Supreme Court reverses PUCO ruling ordering FirstEnergy to refund $43M to customers

By: Tristan Navera |

The Ohio Supreme Court has ruled that a state regulatory agency can’t order an Akron utility to refund $43 million to its customers.

The court ruled in a years-running case after the Public Utilities Commission of Ohio had ordered the refund to customers of FirstEnergy Corp. (NYSE:FE), which includes Ohio Edison Co., Cleveland Electric Illuminating Co. and Toledo Edison Co., after the PUCO found the utility had overcharged customers.

“FirstEnergy agrees with the court’s reversal of the commission’s order that required a refund,” FirstEnergy spokesperson Doug Colafella said in a statement.

The state requires electric utilities to generate a portion of their electricity for retail customers from renewable sources including solar and wind power, or else to buy renewable energy credits. Utilities can pass some of the higher costs of renewable energy, or credits in their place, to customers.

The PUCO had ordered an audit of renewable energy credit purchases made by FirstEnergy from 2009 to 2011, and after a hearing, it found the utility company hadn’t buy some credits in a “prudent” manner. FirstEnergy overpaid and then overcharged customers when it then recovered the cost of the credits, warranting the refunds, the PUCO said. The move had been cheered by environmental advocates.

FirstEnergy appealed. The Environmental Law and Policy Center and Ohio Consumers’ Counsel also cross-appealed, challenging protective orders that granted trade secret protection to certain information on FirstEnergy’s purchases of renewable energy credits. The PUCO ruling concerned certain in-state non-solar energy credits bought in August 2010, but the names of the companies it purchased them from, as well as the prices, had been hidden from public view as trade secrets.

The court sided with FirstEnergy, determining that a refund would be unlawful retroactive ratemaking, violating a doctrine that a utility can only charge rates based on the current, commission-approved tariff.

“We have recognized that application of the no-refund rule has been perceived as unfair and has even sometimes resulted in a windfall for a utility company,” Justice William O’Neill wrote for the majority. “But we have also recognized that it is the statutory scheme that requires this result, and therefore, it is a matter for the General Assembly to remedy, not this court.”

The court said the rule means the commission cannot order a refund or adjust rates to make up for overcharges under previously collected rates, effectively barring the PUCO from enforcing some kinds of refunds.

“While the PUCO is reviewing the court’s decision, we are concerned that today’s ruling will have negative impacts on the agency’s ability to protect Ohio’s utility customers,” the commission’s chairman Asim Haque said in a statement. “Our ability to effectively audit utility expenses is one of our most important regulatory responsibilities.”

As for the information hidden from the public, the court remanded the decision, which would require the PUCO to release them or better explain why they are trade secrets. This part had been particularly controversial, asFirstEnergy Solutions Corp., a subsidiary of FirstEnergy, had been one of the bidders. PUCO had said disclosing information about bidders and prices could discourage participation in the bidding process.

“While trade secrets may continue to be protected if the information retains some measure of value, the commission failed to show that to be the case here,” O’Neill wrote.

Supreme Court reverses PUCO ruling ordering FirstEnergy to refund $43M to customers