Court Opinion

ID: 6757678
Source: CourtListenerOpinion
Date Created: 2022-07-21 00:28:32.259448+00
Date Added: 2024-06-11T16:02:29.877706
License: Public Domain

Brogan, J.,
dissenting. I must respectfully dissent. I agree with my colleagues that this review of the commission’s *295action is upon a question of law. Legal questions are subject to more intensive examination than are factual questions.
This court has on three previous occasions addressed the propriety of offsetting customers’ contributions in the form of accruals from a utility’s working capital allowance. Cincinnati v. Pub. Util. Comm. (1954), 161 Ohio St. 395; Cleveland Electric Illuminating Co. v. Pub. Util. Comm. (1975), 42 Ohio St. 2d 403; Consumers’ Counsel v. Pub. Util. Comm. (1979), 58 Ohio St. 2d 108. Appellants argue these three cases require any positive balance produced by the budget billing program to be offset.
In the hallmark case of Cincinnati v. Pub. Util. Comm., supra, this court, in paragraph five of the syllabus, stated:
“In fixing telephone rates, customers’ contributions in the form of accruals for the payment of taxes, deposits to secure the payment of customers’ bills for service or as advances on installment charges, and collections of rents to be paid at future dates, which will be constant with reasonable certainty in the foreseeable future and which are available for investments in materials and supplies, or for use as working capital, should be used as an offset on the allowance for working capital * * *.”
In Cleveland Elec. Illuminating Co. v. Pub. Util. Comm., supra, this court reaffirmed the working capital allowance offset enunciated in Cincinnati, stating:
“The record shows that there were some accruals for federal income tax payments and that the evidence as to the amount was conflicting. There is nothing in the record to support a conclusion that these accruals were not available due to their payment ‘on a relatively current basis.’ Since there were some federal income tax accruals and the Commission made no allowance for them in the formula used for determining working capital requirements, it follows that the Commission failed to properly apply the holding in Cincinnati v. Pub. Util. Comm., * * * in computing the allowance for working capital.” Id. at 425-426.
Finally, the issue of offsetting working capital with customers’ deposits was addressed in Consumers’ Counsel v. Pub. Util. Comm., supra. This case was decided subsequent to *296enactment of R. C. 4909.05(1) and (J). R. C. 4909.05(J) provides, in relevant part:
“The valuation of the property of the company shall be the sum of the amounts contained in the report pursuant to divisions (C), (D), (E), (F), and (G) of this section, less the sum of the amounts contained in the report pursuant to divisions (H) and (I) of this section.”
R. C. 4909.05(1) provides:
“Any sums of money or property that the company may have received as total or partial defrayal of the costs of its property.”
In Consumers’ Counsel, supra, the commission was of the belief that consumer deposits were not included under the language of R. C. 4909.05(1) and, therefore, they were not subject to an offset pursuant to R. C. 4909.05(J). This court neither accepted nor rejected that contention. Instead, the court stated:
“* * * Cincinnati v. Pub. Util. Comm. * * * governs the issue * * *. The rationale for an offset, as expressed in that decision, and as recognized by the commission in the context of R. C. 4909.05(1) deductions, is to permit investors to earn a return only on that property for which they have supplied funds, not on funds contributed by customers. The record indicates that customer deposits are relatively constant and available for investment or use as working capital. Accordingly, we find that the commission acted improperly in failing to offset working capital by customer deposits.” (Emphasis added.) Id. at 115.
Significantly, the court held that “* * * the formula approach to rate base calculations as used by the commission * * * need [not] be rejected. We only require that due account be taken of customer deposits. If the formula is not designed to accommodate an offset to working capital, * * * then it may be necessary to deduct customer deposits directly from the rate base. The result would be the same.” Id.
Appellants stress that the underlying principle governing this case is that “* * * investors [are entitled] to earn a return only on that property for which they have supplied funds, not on funds contributed by customers.” Id. Additionally, the city of Cleveland notes that it is not necessary for the complaining *297party to actually trace the use of customer supplied funds. It is only necessary to show that the funds were available for use by the utility. Id. at 115, fn. 3.
Appellants argue that the record demonstrates customer budget billing funds were available for use by EOG and, in fact, were used. Appellants illustrate this assertion by pointing to the testimony of A. Scott Rothey, who testified on behalf of Cleveland, as follows:
“* * * There is no doubt that the company’s short term borrowings would increase substantially during the summer months were it not for the availability of these budget billing balances.” Additionally, Rothey stated that “[t]he company is provided significant amounts of working capital in the form of advance payments from its budget billing customers. In an economic sense, they have the same characteristics as any customer deposit.”
EOG witness Timothy J. Long responded to a question raised by appellant Cleveland in the following manner:
“Q.: * * * [D]on’t those billing deposits come at a time which is particularly opportune to the company insofar as the financing of its current gas storage program is concerned?
“A.: The pattern of those balances do match, yes.”
Moreover, appellant cities point to EOG’s Schedule 3, where a summary of budget account balances for the period dating from July 1979 through February 1981, is contained. The schedule indicates that cumulative monthly balances for this period totaled $114,728,123, while debits equaled $38,956,532, producing a positive yearly figure of $75,771,591 which, when divided by 12 equates to an average monthly positive figure of $6,314,299. Appellants contend that a positive figure has been available to EOG for purposes of working capital.
In fact, the commission in its initial opinion and order denied the offset, even assuming “an average positive balance,” on the basis of lack of constancy. On rehearing, the commission denied the offset on the basis that the budget billing account temporarily dipped below a zero balance, unlike tax accounts which shift from a positive figure to a zero balance.
Finally, appellants contend that the commission’s reason*298ing for the denial of a capital offset, on the basis that EOG’s budget account temporarily achieves a negative balance is, at best, unsound. Appellants note that in this same rate case, offsets against working capital were factored against EOG tax accounts, which four times annually reach a zero balance. Appellants contend that according to the commission’s decision, even a minute negative balance in one month would negate any offset for tax accruals, even though the negative balance is substantially outweighed by positive balances in the other 11 months of the yearly cycle. Appellants contend this test is unreasonable and unlawful, and submit that positive and negative balances should be netted to determine whether any benefit or detriment can be attributed to EOG from its budget program. I agree.
The order of the commission should be reversed and remanded for further proceedings to determine the positive balance associated with the budget billing program and, if necessary, to offset any such amount against working capital.
W. Brown and Victor, JJ., concur in the foregoing dissenting opinion.