The Ohio Supreme Court has ruled that the Public Utilities Commission of Ohio erred when it changed the carrying charge related to a fuel cost deferral related to an electric security plan at AEP Ohio, but did not provide an opportunity for AEP Ohio to withdraw its electric security plan.

Statute provides that a utility may withdraw an electric security plan if modified by PUCO.

A PUCO decision on carrying costs for the fuel deferral modified the AEP Ohio electric security plan as filed. Moreover, this modification came after the term of the ESP had ended.

PUCO argued that statute specifically provides that an "application" for an ESP may be withdrawn by the utility. PUCO argued that this allows the utility to withdraw the application, including in response to an order modifying the application in adopting the application as modified.

The change in the carrying charge rate occurred outside of the ESP application proceeding.

PUCO argued that the withdrawal provision applies only when the commission modifies and approves an ESP application within the context of an ESP proceeding, but does not apply to later proceedings in which the commission modifies an order that had previously approved an ESP application.

The Court found this interpretation to be unreasonable.

"If the commission makes a modification to a proposed ESP that the utility is unwilling to accept, R.C. 4928.143(C)(2)(a) allows the utility to withdraw the ESP application. The modification made below, however, occurred after the ESP had expired, making it impossible for Ohio Power to exercise its statutory right to withdraw the modified ESP. Therefore, we find that the commission's order violates R.C. 4928.143(C)(2)(a)," the Court said.

"What the commission overlooks is that when it modified the ESP Order in this case, it effectively modified the application that was approved by that order. R.C. 4928.143(C)(l) requires the commission to issue an order when it modifies and approves an ESP application, which the commission did in the first ESP proceeding. The commission's ESP Order approved the use of the WACC rate during the collection period, as proposed by Ohio Power in its ESP application. Thus, when the commission modified the ESP Order in this case to prohibit the continued use of the WACC rate, it modified a term that was proposed in the company's ESP application. And because the modification of that term occurred after the ESP had expired, Ohio Power was unable to withdraw its ESP," the Court said.

The Court noted that under PUCO's argument, "the commission could modify an ESP at any time after the application has been approved -- even while the ESP is still in effect -- and the utility would have no recourse but to implement the change," which the Court found to be contrary to statute.

The Court remanded the carrying charge issue to PUCO.