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Ohio Supreme Court Says PUC May Impose "Financial" Limitations On Shopping

December 12,2018

In addressing appeals of the Public Utilities Commission of Ohio's order adopting an electric security plan at AEP Ohio (see story here), the Supreme Court of Ohio held that PUCO may impose "financial" limits on customer shopping

The appeals focused on PUCO's approval of the PPA Rider allowing AEP Ohio to recover costs of the OVEC purchases, as well as PUCO's adoption of a bypassable Competition Incentive Rider (CIR) (see story here on the bypassable CIR)

The Supreme Court of Ohio addressed various arguments concerning PUCO's authority to adopt the PPA rider.

Of note is that PUCO's authority to approve the PPA Rider was premised, among other justifications, on PUCO's authority under statute in addressing electric security plans to adopt, "limitations on customer shopping for retail electric service."

Specifically, PUCO in adopting the PPA Rider had said that the PPA rider served as a "financial" limit on customer shopping. The PPA Rider, which is nonbypassable, recovers the costs (or allocates benefits) of disposing of any output under the OVEC contract into the wholesale market. Essentially, since it is nonbypassable, the PPA Rider acted as a mandatory hedge for customers, and therefore a financial limit on shopping (or avoiding such costs)

The Ohio Consumers' Counsel argued that a "financial" limit on shopping went beyond the language of the statute, arguing that the statute only allows "physical" limits on shopping, or, in others words, switching among various providers

However, the Supreme Court noted that the statute uses the term "shopping" and not "switching."

"The statute does not speak to the type of limitations on customer shopping that are allowed. Nor does it otherwise restrict the commission’s determination. The plain language of the statute simply permits the commission to approve 'limitations on customer shopping.' Because a financial limitation is a type of limitation on customer shopping, we reject this argument," the Court said

Also notable is that the Court found that PUCO may authorize "transition" revenue under an ESP, notwithstanding the general prohibition on transition under R.C. 4928.38, if such transition revenue meets certain provisions for ESPs in statute.

"[E]ven though R.C. 4928.38 bars transition revenue, the 'notwithstanding' [in the ESP statute] clause renders R.C. 4928.38 inapplicable if the revenues are recoverable as one of the nine types of provisions listed in R.C. 4928.143(B)(2). Because ... the PPA Rider constitutes one of those types of provisions -- specifically, a limitation on customer shopping under R.C. 4928.143(B)(2)(d) -- it is permissible even if it otherwise could be deemed to constitute transition revenue," the Court said

In adopting the competition incentive rider (CIR), PUCO set the rider at zero, and merely directed a further examination of costs included in base rates

Regarding the competition incentive rider (CIR), the Court dismissed OCC's appeal, in part on procedural grounds, and also because PUCO, in adopting a "zero" CIR rider, never addressed whether the CIR violated R.C. 4928.02(A), which OCC cited in its appeal. "[T]he commission declined to decide whether the CIR was lawful, because the rider had not yet been implemented and OCC’s challenge was not ripe for review," the Court noted

In a related opinion, the Court also affirmed that PUCO may adopt "zero" or placeholder riders (with no charges set initially), as the Court found that appellants did not show harm from adoption of a zero rider

Links to opinion:

PPA Rider, CIR (No. 2017-0752)

Zero Riders (No. 2017-0749)

Ohio   Electricity Shopping   AEP Ohio  

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