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The Ohio Supreme Court has agreed with Dominion East Ohio that a 2012 order issued by the Public Utilities Commission (“PUCO”) was substantively unreasonable, and has remanded the matter for further proceedings.  See In re: Application of East Ohio Gas Co., d/b/a Dominion East Ohio, Slip Opinion No. 2014-Ohio-3073 (July 16, 2014). 

In December 2006, new standards took effect, requiring suppliers of natural gas to make reasonable attempts to secure actual (as opposed to estimated) readings of customers’ gas meters every other month.  The use of automated meter reading (“AMR”) equipment qualified as compliant with these new standards; remote meter index readings (which Dominion had been using) did not.  As part of its effort to timely switch over to AMR equipment, Dominion applied to PUCO for permission to recover the costs of the transition from its customers.  It was estimated that recovering these costs from customers would reduce a 15 to 20-year process to a five-year process. 

PUCO approved Dominion’s plan, adding a requirement that Dominion submit an application each year, justifying that year’s proposed AMR charges to customers, based on its previous-year AMR expenses.  In orders regarding prior years 2008, 2009 and 2010, PUCO’s staff and Dominion agreed on the appropriate AMR charge.  In 2012, however, they could not agree regarding the legitimacy of the proposed charge, based on 2011’s expenses.  PUCO’s staff contended that Dominion’s AMR recovery should be reduced from Dominion’s requested amount, as a penalty for Dominion’s failure to complete installation and re-routing of AMR equipment before the end of 2011.  PUCO’s staff pointed to PUCO’s 2009 order as support for their determination, arguing that the two phases of transition – installation and re-routing – should have occurred in August 2011 and October 2011, respectively.  PUCO adopted its staff’s determination, and Dominion appealed. 

The Ohio Supreme Court agreed with one of Dominion’s bases for appeal, determining that PUCO’s conclusion was unreasonable.  The Court determined not only that the 2009 order on which PUCO’s staff had relied in fact did not require Dominion to complete the two phases of transition in August 2011 and October 2011, but also that these supposed requirements provided the only stated basis for the amount of PUCO’s reduction of Dominion’s proposed AMR customer charges.  The Court rejected PUCO’s effort to hold Dominion to one standard – completion of the transition to AMR equipment by close of 2011 – and then to base the amount of its penalties on an entirely different standard – installation of AMR devices by August 2011 and re-routing completion by October 2011.  The substance of PUCO’s order, the Ohio Supreme Court held, was not rationally tied to Dominion’s purported failure to meet PUCO’s deadline. 

The Ohio Supreme Court’s willingness to reject PUCO’s attempt to retroactively reduce Dominion’s rates here bodes well for the legal and regulatory climate for Ohio utilities and utility-related entities.  It seems clear that the Court will continue to insist on fundamental fairness for all such companies.