicable to monopolies which have a fiduciary duty to the public, that the applicant has the burden of proving all the material allegations in the complaint. In Ohio Motor Freight Tariff Committee, Inc., v. Pub. Util. Comm. (1959), 169 Ohio St. 172, 177, this court noted the commission’s report, which, in pertinent part, stated:
“ ‘***[I]t is elementary that any party complainant before this commission assumes the duty and obligation of proving all of the material allegations contained in his original complaint.***’
*88“C&SOE had the burden of proof to show that the allocation methodology and resulting valuation were reasonable, but it failed to produce any credible evidence supportive of the method of valuation. The lack of specific cost studies and direct assignments by C&SOE make the reasonableness of the proposed allocation methodology questionable.
“In Mt. Vernon, supra, the utility could not prove the valuation of its property because of the lack of reliable depreciation information, and, accordingly, the commission dismissed the rate increase application. This court, at page 389, noted that:
“ ‘***An order by the commission under such circumstances would have required mere conjecture on its part***.’
“Applying the Mt Vernon analysis to the instant cause, the commission should have dismissed the complaint, because it had but a ‘mere conjecture’ as to the reasonableness of the C&SOE load factor, which was the heart of the application for a rate increase.”
For the foregoing reasons, I respectfully dissent from the majority opinion.

 We have never explicitly held, nor does the majority opinion in the instant decision, when the two-year period referred to in R. C. 4909.39 begins to run. For the sake of this opinion it will be assumed, arguendo, that the period began on March 31,1978, the day the commission issued its order.