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<title>May 2006: Ohio Court Rejects PUC-Approved "Rate-Stabilization Plan" as
Violating the State Restructuring Statute</title>
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<p align="left"><strong><small><font face="Arial">About The Author:</font></small></strong></p>
<p align="left"><font face="Arial" style="font-size: 9pt">Robert A. Olson is a partner in the law firm of
Brown, Olson & Gould, P.C. which maintains a nationwide practice in energy law,
public utility law and related commercial transactions.</font></p>
<p><small><font face="Arial"><font style="font-size: 9pt">He can be reached at:</font><br>
<br>
<b><font color="#0000FF">Brown, Olson & Gould, PC</font></b><br>
2 Delta Drive<br>
Suite 301<br>
Concord, NH 03301<br>
<a href="mailto:[email protected]">[email protected]</a><br>
(603) 225-9716<br>
<a href="mailto:[email protected]"></a></font></small></p>
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<p ALIGN="left"><b><u><br>
<br>
May 2006</u></b><font size="6"><b><br>
</b></font></p><font size="6"><b>
<p align="left">Ohio Court Rejects PUC-Approved "Rate-Stabilization Plan" as
Violating the State Restructuring Statute</p>
</b></font><center>
<p ALIGN="left"><font size="6"><b><br>
</b></font><strong>by Robert Olson and
</strong><b>David J. Shulock</b><strong> -- Brown, Olson and Wilson, P.C.<br>
</strong><font face="Arial" size="2">(<em>originally published by PMA OnLine Magazine:
2006</em>/10/27)<br>
</font></p>
<font SIZE="3">
<p ALIGN="JUSTIFY">The Ohio Supreme Court recently rejected a
"rate-stabilization plan" proposed by an Ohio utility and approved by the
Ohio Public Utilities Commission (the "Commission") as part of the state’s
transition to a competitive electricity market on the ground that it
violated the state restructuring statute. Ohio Consumers’ Counsel v. Pub.
Util. Comm., 2006 Ohio 2110 (2006) ("Ohio Consumers’ Counsel"). </p>
</font>
<font FACE="Palatino" SIZE="2">
<p ALIGN="JUSTIFY"></p>
</font>
<p ALIGN="JUSTIFY">Under Ohio’s restructuring statute, upon completion of a
transition period called the "market-development period," electric
distribution utilities are required to provide (1) a "market-based standard
service offer" for electric generation service, and (2) "an option to
purchase competitive retail electric service the price of which is
determined through a competitive bidding process." Ohio Rev. Code Ann. �
4928.14 (the "Statute"). With respect to the competitive bidding option,
however, the statute authorizes the Commission to determine "that a
competitive bidding process is not required, if other means to accomplish
generally the same option for customers is readily available in the market
and a reasonable means for customer participation is developed." Id.</p>
<font FACE="Palatino" SIZE="2">
<font FACE="Palatino" SIZE="3">
<p ALIGN="JUSTIFY"></p>
</font>
</font>
<p ALIGN="JUSTIFY">In preparation for the end of its market-development
period on December 31, 2005, FirstEnergy Corporation proposed what it called
a "rate-stabilization plan" (the "Plan"). See Ohio Consumers’ Counsel at ��
3-20. The Commission approved the Plan with some modifications. Id. As
approved, the Plan established standard service offer pricing and a
competitive-bid process. Id. The competitive-bid process, however, was
established solely for the purpose of periodically testing the rate
established under the Plan to ensure that it did "not exceed long-term
market prices that result from" competitive bidding. Id. </p>
<font FACE="Palatino" SIZE="2">
<font FACE="Palatino" SIZE="3">
<p ALIGN="JUSTIFY"></p>
</font>
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<p ALIGN="JUSTIFY">In implementing the plan, the Commission had already
evaluated one such competitive-bid process and rejected all bids on the
ground that they were lower than the Plan rate. Id. Plan opponents pointed
out, however, that the competitive-bid rate, while higher, was fixed for a
three-year period, whereas the Plan rate was subject to change. Id.
Opponents argued that some customers would prefer a stable fixed rate to the
changeable Plan rate. Id. They claimed the Statute entitled consumers to a
choice between a market-based standard service offer and a rate determined
through a competitive-bid process, and the Plan violated the Statute in that
it failed to provide the competitive-bid rate alternative. Id.</p>
<font FACE="Palatino" SIZE="2">
<font FACE="Palatino" SIZE="3">
<p ALIGN="JUSTIFY"></p>
</font>
</font>
<p ALIGN="JUSTIFY">In response, the Commission invoked its statutory
authority to dispense with competitive bidding where there are other means
to accomplish the same objective. Id. The court rejected this argument on
the ground that the "very narrow" statutory exception to the competitive
bidding requirement also requires the Commission to develop "a reasonable
means for customer participation." Id. The court found that, under the Plan,
the Commission acted unilaterally to eliminate the competitive-bid in
violation of the Statute. The court contrasted the Plan with a similar
pricing plan it had approved in Constellation NewEnergy, Inc. v. Pub. Util.
Comm., 820 N.E.2d 885 (2004). In that case, parties representing all classes
of customers had stipulated to the pricing plan, whereas the customer groups
in the case before the court had not agreed to the Plan and most customer
groups actively opposed it. </p>
<font FACE="Palatino" SIZE="2">
<font FACE="Palatino" SIZE="3">
<p ALIGN="JUSTIFY"></p>
</font>
</font>
<p align="left">The court remanded the case to the Commission for further
proceedings consistent with its opinion.</p>
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<blockquote>
<p align="left"><font face="Arial">
<small>Robert A. Olson is a partner in the law firm of Brown, Olson &
Gould P.C.
which maintains a nationwide practice in energy law, public utility law and related
commercial transactions. He can be reached at:</small></font><p align="center">
<font face="Arial"><small><font color="#0000FF"><b>Brown, Olson & Gould, PC</b></font><br>
2 Delta Drive, Suite 301<br>
Concord, NH 03301 <br>
<br>
<a href="mailto:[email protected]">[email protected]</a> | (603) 225-9716<a href="mailto:[email protected]"></a></small></font>
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