ENERGY WHITE PAPER | JANUARY 2021
In re Determination of Existence of Significantly Excessive Earnings for 2017 under the Elec . Sec . Plan of Ohio Edison Co ., Slip Opinion No . 2020-Ohio-5450 .
In early December 2020 , the Supreme Court again reversed a PUCO order . This time , the Court held that the Commission should not have excluded certain revenue when it analyzed whether Ohio Edison Company had achieved “ significantly excessive earnings ” in 2017 pursuant to R . C . 4928.143 ( F ), which requires an annual earnings review for utilities that opt to provide service under an electric security plan ( ESP ). This case stemmed from the Commission ’ s 2016 approval of FirstEnergy ’ s eight-year ESP , which included a charge to customers – the Distribution Modernization Rider ( DMR ) – intended to modernize the distribution system . When it approved this rider , the Commission said that the revenue FirstEnergy received from customers pursuant to the DMR would be excluded from the test for significantly excessive earnings – the so-called “ SEET test .” The Office of the Ohio Consumers ’ Counsel challenged this exclusion in the Ohio Supreme Court and prevailed . Although Justice Melody Stewart ’ s opinion was joined only by the Chief Justice and Justice Michael Donnelly , three other Justices – Justices Patrick DeWine , Sharon Kennedy and Judith French – concurred with her judgment that the Commission ’ s exclusion of the DMR revenue was unreasonable . And the separate opinions of these Justices – like the Chief Justice ’ s opinion in Direct Energy – reflect a Supreme Court focusing sharply on the General Assembly ’ s intent as reflected in the Revised Code . provision allows the Commission to exclude DMR revenue on this basis .” 2020-Ohio-5450 , at ¶ 20 . Justice DeWine concurred in judgment only , arguing that the lead opinion was actually too deferential to the Commission ’ s interpretation of the law . 2020-Ohio-5450 , at ¶ 67 ( DeWine , J ., concurring ). He wrote separately to reinforce his skepticism of courts according deference to agencies ’ statutory interpretation , which he said “ blurs the separation-of-powers principles that underpin our constitutional order .” Id . at ¶ 71 ( citing his concurring opinion in State ex rel . McCann v . Delaware Cty . Bd . of Elections ). Justice DeWine opined that no deference is owed to an agency ’ s interpretation of an unambiguous statute , 2020-Ohio-5450 at ¶ 73-80 , and that there is no reason to defer to the PUCO ’ s legal construction of rate-of-return statutes , id . at ¶ 81- 85 . He concluded by noting that in recent years , “ at least seven state supreme courts have revisited and rejected their doctrines of administrative deference ,” and he clearly wants the Ohio Supreme Court to follow that path . Id . at ¶ 86 .
Justice Stewart noted in the lead opinion that the Commission ’ s stated justification for excluding the DMR from the SEET test was that including the revenue would “‘ introduce an unnecessary element of risk to the Companies and undermine [ the DMR ’ s ] purpose of providing credit support .’” 2020-Ohio- 5450 , at ¶ 20 ( quoting the Commission ’ s Fifth Entry on Rehearing ). Justice Stewart found this justification lacking because it was untethered to the applicable statute , saying “ the Commission failed to even cite R . C . 4928.143 ( F ), let alone explain how that
PAGE 5