Court Opinion

ID: 6756385
Source: CourtListenerOpinion
Date Created: 2022-07-21 00:27:26.524504+00
Date Added: 2024-06-11T16:02:27.194499
License: Public Domain

Locher, J.,
dissenting. I must respectfully dissent.
The majority opinion inexorably leads to the ratepayers shouldering the expense of a public utility’s (a monopoly guaranteed by the state) charitable contributions.
Citing three cases that permit the expense of charitable contributions of a utility to be charged to the ratepayers and referring to a comment in Priest, Principles of Utility Regulation (1969), at page 87, that contributions by utilities are frequently less than voluntary, the opinon rather nonchalantly accepts a passing of these costs on to the ratepayers as if no other result were conceivable.
In my prior dissent in Franklin Co. Welfare Rights Org. v. Pub. Util. Comm. (1978), 55 Ohio St. 2d 1, I quoted at length from an opinion of the Supreme Court of Alabama,5 wherein that august body, with good justification, declined the opportunity to burden the utility ratepayers with the charitable contributions of the public utility. The issue of whether the ratepayer should be required *178in his or her utility bill to pay for the utility’s donations-was not directly before this court in Franklin Co. Welfare-Rights Org., supra. The issue is now properly before this-court, and thus I have had the opportunity to closely examine its resolution in other jurisdictions. An examination reveals that, since 1972, this issue has been addressed in approximately 30 states, not including Ohio.6 Of those 30 states, 23 have taken the path rejected by the majority and have, in the normal course, refused to allow a public utility to charge its ratepayers for its donations. Only a mere six states, including New York, as noted by the majority, have allowed recoupment of these donations from the utility’s consumers.7 The Illinois Supreme Court, in Illinois Bell Telephone Co. v. Illinois Commerce Comm. (1973), 55 Ill. 2d 461, 303 N. E. 2d 364, 3 PUR 4th 36, at page 480 of its opinion, noted the commission’s reference to Virtjak v. Illinois Bell Telephone Co. (Ill. 1959), 32 PUR 3d 385, but then held that the utility’s charitable contributions were not operating expenses cognizable for the purposes of rate-making. Apparently, none of our neighboring states in the normal course permits a public utility to charge its charitable contributions to its consumers. Re Indianapolis Power & Light Co. (Ind. 1975), 9 PUR 4th 86; Re Union Light, Heat & Power Co. (Ky. 1953), 97 PUR N. S. 33; Re Potomac Edison Co. of W. Va. (W. Va. 1974), 6 PUR 4th 183; Bainbridge Motor Co. v. General telephone Co. of Pa. (Pa. 1975), 12 PUR 4th 416; Re Detroit Edison Co. (Mich. 1970), 83 PUR 3rd 463.8
I wish at this point to emphasize that I am not urging that utilities be prohibited from making contributions but only that they be precluded from charging them against their ratepayers. Furthermore, I have no doubt as to the importance of these contributions to the donees, or that these donations are devoted to beneficial uses. I do believe, *179however, that it is grossly improper to permit a utility to charge its customers for the utility’s charitable contributions.
The Supreme Court of California, in Pacific Tel. & Tel. Co. v. Public Util. Comm. (1965), 62 Cal. 2d 634, 401 P. 2d 353, held that a utility’s attempt to charge all of its own contributions as an operating expense to be borne by the ratepayers was plainly unwarranted. Relying upon the observations of the Public Utilities Commission of California in its decision, the California Supreme Court quoted with approval the following portion thereof, at page 668.
“ ‘Dues, donations and contributions if included as an expense for rate making purposes, become an involuntary levy on ratepayers, who, because of the monopolistic nature of utility service, are unable to obtain service from another source and thereby avoid such a levy. Eatepayers should be encouraged to contribute directly to worthy causes and not involuntarily through an allowance in utility rates. [Pacific] should not be permitted to be generous with ratepayers’ money but may use its own funds in any lawful manner.’ ”
The Illinois Supreme Court, in Illinois Bell Telephone Company, supra, at page 481, stated:
“ ** * [W]e conclude that the allowance of such contributions as operating expenses for purposes of rate making constitutes an involuntary assessment on the utility’s patrons, and we question the propriety of Bell’s being permitted to thus dispense largesse at their expense.”
The Colorado Public Utilties Commission, in Re Mountain States Telephone & Telegraph Co. (1972), 96 PUR 3d 321, 326, expressed its opinion on this issue as follows:
“Donations and charitable contributions are made purely at management discretion, accrue to the benefit of the corporation and its owners and should be borne by the stockholders rather than ratepayers * *
The North Carolina Utilities Commission echoed a similar sentiment in Re Virginia Electric & Power Company (1975), 11 PUR 4th 115, wherein it stated, at page 124:
*180“ * * * The commission is of the opinion that charitable and educational donations is [sic] an expense which should be borne by the company’s stockholders, not its ratepayers. The ratepayers have no voice in determining to which charities and institutions, if any, the donations are to be made. The ratepayers should not be made involuntary donors to charitable and educational institutions through the payment of electric rates.”
In Re Chesapeake & Potomac Telephone Company of W. Va. (1977), 22 PUR 4th 197, the utility argued that the charitable contributions were not to enhance the company’s image but were made as a result of its obligation to perpetuate the social well-being of the community it services. It, thus, contended that the ratepayer will ultimately benefit from such contributions and therefore they should be included in the cost of service. The West Virginia Public Service Commission responded, at page 205, in the following manner:
“■While it is true that such contributions to local service areas do benefit the communities served, they also tend to upgrade the company’s public image and therefore work more to the benefit of the utility and its stockholders than to the benefit of the subscribers. Such an undertaking should be financed by the ownership rather than the utility customers and to allow these expenditures to be treated as an item of operating expense would be to require an involuntary contribution by ratepayers to charities which they may or may not otherwise support.”
Apart from other jurisdictions, the Ohio Public Utilities Commission (commission), in East Ohio Gas Co. v. Cleveland (1934), 4 PUR N. S. 433, disallowed the utility’s claim as an expense of its contributions to the Cleveland community fund, stating that it is the right of the stockholders to make such contributions if they desire, but that it would be unfair to permit them to be reimbursed for such expenditures from the customers of the company, who may have already been contributing to the same cause. Adhering to this same principle, the commission again rejected the utility’s contention that donations *181were operating expenses in Re Springfield Gas Co. (1937), 19 PUR N. S. 1, stating at page 17:
“* * * It has been universally held that donations to charitable and religious institutions and to civic organizations and clubs * * * while evidence of the company’s interest in public welfare and the upbuilding of the community and its participation in public activities, are to come out of surplus and not chargeable to the ratepayers through the medium of operating expenses. It is generally recognized that ratepayers themselves are likewise making similar contributions. ’ ’
The commission has not been steadfast in its deviation from these prior decisions. In Re Cleveland Electric Illuminating Co. (1973), 3 PUR 4th 259, the commission recognized that it had not established a clear precedent as to the allowance or disallowance of charitable contributions as an appropriate item of expense for rate-making purposes. Cognizant of its earliest decisions wherein such donations were disallowed, followed by a period wherein such contributions were an allowable expense, the commission in that cause found that of the $636,149 of charitable contributions during the test year only $300,000 was to be allowed for rate-making purposes. The commission then concluded its discussion on this subject, at page 274, with the following remarks:
“Moreover, we hereby signal the industry that we are moving towards a policy decision that charitable contributions should not be included at all as an appropriate item for rate base purposes.”
It is evident that the commission has in recent years, for reasons not clearly expressed, never implemented the rule it announced in 1973. See Re Ohio Bell Telephone Co. (1976), 15 PUR 4th 344.
This issue is a matter of first impression before this court. Given the apt reasoning expressed in other states for disallowing a utility’s attempt to charge its own contributions to its customers, the early decisions of Ohio which similarly refused to consider these donations for rate-making purposes and unjustified oscillation of the *182commission since its early decisions on this issue which has been repeatedly and consistently raised by concerned consumers, I am constrained to conclude that the charitable contributions of a utility, a monopoly with a guaranteed fair rate of return, should not be involuntarily borne by the consumer, who cannot obtain this service from another source, but should instead be the responsibility of the utility’s shareholders, who not only control the company but share in its guaranteed profits. Moreover, in light of the General Assembly’s recent concern with utility rates, as is readily discernible from its discarding of the old RCNLD standard (see my dissent in Akron v. Pub. Util. Comm. [1978], 55 Ohio St. 2d 155) and its recent establishment of the Public Utilities Commission Consumers’ Counsel, R. C. Chapter 4911, the majority’s opinion clearly is contra to the implied intentions of the General Assembly.
I am further in disagreement with the majority’s summarily affirming the commission’s action of severing the cases involving the municipalities and unincorporated areas. Despite protestations that its decision with respect to these two causes in approving uniform rates and the nine cent earnings erosion adjustment did not automatically deny the city of Cincinnati a different rate or a lower erosion adjustment, the plain facts are that the commission eventually approved both the nine cent earnings erosion adjustment and the uniform rate in the cause involving Cincinnati. Having dwelt on the issue of charitable contributions in such an extended manner, I will not attempt an in-depth analysis of this facet of the instant cause. I believe it is sufficient to state that these actions of the commission have the appearance of impropriety and, when combined with the highly technical parlance of engineering and accounting inherent within a rate case, this court should not so lightly grant its imprimatur.

 Alabama Power Co. v. Alabama Public Service Comm. (Ala. 1977), CCH Pub. Util. Law Rptr., New Matters.

 3 PUR Digest, 2d Series, 1977 Supp., Expenses, Section 46.

 Conflict apparently exists between the Supreme Court of Washington and the commission with regard to this issue.

 Contra: Re Michigan Bell Telephone Co. (Mich. 1975), Case No. U-4575.