ML20113F558
| ML20113F558 | |
| Person / Time | |
|---|---|
| Site: | Davis Besse, Perry  |
| Issue date: | 09/23/1996 |
| From: | Doris Lewis SHAW, PITTMAN, POTTS & TROWBRIDGE |
| To: | NRC OFFICE OF INFORMATION RESOURCES MANAGEMENT (IRM) |
| References | |
| 2.206, A, NUDOCS 9609240352 | |
| Download: ML20113F558 (63) | |
Text
.
t
- i SHAW, PirrMAN, PoTTs & TROWBRIDGE A PAMTNERSMtP INCLUDING PROPSSSIONAL COMPORATsONS 2300 N STREET. N.W.
1501 FARM CREDIT DRIVE WASHINGTON. D.C. 20037-1128 MoLEAN. VIRGINIA 22102-5004 (202) 663-8000 (202 6 3 8007 LEE URG G NlA 2'721
%E "dE!*
September 23,1996 By Hand Deliverv U.S. Nuclear Regulatory Commission Attn: Document Control Desk One White Flint North 11555 Rockville Pike Rockville, MD 20852-2738 Re:
In the Matter of Cleveland Electric illuminating Company Docket Nos. 50-440 and 50-346 (City of Cleveland's 2.206 Petition to Enforce Antitrust Conditions)
Dear Sir:
Please find enclosed two documents, which Cleveland Electric Illuminating Company (CEI) is providing to keep you informed of developments related to the City of Cleveland's 2.206 petition.
The first document is a slip opinion' of the Ohio Supreme Court relating to the wheeling of power from Ohio Power, which CEl has challenged as a sham transaction involving retail wheeling to the Medical Center Company. As noted in The Cleveland Electric Illuminating Company's Response to City of Cleveland's 2.206 Petition (May 6,1996), at page 8 note 1, the Public Utility Commission of Ohio (PUCO) had dismissed onjurisdictional grounds a complaint by CEI that this transaction between Ohio Power, Medical Center, and Cleveland Public Power (the City of Cleveland's municipal electric system) violated the Ohio Certified Territory Act.
The attached opinion of the Ohio Supreme Court holds that the PUCO has jurisdiction to consider CEPs complaint and remands the case to the PUCO to do so.
The second document is a " Request for Rehearing of Cleveland Electric Illuminating Company," which was filed with FERC on August 30. This request relates to the FERC decision that we transmitted to you on August 2 and August 8 pertaining to the same transaction.
8 The editing marks on the slip opinion were made by the Ohio Supreme Court's Reporter's Office, b
9609240352 960923 PDR ADOCK 05000346 M
1 SHAW, PITTMAN, POTTS & TROWBRIDGE A PARTNE A5 HIP 4NCLUDING PROFES$10NAL ComponA7 sons l
U.S. Nuclear Regulatory Commission September 23,1996 Page 2 While CEI is continuing to exercise it legal rights to determine whether the Ohio i
Power-Cleveland Public Power-Medical Center transaction is lawful, CEI is also continuing in the interim to honor the service agreement (providing transmission services for the Medical j
Center transaction) that it executed after FERC's decision.
i i
Sincerely, AL72M David R. Lewis Counsel for Licensee
=
1 cc: Service List i
l I
I i
4 i
1 1
1 1
f 1
I i
l 4
I g
i i
1 1
1 1
l i
1 3
i
SERVICE LIST David B. Matthews David R. Straus Chief, Generic Issues and Environmental Speigel & McDiarmid Projects Branch Suite 1100 Office of Nuclear Reactor Regulation 1350 New York Avenue, N.W.
U.S. Nuclear Regulatory Commission Washington, D.C. 200005-4798 Washington, D.C. 20555 John B. Hopkins, Sr. Project Manager Sharon Sobol Jordon, Director of Law Project Directorate III-3 William T. Zigli, Chief Ass't Director of Law Division of Reactor Projects - Ill/IV City of Cleveland, Ohio Office of Nuclear Reactor Regulation 106 City Hall U.S. Nuclear Regulatory Commission 601 Lakeside Avenue Washington. D.C. 20555 Cleveland, Ohio 44114 -
Steven R. Hom, Esq.
Glenn S. Krassen Office of the General Counsel Climaco, Climaco, Seminatore, Lefkowitz U.S. Nuclear Regulatory Commission and Garofoli, Co. L.P.A.
Washington, D.C. 20555 The Halle Building, Suite 900 1228 Euclid Avenue Cleveland, Ohio 44115 Regional Administrator, Region III U.S. Nuclear Regulatory Commission 801 Warrenville Road Lisle, IL 60532-4351 l
l 4
e f i
SUPREME COURT OF OHIO j
i COLUMBUS i
i i
ANNOUNCEMENT 1
1:00 P.M.
WEDNESDAY i
j August 21,1996 MERIT DOCKET i
95-2444. Cleveland Elec. Illum. Co. v. Pub. Util. Comm.
Appeal from the Public Utilities Commission of Ohio, No. 95-458-EL-UNO.
i Orier reversed and cause remanded.
/
^
Douglas, F.E. Sweeney, Pfeifer, Cook and Stratton, JJ., concur.
j Douglas, J., concurs separately.
Moyer, C.J., and Resnick, J., dissent.
I.
1 i
t e
d L
i I
d.
1
a PLEASE NOTE THESE SUMMARIES ARE PREPARED BY THE COMMUNICATIONS DIRECTOR FOR THE CONVENIENCE OF THE MEDIA. THEY ARE NOT TO I
BE CONSIDERED HEADNOTES OR SYLLABI OF THE COURT.
INTERESTED PERSONS ARE URGED TO OBTAIN COPIES OF THE ACTUAL DECISIONS $O THAT THE FULL TEXTS OF THE COURT'S OPINIONS CAN BE CAREFULLY STUDIED.
1 3
f l
I J
i e
9
I.
i Case No. 95-2444 Cleveland Electric Illuminating Company, Appellant v. Public Utilities Commission of Ohio, et al., Appellees Appeal from the Public Utilities Commission of Ohio, No. 95-458-EL-UNC The Public Utilities Commission of Ohio has jurisdiction to consider a complaint alleging the sale of electricity to a municipal power company war an attempt to circumvent the Certified Territory Act of the power company in the city, the Supreme Court of Ohio held today.
The utilities comnussion had dismimvl the complaint filed by the Cleveland Electric Ilhiminating Coinpany on the ground that municipal power companies are specifically excepted from application of the Certified Territory l!
Act.-
f l
Writing for the majority of the Court, Justice Evelyn L. Stratton said the utilitics commission has the power to determine if the complaint of" sham transactions" was true.
Cleveland Electric Illuminating sold power to Medical Center Comparty as a retail customer. Medical Center resold the electricity to its mamhars-owners.
l Medical Center had asked to be treated as a wholesale customer. When Cleveland Electric Illuminating would not make the change, Medical Center announced it would start buying power from Cleveland Public Power, a municipal plant.
1 1
Cleveland Public Power said it would purchase power from Ohio Power Company, a subsidiary of American Electric Power.
Cleveland Electric Bluminating charged that the municipal light plant was being used as a " straw man" for the sole purpose of circumventing the Certified Territory Act. It charged the plan actually provided for the sale of electricity by Ohio Power Company to Medical Center Company.
4 I
3
i 0
Cleveland Electric Illuminating Company also charBed that Medical Center Company planned to build additional facilities and to sell electricity to non member / owners. It said this would cause financial loss to Cleveland Electric Illuminating. The Public Utilities Commission granted motions to dismiss filed by Ohio Power Company and Medical Center Company stating that it had no juriSdletion to consider the contracts.
1 "While the commission may not have jurisdiction over either the OPC/CPP i
contract, or the CPP/MCC contract individually, the totality of the evidence could indicate the real intention of the deal was to transfer electricity from OPC to MCC using two independent transactions, which would violate the Certified Territory Act.
"In such an instance, the commission must look beyond the surface of the two contracts to see if there was an underlying deal between OPC and MCC,"
1 2
Justice Stratton said. However, the court made it clear it was not deciding the case i
on the merits, but merely remanding he case to the Public Utilities Commission to consider the allegations.
She said that although the federal government had given regulation of wholesale power transactions to Federal Energy Regulatory Comminnion, the public utilities comminsion review would not encroach on federal jurisdiction, since it would involve the whole transaction and not just the pact between Ohio Power Company and Cleveland Public Power.
j The case was remanded to the Public Utilities Commission.
Concurring were Justices Andrew Douglas, Francis E. Swemey, Paul E.
Pfeifer, and Deborah L. Cook. Justice Douglas also concurred separately, Chief Justice 'Ihomas J. Moyer and Justice Alice Roble Resnick dia==fai "The commission has no authority over a municipal decision to purchase power from a public utility," Chief Justice Moyer said.
"CPP also had the exclusive right to contract with and sell electrical energy to MedCo, a retail customer within CPP's service territory.
W
"T.ie two contracts before us today are totally independent of each other, and ibily effectuate the power transfer in question. These contracts do not impose reciprocal obligations upon each other."
He said other charges by Cleveland Electric Illuminating were speculative and were not the basis for a valid complaint to the commission.
-3 0-Jones, Day, Reavis & Pogue, Paul T. Ruxin and Helen L. Liebman, for appellant, Cleveland Electric Illuminating Company.
Betty Montgomery, Attomey General, Duane W. Luckey and. Steven T.
Ej Nourse, Assistant Attorneys G6neral, for appellee, Public Utilities Commission.
Bell, Royer & Sanders Co., L.P.d., and Barth E. Royer, for intervening appellee, Medical Center Company.
Edward J. Bray, Marvin L Resnick and Kevin F. Duffy for intervening appellee, Ohio Power Company.
Chester, Wilcox Saxbe, John W. Bentine and Jeffery L Small, urging affirmance for amicus curiae, American Municipal Power-Ohio, Inc.
Climaco, Climaco, Semin*re, Lefkowitz & Garofoli Co., L.P.A., John R'.
C11maco, Anthony J. Garofoli, Glenn S. Krassen and Joseph M. Hegedus, urging affirmance for amicus curiae, City of Cleveland.
i 4
5
I i
t.
o.
i.
1 ELEC. ILLUM. CO. v. PUB. UTIL.
1 l
j 99 Ohio St3dl matement of h cue i
i' Lawn Euncrmo L4tnENATING COMPANY, ArtsLLANT, v.
i Cum:
I Punuc UTILmus CouvramoN or Omo sr AL. ArrsLLess.
+
[Cita as Cleveland Klec.1Dum Cb. v. Puh. Uts7.
comen. (1996),- Ohio St.3d
.]
I l
'1'sdnte Ut0Utse Com 't.Memional of&M)%d by elantese sonapany.
j auspimp violation er Cergied rmisery hwar enemi 63r 8sswomei Comed and cause venaseded so comedesion to praesed tosik Aeering ishen.
l The Public UtSties t'Wa=ta= hee.hnW= to aan=h a enmp1 mint aBeging l
that a sale of M ::, was initiated by a uti: tty to a retail user using a j
strar man to strecenate the dosi ihr the sole pu. pose of,
_ "-; the
~
CertifiedTerrttaryAct.
% v S t. '2.l f
i (No. 96 8444-Subadtted June 5,1""l !=""[996.)
l j
APPEAL fhun the Pab5e UtDities Can=l==ta= cf Ohio, No. 95 458.-EL-UNC.
l Tids appeal arose than an order of the Pabile Utinties h=Im of Oblo j
' ---) that disadssed a essaplaint Sled by appeDant, Cleveisad Elaetric s--
TEnminstmar Congesl r _("CEI"). Is its cargdaints CEI eBased that American h)
Electric Power CAmedusing ks subsidiary, latervening appeDee Ohio Poww i
h--W'OPC"k sold eleetdsity through Clevelsad Public Power ('CPP). sad O _,
l that CPP in tura sold the electristr to artutavadag appeDee Mabel Cantar
%,a= CMCC"1la violation of the CertiSed Tardtery Act.' In other weds.
af elshes that AEP, through its anbsidiary OPC, aDeseDr sold sleetdetty in l
9 Cat'sh,ritory.-
t
, Originalty, MCO parehased power fham CEI and redistributed k to some of its MCC was a reten ensenener of CBI at that tems. MCG i
wii ; a that CEI convert k ftma a : sten eastomer to a vhoisonia eastww=ar.
CEI apparently douled the change. MCC notified CEI that en September 1,.
l 1ses, woo id me edene. serviae week Car d i ire tem power than CPP.
54%ESL e.t St.4.2 l
s n. c o m.4 3
, u = = e.t m fder - i.a o.an.a s sheri u r
peerseas ess, web the imagaba set aus un rym erthe olds casamusa tunndeipe j
eery==al==a eash eheness suppasr e asupass a ementi essreasywhose k has the enhete Wahs
' topseuddeeersten.
& h8Dct Bespesh et assehad, Cue W
. Usdussety,/he Ospelnd 30mesuu af Ale C J., af tbs Ossoasst. sis -- Ants' I
l Ash the Gueuland Batmakel assessa meenug a spessa cueury
~
i 08'elandWIAsapyAsseshtien lasessesafArt.
l Mtm d own<.r3 g i
4 i
1 i
1
-. _... ~ _ -
l' 1
e i g
l OP C-CPP i
i i
2 SUPREME COURT. JANUARY TERM, 1996 [99 Ohio St.Sd j
Statereset of the Case against MCC, AEP On May 3,1996 CEI feed a cornplaint with the +
1'-'-
l and its generating anhanavies, including OPd(In n CKI, case No. 96 458-EIr-UNC,1995 WL 786634.
__ Q Count one of the complaint alleged that OPC "has ammged to furnish service j
j k
to fMcc) by seDina 50 MW of espasity and ammadatmi energy to (CPPl." CEI l
further aDeged that thye,C transaction and the CPP/M00 transaction are two halves of the same transecdon? CDI eBeges that these two tranene-a e
[tions "are sham transmetbas" sad wars.LM to ciremnve i
Territory Act. Thna, CEI contends OPC wG1 violate the Certi$od Territory Act i
Sy seDing power to MCC.
4 In enant two CEI eBased that MCC may be an electrie light company as O
e j
/
1senned la R.C. 4 sos.ce(AX4) becsame 2 receue ;; : T to sus r "_ _-m
/ O.
l
'CEI further supports this elehn by eBeging that MCC intends to baDd aIditional fadittias to take power at trenanlesion voltages, to change its idning - " ' g S kc-Sh
.and to sen e 9 "y to non.aiembec' owners, which wGI make MCC, if it is not 21 ready, an eleetde light company under Olso law.
Coant three eneged that CEI insteHed generation and distribution systemas in'
.zsRance on continued service to MCC and its saembers, and that CEI wDL suffer
~
3 fhmdal less beesues of the stranded investenent==am' law with MOO leaving i
CEPs systeen.
j OPC and MCC fDed esperate==dha to dismiss CEPs aa==aw eBegingin part that the CPC/CPP power purchase ;;. -- ^ was a iskalaanla tremenotion That is escluelvely under the M="*= of the 1%deral Energy Regulatory Q
emindantam CTERC').' CEI has inittsted a FERC actba eseldag to invoudete C
+ka agreement for the sale of M.4 fhun OPC to G"P_ Md afQessiend i
M I"-
vo., rr no r-:- '--=_ No. EL 964 400. OPO and MCC also j
. argued that the Certised Territory Act does not prevent wholesale tranaandiaaa auch as the sale between OPC end CPP. CEI countaand the metias to dismiss, contending that the leone before the comunission was not the OPQCPP wholesale-i tra===*Iaa indMdnaEy or the CPP/MCC exempt W1 agreement individual-
{
,37, but retbar the de ibete aster" eale between OPO and MOC.
a After revisning the earloos arguments by the padies, the aa==i=qdr= dis.
l anisaal CEPs complaint, stating l
.'s Far pupsees of this epides Olde Pewer Cow hee edad se beber ofits,_.
'a, j
1
. EleserteFWeer.
4 L
'4.
Puumat to the Fedeel Feuer Aet, sealen set, tale 18, UJLcede, FEEC has jerteilelles to
)
neens n mis of seem samur etid.imme een.a.. ese of
.es., is ear permu.ierrusale." 8eselesst(ik1Rio14,V.g. cede.
1 1
1 J
1 1
4 e
se l
}
e
i*
a l
99 Ohio St.3d]
ELEC. ILLUM. Co. v. PUB. UTIL.
3 OpW w Strutt.cn. J.
"Panuant to Ardele XVIII, Sech.
af the Ohio Constitution, municipalides in Ohio may own and operate pubMe utilities and may 'contreet with others for.
j any prodnet or service.' Moreover, the certi6ed territory statutes (Sections 4938.81.84. Revised Code) sw8-ny cane out an excepuen for namicipal l
utuities negarding appheation of cert 15ed tenbries. 'Dans, even construing l
CErs anegations in this ease as true, the existmg constitutional and,,666ty
-..6m preslude sventing tha salief neusht by CEL Based on our assess.
r i
ment et the agnedepon facts and the law, we do not beHeve that a hearing is l
warranted or m in this case to neotw the stnetly jurisdictionalissues raisedin CErs complaint" l
hs, the==wasion di==lamaA CEra mnplaint because it determined that it did not han judediction over either of the two agmements i W g to the saler 4
j of M'.4 Se OPQCPP agnement and the CPP/MCC agreement.
De conse is before this court upon an syyeel as ef vight.
j Iones D4 Receis & Popus, Poid f. Rusin and Helen L fis6rmas, for g-;
- camland m trie rn -r a=r 0==pany.
1 Refer D. MM_
r,, Attorney General, Duane W. Imekey and Steven T.
i Nouros, Assistant Attorneys General, for appenee. Public Utcides w = e n.
Rett, Royer a sendere Ca. LP.A. and Rort4 R. Royer, for intame.;
i appeneqMedies! Center campany.
l Edmord J. Prody, Mmvis I. Ammik and Kasis F. Dagfer latervening A
l supelleQOhioPowerCompany.
Owster, Wiscos e ses6s loks W. Bessine and Iq(ery L Smo#, urging j
.ainn far w.w.ueing Amerlma ManleipalPower-Chio.Inc.
j Gismoog 0:sses sessW Leflossics a GerqbH Co, LP.A., Joins Jt.
dissong Assthony J. Gertpsif, Glens K. Ksesess and /casp4 M. Ifsameus, ursing 1-siennance ist amione suries alty et Geseland.
Braamu, J. no esses to be dedded toder is,la '
' " ; a nwesen to.
dismiss a mamplel=t before the cosranission aleging a vielstina et the'Castified
%..; q Aat, esa tbs osmudesion look beyond two indivlemal sentrasts, oser.
which tbs enemission adenttedly has no jurisdiction, to doisemine whether tbs-Q 5tataMay at tbs evidenes anages a potential vicistion et the Curtified L.;;w mise et this issna is a qasstian at law. Aeoonungly, we address this issue a de noso standard of reslow. Indus. Emeryy Coneenners gf owe LL*.8
.Poiser ca a pub. DIO. Comm. nses), as osso stad ass, sea,000 N.15.3d 488, w.
<mA.
.._._ _ _.__. y i
j-f l
1 4
SUPREME COURT, JANUARY TERM, 1996 (99 Ohio St.3d optrJen, per Sumnen. J.
I f
StmMard for Dismissal far FaDare to State a tw i
In a cM1 ease befoes a enet, Wmust appear beyond doubt from the
- eomplaint that the plaintiff enn prove no set of feets entitling him to s,-mf 1
e
/
betom a raation to dundes aan be smated. O'IMen a Umfaerody l
cornenwdiy Tenants Union, Inc. 0975),42 Ohio Stad S42,710.0.Bd att,327 l
N.E.2d 758, syBabus. Further, in ruRag on the motion to dismien, au meterial l
factual aDegations of the complaint must be taken as true. See Yail e, Mein l
Dealer Pu68isMag Ca Q996),72 Ohio St.3d 279,649 N.E.Sd 1st. 'the comads-slon has adar ad the same standard in reviewing motions to disades bmught e
l under R.C. 4905J6, La, that aH of the complainants' factual ausgations must be j
taken as true. In,e 2bledo Prowduen Yapiert a 2bledo Edison Co. (Segd.,17.
l 1992), enee No. 91-1528-EL 088, at 2.
o.Q The present once is brought under B,.C. QCartified Territory Act.
i
'Itas, the holding in folado Promises Yoyeet is not dinctly on point in this casa.
i However, the aanw=W's order of dismissella this matterIndiented that it had senepted aB CEI's aDegations as true. A l.. iiy, the ansaadamlan anst ecoept au aDegations as true in determining whether to dismiss a corrplaint brought i
i under the Certi6ed Territory Aet.
In its complaint, CE! abased that "AEP
. " W dimetly with Medical i
Center, either en its own er in engunstion with Cimland, aga.dag th 80 MW j
l an3e and purchase." CEIalme eDaged _
--- h
Ihe 60 MW trannaseian between AEP and Cisveland, and the 60 MW tr==A between C5eveland and Memen1 Center, een tuo hahes of the sune j
l transaction. '!he purchase is la reality a purchase fhun AEP, sad the raies I
javelded by Cleveland, a wheeling servios to esseteste the Medieel contar j
{
pahase."
If the above eBagstians slaimed by CEI are taken as true, as is required lg the l
====da=laa's own standards in evahasting a motion to disadas, thou CEI's l
esenplaint anst survive a motion to dismias, Wh5e the commission may not have a,
l jurisdiction over either the OPOCPP enesteet/tr as wrdsw --uunvid-l nauy, the totality of the evidenes eenld ladkets that the nellatenlien af the deal j
was to innsese elesaseby num oPC e MCc using t.o ; ' --v
- =.
i whidrwoeMviolatetheCertisedL.L i Ad.
l In such an instanes, the a==ndamina mustlook beyond the surfbes of the two esotreets to see if these was an undestying deal betuosa OPC and MCC, thenby estehushing a pedma thde eene et a violation at the Caseled Tarvitary Act.
As previously w the osuusdesion's pshnery namoulas Sur we j
this ease was its pensived leek er,t'=4adwaar spedoenity, the aaap=* thund l
i
}
}
I i
i
1; a
i t
1 i
i i
5 93 Ohio St.3d]
ELEC ILLUM. CO. v. PUB. UTIL, l
Opinion. per Stntten. J.
l that it did not here jurisdiction because the CPP/MCC tranaaetion was exempt from being subject to the Certised Territory Act. 'Ibe commiasima apparent:y made a cursory review of sount two of CEra cataplaint as to whether MCC was an electrical supplier. 'Ihere was no analysis of count three of CEra Mat.
4 Therefore, upon remand, the==miastan should consider CErs complaint in its 1
entirety.
It is ", u to note that we make no determinaBon as to the existence or suf5eleney of evidence as to the merits of any of CErs aHegations. Such a determinahm is for the sammi==lan alone to make. Hewever, the fact that at j
Jesst feelaHy, two discrete tramaneHass were used {n this pgyhaan should not prevent the camadsstem fram detsruntaing whether the purchmas mmpnrts with i
the Cerused Territory Act when viewed in its entirety.
i 1
I II f
FERC's Jurisdiction
'the import of this decision does not reqube the camml==lan to impy ;i l
mguinte an area where the federal.m " has preempted the Seld with' regard to the FERC's regulatiod af wumah power transactions. The camema-sion's avview wiB be of the entine eBeBod transnation fress OPC to MCC by way j
g bt CFP, not sa sentrals of the OPCCPP emetraat. '1%ns, the aa==Imalan would l
C not be eneronaldag into FERC's jiaisdiction over the OICCPP oentreet.
j Further, la redW J'osser comme it 3. coagtnists Edises Os. 09N),878 U.G..
205,216-816, N S.Ct. 644,651,11 L.Edad 838,646, the Suprutna Court stated:
- * *
- Congress meant to desw a taightline easily sacertained, between stets and 2ederaljurian*daa * * *. ' Ibis was dans in the (Federal) Power Ast anaking i
[FERC] Mh plenary and **anang it to aR wholesale sales in laterstate commeros op #Aess ws4 c,;._ A as em. -~ no,emangen g
6 r the Simes." Chaphasis addagpeetk,a 8Mk00, Title 166 a. Code (probiti-l Of N
3 l
taan on mandatory astmit wheenas and ehem teensestians), stases: suoimang in this sah shnu afBeet any.# ;;j et any State er leent governmess unear 1 l
stata law conearning tbs tran==lah of electrie energy direetly to an nW=ata
)
i consemer." In===in8=r the aDaged absm transaction (the eBased dealbetereen k OPC and MCC by war et CPP), the annunissies wal be scrumiksag whether OPC tas made a rotat deal with MCC. As stated above, retall deals are explicitly escinded boat FERC's emelestre jurisdiction.
m A M*r's Antherity to say er set Electrielty Purement in Areais rym,et the <*u c--J" "=
L j:;N Under Adiele wu-
', " '- hsve eartain powers,lacInding the authort-3 4 to "sequire * *
- an} publie utalty the prednets or sentes etwideh is or is to i
I ki i
)
i i
i i
1 1
I
."4 l
Y dec1SIon 6
SUPREME COURT, JANUARY TERM. 1996 [99 Ohio St.8d i
Optrdon, per 8tratten, J.
be suppEed to the anunicipality or its inhabitants, and may contract with others t
j for any such product or service? Section 4, Article XVIII of the Ohio Constitn-l tion. % Certified Territory Act excepts from its eaverage
'-t=N== acting
_ wrsuant to Article XVIII of the Ohio C-
- h R.C. 4988.88(A). However, i
this
^ ' not evincerate a mW'@y's powers to buy or seH electricity i
under IvtII, of the oh!, ConM-is not a result of thia 7hQ E
j l
opinion, nor should it be the pesetical resalt. Rather, this decision is to nrevent a o
j ntility hora cireuraventma me Ceruned Territory Act by K J.* 4 to an 2
~
r entity to which it cannot een under the Act, by inserting a _ straw man" to l
1egithnise the desL It u only a um feetJspeeme e="^^ sneh as me case at H
l bar, wherlecompialat aBeges that there was an agreement between OPC M C,,,,t)rd.
MCC to een electrielty hem OPC to MCC using CPP as the straw man conduit.
that the earn ='I==Ian has j=8@*8en to hear a complaint aBeging a violation of the Certi$ed Territory Act. FaGure to reach this normw factual threshold wD1 result l
In a sanan to state a elehn upon wWh relief esold be greated.
h aa ah is bee to find, based on the evidence, that each transaction stands on its own merit and was not anerely a sham transmetion, and that each j
contractual transaction most be honesed ngardless of whether the other contreet pieceeds. EssentiaBy, this decision should provide a deleats balanes by passere-i ing a nundelpelity9s right to fusely purchase electrialty pursuant to the Ohio Constnation, yet preventing utGities Aeon L ;*.g the Certified Territory l
- Act en the rare aernatan when there is evidenas that shows that a utility has used l
a straw man to ha+= a sals of electricity fbr the sole purpose ofheat-j lag the Certilled L.-i Act. A l.'us;y, we hold Pubtc Utaitses CLt,,,
j Corainlaata= has jarlediction to eomidar a complaint that a sale of electricity was initisted by a utstity to a reten user uslag a straw man to j
effectuate the deel for the sole purpose of 4
- Jag the Certified Territory Act.
i O
l IV-1 cm i
Within these narrour definitions, we find that CE!'s ecmpialat sets out sufS-i j
cient anesettees te withstand a inetsen to dismise for lack at jur4h h connaissias inued to talso the essence of CEI's aDagstions as true flor purposes of
's motion to disemiss, astytag solely on its technical analysis of a lack of jartsdiction J
over the separate trah
% statue, the court reversas the emarminalan's distnissal of CEI's compisint l
end reasods the eense to the annumissies with lastmotions to ruinstste CEI's i
'esspistet and preeeed with a bearing on the same.
Onist neersed i
8814 souse reseanded, j
4 4
}
l I
1 E
4 i-99 Ohio St.8d]
ELEC. ILLUM. CO. v. PUB. UTIL.
7 covurrtas opngan, per Destas. J.
j Douaus, F.E. SwssusT. Pratrza and 00:2. JJ., concur.
f Doucus.J., concurs separately.
Marra. CJ., and Rasmes. J., diament.
i Doucus, J., concurdag. I agree with b well-rusoned and enlightaned i
judgment of the endodty. I write separately 9 address the dissent. Reading i
the m4aritr osinion and the dissent together, one wonders if we are talking j
'about the same case. Contrary to what the dissent may imply, au that the j
.msdodty decides today is that the Pahlte Utilties n,m,Jaan of Ohio C'PUCO")
e must hoki a hearing to determine whether Ameriesa Electrie Power O'AEP") and its subsidlary, Oldo Power Company O'OPC"), created a sham transection in j
consort with Cleveland Public Power ("CPP") to seu eleatncity to Madhi Center j
Company O'MedCo")in violation of the Certified 14rrttory Act.
i Both b m4 arty and dineent are asswd that a dired sale of electriesty from.
OPC to MedCo would be a violation of R.C. 498L88. R.C. 498 TAB (A), of the l
Certified Territory Act, guarantees each electric supplier *the exclusive right to.
fundsh eleetne servlee to all electric load centers (te., customers] located ~
6 '83 h b
presently or in the future within tea certised teerttery * * */ In this ones, b
}
exclusive right to fhraish electdeity to MedCo (a load eenter or enstomer within-
)
{
the meaning of M 4988.81[E] of the Certised Territory M) belongs to Cleveland Elaetric IHuminating Company ("CEI"). 'Ihns, OPC,Qa competi-s
]
. tor of CEI,inay not invade CEI's asciusive tardtory.
44 he Certi6ed Tardtory Act (E.C. 498831 et ag.), however, exp5aitly entwo out an a=reta= fbr i I utfittias regarding the - -hh_ etthe Act. It is ws!!
esiahMahad that, persaant to Seetsen 4, Article XVIII af the Ohio Constitution,
=" aft"% may own and operate public utDities "the prodner, er service of which is or is to be suppund to the - 8t*y er its inhabitants, and may l
c" g contreet with others for any such product or eereies.' M Akron j
- v. PdW DNL Cosos, QN8),149 Olde St. N7,47 0.0. 80,78 N.E.2d 800; Pfsu a ____ g i
{
Cueemusef QM8),142 Ohio St.101,28 0.0. 284, so N.E.3d Mt; W Geo-l Co. m PubWe UNL Cosen. (1940),187 Ohio St.Sts,180.0.10,28 N.E.3d 500; Bd.
Wb'LS_
grKds a Ophen6ss Gets),118 Ohio St. SSE, let N.E. 95t. %seefsee,
--n h. the anse herein is enespeed from the Certised Tsedtery Amt when
'it operates CPP, its own utnity, sor the purpose of genereung power to soeve the j
.tannicipanty er its tahahat=nen-It may also ancare by contreet froen another j
atGity a preduet er servios fbr the InunicipeHty9s needs.
j However, this does not perndt a municipal utDity to act merely as a emhet for l
the tremesse of alesuity fhun an outside atettyinto the mansdpaHty. If thie.
were pernessible, then a municipanty c 3 d est up a publie statty oper tson, 3
acquire power froen an outside utetty, and convey that power to its==wp=1
t i
i 4
8 SUPREME COURT, JANUARY TERM, 1996 [99 Ohio St.2d j
]
Dimanung opWon, per Meyer, cJ.
j j
tahabitants without ever operating a generating fedllty. This would resultin the j
negating of the laudatory purposes of the Certified Territory Act. Clearly, this j
i l
would be kapertnissible.
ne dissent calls EdCo's activities an " artful comptance." 'Ihe dissent i
a rnalrea I beHevs. the majority's point. What we and the cornmission should be concerned with is whether AEP, OPC, CPP and MedCo have "artM!y" or J
dherwise erested a earles of transactions which. taken together, contravene the 1
laws of this state.
I The PUC0 was sW=ny erested by the Ohio legislature to handle these 1
types ofissues, s.nd it has the expertise to do so. %s, we grant the conunission permission to review such metters. % dissent bandens our order for a headng i
into the pnposition that a =Wynty cannot buy eledricity from other electric i
l j
power petwiders.
% madority opinion does not say that a _.
Midtyinar not contractwith an j
outalde supplier of power to satisfy its needs. A home-rule m=W=h may at!Il i
elect not to contract with its local publie utaity to supply the municipalty's eneaur nquirements. What the majority is saying, however, is that when, as i
j here, aDegations of foul play are made, the PUC0 may look beyond two individual contracts to detennine whether the totehty of b contreets evidename a sham tranan*Hari in direct vih of the W W h M k a# the majority opiadon holds. The other issues are left to another day when they are 1
p.y I, presented in esses coming before the court. Aeoordingly, I concur.
e af d,
H seen a
og Article XVIII of the Ohio constitution and the Certified Territary Aet cAet") in of plain language and oortain tatent, I must si=:*ny dissent.
vw=Han CEI as whdgas that the===damlan has no jurtaMian over either the Ohio PoweWCPP *entrast er the CPPhdCo eentreet. Yet CEI asked the commis-sica, sad now this court, to look beyond this lack of,turisdiction and recognise s esase of setton under the Act. Simply put, MedCo's artful complianae with the plain words in the Ad p rednee its energy easts does not violate the Act and i
dass not miste an accabie ciasm uneer the shete presently barba the sommi.-
alan or this enart. b meJority decision reaches boycod the aDegations con-tained in CErs ---- ;' : to ereste an allegation that there actuary is a contrad, between Ohio Power and MedCo: the only possible fam1 dreuenstanes which
)
cockl vielste the Act and give rios to a esuse of action betuosa these parties.
seetsen 4, Artiene xvmgths ohio Constitution provides:
l 4.,
M;m; sy esquin, e etroet, ou=, heen and ope,are within or-without its corporate Iknits, one publie seaiey #4s produd er eerenw ermMen de i
{
i
o <
j t
i 4
99 Ohio St.3dl ELEC. ILLUM. CO. v. PUB. UTIL.
9 Dis enting opinha, per myer. cJ.
i or se to le eupplied to the municipality or its inAahtenta, and may contruct with 2
l othersfurany ewh produt or wrvice. * * * * (Emphasis added.)
I Until today this prcmston meant that a in' nidpality could choose to contract i
u with any wholesale energy ev. Ar for the prwiston of energy to the municipal inhabitants. This is the situation no longer.
Moreover, the Act expressly provides:
" * *
- In the event that a munkspal corporation retme to great a &==Au l
or contnet for elsetdc servloe within its ha= Hee to an electric supplier whose l
eertafled to:Titory is ineladed within the numielpaHty, any other slectric supplier
,may wm tAs musicipal e,p, h under a franeAlas or contmet writh tAs I
musicipalcorporation." Or,mphasis added.) R.C.4938.88(A).
The plain words of the statute have, unta today, meant that a home-rule rnunicipnHty could elect not to contract with its local public utlHty to supply the ertala=%'s energy regt"7ernents but, instead, could contract with any other energy preider of its choice to supply those needs.
i he umfority decislan wiB have the effect of hat =Wg these rights of the i
tea - = y. It win -E2 p ----- -91ities from contracting with the chio electrseal supplier of their choice to satish the energy neede of the==MaaM.
l If a - ---Ziewty wishes to purchase energy competitively to supply the needs of its citiaans,it taust either buy from the local puble utility or go outside the state i
of Ohio to satisfy its energy needs. Home-rule ranma=w-= will be unlikely to
/,h sadsfy their energy IQwts freen a nonAccel Ohio enetty producer, such as N
Ohio Power in this cass, beeanse such a purchase would enate the very real threat et possible Act Utigation at the==1= tan by the aggriend local pohlie utDity.
l AdditionaBy, Ohits now. cost energy producers wl!!!a'se the oppsetunity to sell large bleeks of electrie energy'in the wholesale market to Ohio's borne-rule municipanties. Sees sales win Ikey be farose out of state in the ines of potential Actlitigation by loon! pubBe utilities. Neither ".c=M =1 inhabitants nor i
Ohio's low cost energy prodneers beneAt from such a decurnstanee.
ne w is a cneture of statate, engTsush, may exercise only that /[
i M8h senisered uponit by statuta. Time FernerAss a M Uta. Comm.
0906) 16 Ohio BL.3d 229,254, OSI NZal 1097,1101; Caston Starage e insnefer l
Co. s. M UNL Comst. 0 906). 72 Ohlo St.3d 1, s, 647 N.E2d 186,141; 1
Colano6ms 3. Poeper Co. u M UsG. Opens. 0908),87 Ohio St.8d 585,587,620 N.E.Sd 8I6, ass. A eompletat that taas to trigger the =amf=h's i#Wb is soldest to dismissal. See Cineissnaid a M Util. Comum. O9mo,64 Ohio St.8d 879, ses N.E.Sd 868: Daytes C&'"M Corp u M Util Comm. 0990),
j j
64 Ohio St.2d 30s,18 0.0.3d 478,414 U.E.2d 1081.
i k
~
4 i
~-.
l 10 BUPREME COURT, JANUARY TERM, 1996 [99 Ohio St.3d Dissecung Optntan, per Mayer. CJ.
The General Assembly has narmwly preserfbed the eonunission's statutory b(
authority over homepe municipal utility operstaans. The==* has express authority over the vohmtary and forced abandonment of utility facilities i
and services inside mi.nleipal lindts andse the Miller Act. R.C. 4906.20 and 4905.21 (State er wt JDepp u Doyfos Power & LipM Co. D967],10 Ohio St.2d 14, 38 0.0.2d 9, 225 N.E.2d 200), and the state has the authenty te eentrol hunfelpal utiHty actions in situations involving statewide pubHe health and safety, for example, water thloridation (Cantos u Whitsnas D975],44 Ohio St.2d 62,73 0.0.2d 286,337 N.E.2d 766), and approval of sewage projects (Delosuseo Cty. Bd.
.of Coments a Columbus D986),26 Ohio St.Sd 179,184,26 OBR 164,158-169,497 N.E.2d 1112,1117).
But the -=W has no authority over s =wp decision to purchase power from a puhue utility. Section 4. Article XVIII of the Ohio Constitution provulas that municipalities.have the right to choose their wholesale energy suppliers. This right is not subjoet to atah*ary restriction or to mmmfanfan review or control. Link s Pub. Util Coram 0911),102 Ohio St. 386,131 N.E.
796, paragnph two of the synabus; In n Complaint ofResidents ofStruthen Q989) 45 Ohlo St.3d 337, 643 N.E.2d 794, paragraphs one and three of the syllabus. Accord Laoas s. Lucas Lom! School Dist. C982),2 Ohio St.8412,2 OBR 501,442 N.E.2d da9; Colurn6ma u Puk Util. Comen. 0979) 58 Chlo St,Sd 427,12 0.0.Sd S61,390 N.E.2d 1201; Coises6us s. OMo Poeper Siting Conses.
(1979),58 Ohio Stad 486,12 0.0.5d 365,390 N.E.3d 1208. Thus, CPP had the i
constitutional authodty to contract with Ohio Power to parehaos electrieel energy. Moreover, the terms of that contract are not sutdest to -minalen review. M supra, st. ic.g-is two of the syllabus: In en Comp!sist of Rseidents erShutAera, supre, at paragraph thne at the syllabes. Soe, sloo, meter a oml e nee 0), se ohs. st.sd Iso, tal, sso N.E.841168,1184-1185.
CPP also had the exclusive right to.enetract with and een electrical energy to MedCo, a retaD customer within CPP's servlee 6 Aj. Als unfettered rightis expressly recogniaodby the Act:
Vuothingin Ithe Catifs d Temtory Act] shall kapiir the power of mumleipal comparations to require frenchiess or contracts ihr the penision of eisetric serviceswithin thstrboundades * * *.* R.C.deananm "Nothing costalmed in (the Act] diall be construed to affect the right of munidpal corporations to generate, transmit, distribute, or esE electrie energy.
- Iba rights and powers et maw-! C'r as ther mist on or aAer the
- Naedro date et this section to aoquire, construct, own, lease, or operate in any
====ar a pahne nasty or to supply the earvios or prodnet * *
- under Beetica 4, Article XVIU, Ohio Constitatien in any partion of the state is not afladed by Ithe
. -. ~. -.
+ -
99 Ohio St,8d]
ELEC. ILLUM. CO. v. PUB. UTIL.
11 Dianershg Ognion, per Moyer. C1 Aet]."
R.C. 4933XI.[Thus, the commission had no authority to regulate or
.s otherwise control the CPP/MedCo power agreement.
NI More important$, jurisdiction over wholesale power purchases like the Ohio Power /CPP agnament has expressly been pr====n**d hv faderal law. Under_th_e Federal Power Act, Section 824, Title 16JU.S. Code, the FERO has exclusive
/{
jurisdiction ever the sale of wholeente electrie energy. The United States j
' Supreme Court has longpstablished the preemptive affect of the Federal Power i
Act gD
- a '
- Congress meant to dmw a bright line_ easily ascertained, between state and federal jurisdiction *
- a was done in the [ Federal) Power Act byTg making [FERC] jd=Atetton p1 nary and extending it to all wholesale sales in
[
inter =wa cammame -
- those which Congress has inade explicitly subinet to
+en
- - s_d-c.
mf 0964),376 UA 206,216.,216,84 S.Ct. 644,661,11 L.Ed.2d 838,646. Intrastste wholesale tr==== *%w, like the one at bar, are also canaidared to be made in g
j interstate mmm=ce and preempted by the Federal Power Act. FedsurPoncer j
l Coram, v. Florids Power & figki Ca Q972), 404 US 458, 92 S.Ct. 637,30 1
T. Med 600.
'Ihe majority holds that the onmmianian has concurrent jdadwan over.an aneged sham transaction under the Act. I disagree. If pneemption r*+=1== any force whatsoever, then the cammiaak cannot have concurtint j=4adWan over j
th!a sitnation. Pursuant to Section at4E00 Tit.lc la, U.S. Code, the "sharn tranaadh" of which CEI **plak is sutdeet to the FERC's jurisdiction. Only the FERC has the authority over this contract. @mortstuip Rossaeen ser.
vices Inc. v. Pd. Dh7. Comm. 0987),84 Obla St.sd 62,617 N.EJkt 640. In inet, 4 tg CEI ham, ssd-.A this, initiated a FERC proceeding under thls meetion to invalkists the Ohio PawedCPP power contract, Pshtion o(CKI, Ofor.0,1995),
l FEBC Docket No. EL 964 000, at 4,14.
i
'! hat is not to esy that the ~===8 =6 might not have jurisdiction ever this matf= at some later date. If the FERC agrees with CEI that this sitosi$an l
constitutes a "shmen tramandlan," the FERO has the ashMtw to strike down the i
Ohio Powe:WCPP whoisaale power oomtract. Armed with the FERC's " sham transedion" Sading, the===daalm wockl then have judsdiction to determine CEPs damages undse the Ad. Howeve, absent such a FERC Sading, the
-miaak -4 held that it has no right to render any dedston related
' 4 within FERC's domata. Qt tho =h=*
et a soetseet that, is =-
- I RadsI6 p Rassem4 Serviesg Ime., supra, j
Even if we could put aside the determinative issue of jordadw= the question at the heart of this case is whether Ohio Power and MedCo contracted to een 50 of power in viciation af the Act. If CEI alleged that they did, then the t
i i
4
hoPl%
12 SU[REEE OOUE'T, JANUARY TERM. 1996 [99 Ohio St.8d i
Diseeschqr opinion, per myer, cJ.
l complahrt was not subject to being disadssed, because the complaint would have augged afprwns facis) violation of CEI's cestised tomtory under the Act.
j However, the complamt contains no such =fla*=%-
The completat alleges in count one thats (1) Ohie Power "has arranged to fumiah electric service to [MedCo) by seHing j
40 MW of capnosty and associated energy to [CPP]";
4 i
(t) Ohio Power " negotiated directly with [MedCol * *
- stranling the 60 MW aale and purchase";
, (8) CPP wSI b!D MedCo under the'same method that Ohio Power was buling (
t CPP for the 501sgor p_,
(i) the Ohio Powse1CPP and CPPMedCo power agreements "are two halves of i
the same tran==etion";
i (5) these two transsetions "are sham transactions" structured to dinau..ut the Aet; and (6) Ohio Power win violate the Act by selEng power through CPP to MedCo.
Neither the eenmdeston nor the court is required to secept aBegations in a eampWat as tme whleh an eontadiated by d=='a-ats
- w to b m 6
u
.See Siete er rol Schamnis s. 2bledo Ci4 SchooIIXst Ed. q(Edn, (12172 Ohio St.3d 106,100, 647 N.P.2d' ins, 802. The two contracts before as today are totany independent of each other, and fully effectuate the power tranafar in question. bee contracta do not impose redprocal an;-*-- upon eads other.
C As a matter et$ net, Article 10.3 of the CPP/MedCo agreement specifically states that it ersetes no third party bene $ciaries and that the only parties to the agW sm CPP and hdCa. CPP is not mquired to nas Oblo Power as the ocuros of tis energy under the CPP/MedCo contract. Amaa.ny, CPP is obligated to provide MedCe with an of its energy needs under Artiole 1.1 et the CPP/MedCo agnement, ineWe any amounto mr 50 MW, whue Ohio Power, 4n the other hand,is obligated saly to provide 50 MW to CPP. Moreover, Article 5.8 ef the CPP/MedCo agre==nant =aa 8a, ny aaatamp1=ta= intera==acHan y[th wholesale electric Two halves of awholet h d=====+= clearly state otherwies.
O Q -t,Q QQ Further, changue in bHEng prs %:ee and methods betwoon a municipsHty and its mean *=aa====s have me unenalog under the Amt. Nor de nogettations boWEf*O between Medce and Ohio Power without. sorne type of contreet. Amanany,
,every petty to tNs Etigation agewes that these two power contracts are not seldoet to the -i=daa's.i=<= mon. m fact that this alleend b+
ment" is regulated by and soldest to a reinedy at FEEC, under flahn 8NK00,
- litle 16, U.S. Code does not vest the corr== alan with FM!^ to hear CEPs gonplaint.
t*
99 Ohio StJd]
ELEC. ILLUM. CO. v. PUB. UTIL.
18 Dunerties opimon. par Wrer, cJ.
Under these cim==+=a=; the errnmf enfon was free to question the allegations in CEra complaint and detetuine that this complaint did not set forth "resson-able grounds for a complaint." b aBegations in count one do not trigger commianton jurisdin**m.
In oeunt two.CEI alleges that:
(1) although CEI never raised the issue before this complaint, EdCo is an electrie light company under Ohio law bean = it sans the power that it buys fawn tEI to its memha'4wners; o
(2) MedCo intends et some point in the future /E buDd additional faciEties ta take pmuer at transminatem voltages, change its hining me++% waarding its.
,membevowners, and een eteetricity to non-membedowners;
- . (3) these changes w01 make MedCo, if it is not already, an electric light
'companyunderOhioinw; and (4) after the changes, MedCo wEl be seHing electricity to its member / owners in violation af the Act.
Speenistive future changes in bEling methods to member /ownera, the construe-tion of facHities to take power et tranamfaalan voltages, and paenlaHan that MedCo may provide electricity to new membersf5irners do not vloiate the Act.
'Nor do they conweet a : stall eastomer of ever sixty years into an electric supplier that is subject to the Act. Simply stated, speculative thture activity which may or may not occur is not the basis for a valid complaint at the evenmlantan. Clevelased s, Pub. Uh7. Conses. (1980),64 Ohio St2d 209,216-217,18 04Jd 418,428 428, 414W.E2d 718,123.
A=--ny, the peop ety stated that.1 trie.p. (if that is irhat MedCo is in this mee) in existence before January 1,1977 are esempt then She Act. In w CETl esse No. 95 458-Eb-UNC. Entry at 7,1996 WL 786880-ujetit. Therefore, even if MedComre aanetAmed an electrie suppliar under the Aet, MedCo is exempt beta the Ad untG 18 actually provides energy to new customers er otheewise vloistes that Ast. N evanndamlan did not err in determining that the Nre no mkla groteds for CEra -f=6t. CEI argues here and in 1ts FEltC eemplaint that these is a contract between Madce =d nw Power ihr
'the sala of 50 MpK enestriesty and a-=+=d power. CEPs eemplaint abapty does not, support these orgaumats. Absent that spectSc ausgation, the coments.
s6an has no W over the Ohio PowetSPP/MedCo power traaefer. Even
.tf the oesaplaint ineinded that specine @=--Haa. I serlocaly question whether the enaamission has jernsdiation over this power treaster in light of the Federal Power Act's judediction over " sham transactions" under Section 824K(h), 'ntle 1
)
e e
i
l 4
14 SUPREME COURT, JANUARY TERM, 1996 [99 Ohio St.2d Dimnting cptakm, per Mayer, CJ.
U.S. Code, and the acknowledged lack of jur'.sdiction by the conunission over either power contract.
For the foregoing reasons, I respectAdly dissent.
Rasmcz, J., concurs in the foregoing dissenting opirdon.
j f
i 4
1
\\
T j
t 4
e
i e
UNITED STATES OF AMERICA
. P F., _,..
FEDERAL ENERGY REGULATORY COMMISSION 0Ff t;.;. a....u A3 Y 95 95144eEsn'd Tiectric Illuminating
)-
Docket No. EL96-9-000
.pr qCompany.,
)
)-
I.[ Cleveland Public Power of the City
)
L' Cleveland, Ohio
)
)
v.
)
Docket No. EL96-21-000 i
)
(unconsolidated)
Cleveland Electric Illuminating
).
l Company
)
i f
REQUEST FOR REHEARING OF CLEVELAND ELECTRIC ILLUMINATING COMPANY f'
l l
Pursuant to the Rule 713 of'the Commission's Rules of l
Practice and Procedure, Cleveland Electric Illuminating. Company l
\\
l (CEI or Cleveland Electric) hereby requests rehearing of the l
1 Commission's " Order Denying Petition For Declaratory Order And Granting Complaint" (Final Order), dated July 31, 1996, issued in these proceedings.
CEI's request for rehearing is based in part l
"on matters not available for consideration by the Commission at the time of the final decision or final order."
18 C.F.R.
S 385.713 (c) (3).
In support, CEI states:
l SPECIFICATION OF ERROR The Final Order finds that CEI is required to provide I
transmission service to effect a sale of power by Ohio Power L
Company- (Ohio Power or OPC) to Cleveland Public Power (Cleveland or CPP), which would then be followed by another sale from CPP to
'the Medical. Center Company (Medical Center or MCC), formerly one I
4
[
of CEI's retail load 5..
In.its November 16, 1995 Petition, CEI j.
alleges that both sales are shams designed to conceal an illegal L
. arranged power supply arrangement between Ohio Power and Medical Center.
If CEI's allegations are proven, the Final Order violates the prohibition in section 212 of the Federal Power Act, as amended (FPA), against the issuance of a sham wholesale 4
transaction order and may violate the State of Ohio's certified retail marketing law.
1 The Final Order finds that CEI already had consented in an
" effective transmission service agreement" with CPP, a municipal electric system, to provide it with the requested transmission service.
Slip Op. at 5.
The Commission, however, fails to determine whether the effective transmission agreement obligates CEI to provide transmission if as alleged by CEI, the Ohio Power sales agreement with CPP is an illegitimate transaction designed to paper over Ohio Power's agreement to become Medical Center's new power supplier.
Additionally, the Commission wrongly concludes that FPA section 212, as amended by the Energy Policy Act of 1992, enable the Commission to enforce the effective transmission agreement with "no need to respond to Cleveland Electric's arguments that Ohio Power's sale to Cleveland is not a legitimate wholesale sale."1 Slip Op. at 11.
The Final Order represerxs a f ailure to engage in reasoned analysis.
If the wholesale sale by Ohio Power to Cleveland is a 1
CEI also applies for rehearing of the Commission's July 31, 1996 letter order in Docket No. ER96-501-000 accepting for filing the Ohio Power /CPP sales agreement.
The Commission's letter order, in direct contravention of the Final Order, states that the Final Order " determines that Ohio Power's sale is not a sham wholesale transaction."
A copy of CEI's rehearing request and the letter order in Docket No. ER96-501-000 are attached.
3 sham, any transmission of energy by CEI associated with the sham sale must be deemed to be flowing directly to the " ultimate consumer",
i.e. to Medical Center.
Thus, the Commission should have given CEI an opportunity to prove that the Ohio Power /CPP agreement is a sham designed to circumvent FPA section 212 (h).
t Furthermore, the Final Order may violate FPA section 212 (g),
which provides that the Commission is unauthorized to issue a mandatory wheeling order that is " inconsistent with any State law which governs the retail marketing areas of electric utilities."
CEI's Petition attached copies of the 1995 orders of the Public Utilities Commission of Ohio ("PUCO") dismissing CEI's complaint filed with the PUCO in 1995, which asserted that the proposed OPC to CPP to Medical Center transactions are, in totality,.a violation of Ohio Electric Supplier Certified Territories Act for Electric Suppliers
(" Certified Territory.Act").
Although CEI' f
i alleged specifically that the proposed transactions constitute an invasion by Ohio Power of CEI's certified territory, the PUCO ruled that "even construing CEI's allegations in this case as true, the existing constitutional and statutory constraints preclude granting the relief sought by CEI."
On August 21, 1996, however, the Supreme Court of Ohio reversed and remanded the PUCO's orders.
The court ruled that
.the PUCO must determine, based upon the totality of the evidence, whether "the real intention of the deal was to transfer electricity from OPC to MCC using two independent transactions."
If the PUCO answers the question in the affirmative, then the'two u
y
._y w
1
-4 transactions "would violate the Certified Territory Act."
Cleveland Elec. Illum. Co.
- v. Pub. Util. Comm. (1996),
Ohio St. 3d.
( ".CEI" ) (A slip opinion copy of.qEl with hand-written edits to the Ohio Supreme Court's Reporter's Office is attached.)
It would then follow automatically that the Commission, pursuant to FPA section 212 (g), may not order CEI to provide transmission service to effect the transactions.
Therefore, CEI respectfully requests the Commission on rehearing to take CEI into account.
FACTS IN ISSUE The Final Order ignores critical facts.
The Commission adequately describes that during the spring of 1995, CPP and Medical Center entered into a power service agreement, and that at the same time, Ohio Power and CDP signed an agreement for Ohio Power to sell power to CPP essentially on the same terms as those in the pass-through agreement between CPP and Medical Center.
However, the Final Order does not indicate any awareness of CEI's assertions that these agreements were intended to paper over Ohio Power's agreement to become Medical Center's supplier.
Nowhere does the Final Order allude to the gravamen of CEI's objection to the Ohio Power-to-CPP-to-Medical Center transaction:
CEI believes that the Proposed Transaction is based upon an oral agreement that was reached (probably in the spring of 1995) during face to face negotiations between Ohio Power (as power supplier) and Medical Center (the retail load).
On behalf of CPP, an official of the City of Cleveland subsequently stated in a private letter or memorandum that "we were given to understand that [American Electric Power) was MCC's preferred so,urce"
N-e i =
l !
(Attachment A).
Furthermore, an officer of l
CEI was informed by Medical Center that CEI's "true competitor" was Ohio Power, and not CPP.
[T]he proposed transaction.
provides that Medical Center's charges would reflect a direct pass-through of CPP's payments to Ohio Power.
1 Petition at 4-5.
Absent an opportunity to engage in discovery, CEI cannot, of course, conclusively establish the existence of-l this illegal agreement (perhaps oral), which undermines the l
legitimacy of the Ohio Power to CPP sales agreement.
- Moreover, CEI asserts that its transmission agreement with CPP implicitly i
was intended solely to permit the transmission of energy sold to CPP pursuant to a legitimate wholesale sales agreement.
The Commission must afford CEI the opportunity to prove its allegations, unless as a matter of law CEI's allegations are legally insufficient, which is not the case.
ARGUMENT 1.
Ordering CEI To Abide By Its Currently Effective Transmission Service Agreement With CPP Misses The Critical Issue: _ hether That Agreement Requires Transmission W
Necessary To Effect A Sham Wholesale Sale.
- As discussed above, the Commission finds "that Cleveland Electric is obligated to provide the requested transmission service under Cleveland Electric's currently effective transmission service agreement."
Slip Op. at 5.
The Commission disregards CEI's assertion that Ohio Power secretly entered into l
cn agreement (perhaps oral) with Medical Center to be Medical Center's true supplier.
The Commission does note CEI's argument that it is not required to provide transmission to effect the l
Ohio Power to CPP sale "since '[i]mplicit in any, transmission i
n
, i tariff intended to provide for wholesale transmission is a 1egitimate wholesale sale."
Id. at 7.
However, the Commission never resolves the issue of whether CEI's characterization of the Ohio Power / Cleveland sales agreement is correct.
Instead of specifically addressing this critical point of dispute, the Commission merely concludes that 4
the CEI/CPP transmission service agreement is dispositive.
As the Commission's superficial analysis goes, there are no limitations on CPP's ability to obtain transmission from CEI under the agreement provided CEI has the capacity and the requested transaction will not impose a burden on CEI's system.
Id. at 6-7.
The existing transmission agreement between CEI and Cleveland, however, is intended solely to provide wholesale transmission of energy scheduled for delivery pursuant to a legitimate wholesale sale.
The Commission cannot properly conclude that CEI is obligated to provide transmission service under an " effective transmission service agreement," which contemplates only legitimate wholesale transactions.
The Commission must first find that the transmitted energy reflects a
" legitimate wholesale sale".2 2 - The Commission states that "whether the transmission of electric energy is directly to an ultimate consumer is different than whether a sale of electric energy is directly to an ultimate consumer; img., a retail sale."
Slip Op. at 10, n. 24.
This observation, whatever it is intended to suggest, does not justify the Commission's failure to investigate the allegation that the Ohio Power to CPP sale is a sham.
1
- 1 The Commission's superficial analysis disregards the u.
j Commission's duty not to mandate transmission that will facilitate a sham wholesale sale.
If CEI allegations are t
i correct, then, notwithstanding that CPP will provide some I
distribution facilities to complete the transaction, CPP's overriding role in the ultimate transaction between Ohio Power, I
the supplier, and Medical Center, the retail load, is merely that of a paper entity.
The Commission failed to place any weight on Ohio Power's alleged role in arranging the ultimate transaction, i
the transparency of CPP's agreement with Medical Center, the direct pass-through of CPP's payments to Ohio Power, the minimal use of CPP's facilities'in completing the transaction, or Ohio Power's behind-the-scenes role in arranging the sale to Medical Center.
Surely the Commission should not implicitly assume that 1
the Ohio Power /CPP agreement is legitimate merely because one of the parties vigorously asserts that it is.
As the Ohio Supreme Court states in CEl, "the commission (PUCO] must look beyond the surface of the two contracts to see if there was an underlying deal between OPC and MCC Therefore, because CEI's effective transmission agreement provides solely for wholesale transmission, the Commission committed patent reversible error when it failed in part B.1 of the Final Order (at 5-7) to address CEI's contention that the applicable wholesale sales agreement (the agreement between Ohio Power and Cleveland filed in Docket No. ER96-601-000) is a sham,
i
. and that in fact, Ohio Power contracted (perhaps orally) to i
supply power directly to Medical Center, a retail customer.3 1
The Commission's Analysis Of The Applicability Of FPA 2.
Section 212 To The Facts Exalts Form Over Substance.
Similarly, for the same reason, the Commission committed reversible error in part B.2 of the Final Order.
There, the Commission again fails to realize that the critical issue is l
whether the proposed sale by Ohio Power to Cleveland is a legitimate wholesale sale or a sham.
In response to CEI's Petition, the Commission merely engages in a superficial analysis according dispositive weight to " technicalities."
The net effect of the Final Order is that CEI will lose to Ohio Power (CEI's true competitor) a retail load, which Ohio Power could not reach except through CEI's transmission system and a minimal amount of distribution facilities owned by CPP.
I t
The Commission's analysis consists entirely of reciting several undisputed facts: CPP is not a " paper entity" and has been interposed in the contract path between Ohio Power and Medical Center, an ultimate consumer.
Having thus found that the
" technicalities" for wholesale wheeling are in place, the Commission appears unconcerned that Ohio Power, not CPP, will be in reality Medical Center's new power supplier, that Ohio Power, not CPP, negotiated the sale to Medical Center, that the rates 3
The legislative history cited by the Commission in the Final Order (Slip Op. at 10-11) does not excuse the Commission's failure to thoroughly investigate CEI's allegations that the transactions at issue are shams " intended to circumvent the ban on retail wheeling...."
9 -
directly pass through Ohio Power's costs to CPP, that CPP was interposed merely to make the transaction appear legitimate, and that Ohio Power, not CPP, is the primary financial beneficiary of the transaction.
Certainly lacking is any attempt to balance the weight of circumstantial evidence that CPP's contribution is barely more than that of a participant on paper, even if CPP itself is not just a paper entity, against the few technical factors relied upon by the Commission.
Thus, the commission violates its duty to guard against sham transactions designed to circumvent FPA section 212.
The Final Order, indeed, contravenes the Commission's own view, announced on the same day the Commission issued the Final Order, of its responsibility under FPA section 212 to examine "the underlying reality of the facts" in a case involving "an established municipality" (i.e., not a " paper entity") in which a sham transaction is alleged and "to prevent what is in essence retail wheeling even though the technicalities of a wholesale wheeling transaction are otherwise met."
City of Palm Sorinos.
California, 76 FERC 1 (July 31, 1996) (Palm Sorinos), at In Palm Sorinos, moreover, while not setting forth a list of relevant factors or guidelines to be used in other cases in which fact-specific allegations of sham wholesale transactions or agreements must be addressed, at least the Commission resolved the fact-specific issue at hand.
Rather than evading the fact question, the Commission informed the parties that the 1
D
l
~
installation of duplicate meters by an existing municipal system, i.e., a municipal system that like CPP is not a " paper entity",
i is insufficient to circumvent the section 212 limitations on the issuance of compulsory wheeling directly to, or for the benefit of, an ultimate consumer.
The Commission stated:
We are unable to conclude that the Congress, having expressly prohibited us from ordering direct retail wheeling, and having created a limited framework in which municipalities can obtain wheeling services, would in the same section provide municipalities or other wholesale entities with such a facile and failsafe path to the circumvention of that very prohibition.
We decline to embrace an interpretation that, as a practical matter, renders a nullity the Congress' prohibition on Commission ordered direct retail wheeling.
Palm Sorinos at CEI deserves no less attention to the facts, however less concrete they may seem, and no less a reasoned analysis, however greater the need for evaluating offsetting factors.4 Surely, if CEI's allegations, supported by such evidence as is available without the benefit of Commission-order discovery, are correct, then Ohio Power has found "a facile and failsafe path" around FPA section 212.
In the Commission's apparent desire to avoid an evidentiary hearing in this case, the commission has, in other 4
In a partial dissent to Palm Sorinas, Ccmmissioner Hoecker states that Palm Springs together with the Final Order
" interprets for the first time the metes and bounds of its wheeling authority under section 211 in light of section 212(h), which prohibits Commission-ordered retail wheeling and
' sham' wholesale transactions."
CEI respectfully submits that the Commission has failed to focus on the substance of the transactions at issue herein as evidenced not just by contractual technicalities but by available circumstantial evidence as well.
n
, i words, engaged in a simplistic analysis that denies CEI's rights to a fair hearing; it has done what it committed not to do in Palm Sorinas.
The Commission's failure to "look beyond the surface of the two contracts" (CEl, supra) is not overcome by the Commission's power to " enforce contracts that are on file as rate schedules."
Final Order at 8.
CEI, contrary to the implication of the Commission's specious analysis (L2.), never argued that the Commission lacks this power.
Such power is unavailing if the contract does not require the utility to perform the service in question -- in this case, to wheel in order to effectuate a sham i
wholesale.
The Commission's assertion that it may even enforce
" contractual transmission obligations which we could not otherwise order" (id. at 9) merely emphasizes the Commission's failure to engage in reasoned analysis.
3.
The Final Order May Be Inconsistent With Ohio's Certified Territorv Act.
Under Ohio's Certified Territories Act, Ohio Power is prohibited from making retail sales within CEI's certified territory, which includes the City of Cleveland.
In CEl, the 1
Ohio Supreme Court requires the PUCO "to hold a hearing to determine whether American Electric Power ( ' AEP ' ) and its cubsidiary, Ohio Power Company ('OPC'), created a sham transaction in consort with Cleveland Public Power (' CPP' ) to sell electricity to Medical Center Company ('MedCo') in violation of the Certified Territory Act."
CEl, Douglas, J.
concurring.
Moreover, the court would not allow CPP "to act merely as a
n
- 12 conduit for the transfer of electricity from an outside utility l
into the municipality."
Id.
If, after a hearing, CEI establishes the validity of its allegations that the Ohio Power to CPP to Medical Center transactions are violations of the Certified Territories Act, l
this Commission could not order CEI to provide any transmission
{
related to effecting the unlawful transaction.
FPA section 212 (g) states:
PROHIBITION ON ORDERS INCONSISTENT WITH RETAIL MARKETING AREAS. -- No order may be issued under this Act which is inconsistent with any State law which governs the retail marketing areas of electric utilities.
l Clearly, section 212 (g) would apply directly to the l
cituation because the only transmission that CEI opposes in its l
Petition is the transmission of power intended to enable Ohio l
Power, by means of the subterfuge with CPP, to serve Medical 3
Center.
Therefore, if the PUCO ultimately determines that Ohio Power's sale to CPP violates the Certified Territories Act the l
Commission would be required to vacate any order requiring CEI to provide any wheeling to consummate the transaction.
WHEREFORE, The Commission should not have denied CEI's Petition or granted CPP's complaint without giving CEI an opportunity to establish in an avidentiary hearing (1) that the " effective transmission agreement" with CPP is premised on a legitimate wholesale. sale and (2) that Ohio Power's contract with CPP is a cham interposed in the contractual path merely to legitimize Ohio i
I
~
l L
- 13 Power's retail sales agreement (perhaps oral) with Medical 2
Center.
CEI requests rehearing o Final Order.
~
,Res >ectfully submiged,f f
(
bbi
'Q.
13%
Of Counsel:
Michael C. Reaulinski Centerior Energy Corporation Paul T.
Ruxin 6200 Oak Tree Blvd., IND 44 8 Jones, Day, Reavis & Pogue Independence, Ohio 44131 c
North Point 901 Lakeside Avenue Robert S. Waters Cleveland, Ohio 49114 Jones, Day, Reavis & Pogue 1450 G Street, N.W.
Washington, D.C.
20005-2088 i
f Attorneys for The Cleveland Electric Illuminating Company i
i August 30, 1996 l
t i
i
~
io i
UNITED STATES OF AMERICA FEDERAL ENERGY REGULATORY COMMISSION 1
Chio Power Company
)
Docket No. ER96-501-000 4
0 REQUEST FOR REHEARING OF CLEVELAND ELECTRIC ILLUMINATING COMPANY Cleveland Electric Illuminating Company (CEI),
pursuant to the Commission's Rules of Practice and Procedural, requests rehearing of the Commission's letter order dated July 31, 1996 in this proceeding (letter order).
CEI requests that the Commission's letter order be vacated.
In support, CEI states:
1.
In this proceeding, American Electric Power Service Company filed on behalf of Ohio Power Company (Ohio Power) a 4
proposed five year power supply agreement with Cleveland Public
{
_ Power (CPP).
CEI objected to Ohio Power's filing on the grounds i
{
that the proposed agreement is an illegitimate or sham wholesale i
sale.
Over CEI's objection, the letter order accepts the service agreement.
2.
The letter order incorrectly states that the i
j
" Commission issued an order in Docket No. EL96-9-000 which determines that Ohio Power's sale is not a sham wholasale 4
transaction.""
In fact, the Commission's order in Docket t
No. EL96-9-000 expressly declined to make that determination.
The Commission therein stated:
Given the above findings, there is no need to i
i respond to Cleveland Electric's arguments that Ohio Power's sale to Cleveland is not a legitimate wholesale sale.
k
-2 Cleveland Electric Illuminatina Comeany, Order Denying Petition 1
for Declaratory Order and Granting Complaint, 76 FERC f
at (July 31, 1996).
Slip Op. at 11.
Thus, contrary to the letter order, Cleveland Electric's protest is not rendered l
" moot" by the Commission's decision in Docket No. EL96-9-000, and the letter order commits patently reversible error.
3.
On the same date of this rehearing request, CEI has requested rehearing of the order denying CEI's petition for a declaratory order in Docket No. EL96-9-000.
WHEREFORE,
+
CEI requests that the Commission immediately vacate the letter order.
g'~'N Re pectfully submitted, D
sj\\
N
~
Michael C.
Regulinski Senior Counsel Centerior Energy Corporation s
6200 Oak Tree Blvd., IND-448
{
Independence, Ohio 44131 Robert S. Waters Jones, Day, Reavis & Pogue 1450 G Street, N.W.
Washington, D.C. 20005-2088 Attorneys for The Cleveland Electric Illuminating Company August 30, 1996
n o.
l CERTIFICATE OF SERVICE t
i i
I hereby certify that I have on this 30th day of i
August, 1996, caused the foregoing pleading to be sent by first class mail to all parties on the list compiled by the Secretary i
of the Commission in this proceeding.
2 I
hb Robalt S. Waters 9V\\S A
Jones, Day, Reavis & Pogue I
1450 G Street, N.W.
Washington, D.C.
20005-2088 Attorney for The Cleveland Electric Illuminating Company i
4 i
l l
}
1
.s l
d
RECEIVED
, = cei. R eece e = =, Co,m. u na.
AUG 0 r.19h6
= = t.rann. D C.
nu Jtaly 11, 1995 ggQg%
relating to pech service or rate; and each action in without Docket too. RR96-501-008 prejudice to any finAlege or orders sentch have been or ony bersetter lise smede by the Osmoulselon in any proceeding now panding Aem=rlean f!tre t rie Pomar or hereaf ter lnetituted try or against Ohio power Camereny.
ATTH:
Mr. Dennie tr. Itathel. Dennetyar Iaterconneet8ces Agreeseenta "Itale letter tetentnotes Docket 90. 3396-301-900.
1 elverelde Place. 27th Floor Cnlesmense. Disto 41215 By directice of ties Coogalselon.
teem t l't. Dethel Qgh By let ter detrel Deceeder I. 3995 you enheittted for tilleg.
nn tenhalt of Ohio power Cemgany lohto power), e five-year peepr Le D. Ceehell, eispply agreewegvet with Clevelemed Pistet te Power IClevelsewt Power).
Secretary.
roser outmittat la acewpted for tiling ef fective septemeser 1.
1996, se reepseeted, asuls9emigssated met 9hin_EstateLCasseelt Rate Scleoeiste FeeC 110. 191 par,t ice of ymer filing een peablished in the Federal soglater witti causmente, pentests, or laterventione due art er hetore j
Decestwar 2e
- 1996, es interventious tree tited lyy the C3evelated anectric filmednet tsee Cove *y IClevelesed stectr$ct reagisesting t hat the cenasteettwo reject the titing or deter art ton unt ti e f lant Ceyanteeton detervoinet ton is mode out Clowettend Electric's retteent for eleclav atory order tiled to Docket too. eL96 9-eto.
Time Cementeeton lessed en ortler to Docket 88o. St96 9-909 oktch determinee that 08:1o Pomer's sale le not a sham shelesele transactiosi. T9 ele renders Cleveland Electric's preteet sect.
thwier siste 214 of the Commelecton's eulee of Practice med I
Pror*deste lie CF11 3e5.2143. C3ewelenri Blectric's timely settce of intervention serves to imeke it a party to this proceeding, hiso, en vet leerly interventlers emme filed by cleveleed Power oral the City of Clevetenel filed a smottom for en esquadtted tuting.
l Ptsreuent to este 214 tdl. Cleveland Power's tete suotion to Int e rv*ne le granted.
Coort catree is shown for granting wolver of the notice reurstremente perseest to section 205 td) of tlue Fthieral Power Act omt spectlent J1.11 of the ccmariesloe's seguistions thereunders theretose, ths, ret e schedules m#sm11 because ef fective Septemmener 1 1996, se r* quested.
T1'Is nece rat e, therge, pt ance does not const* tate approwel of any earvice.
clamelfacattnn. or any rule. twyulation, contract.
or Practice eff=cting such rete or service prweided tot to the t
ti1*d b-...,ea nor ohnt I such action to deemed as recognit teri of any clelmed contractuel r Aght or otiligatiest ettecting or i
Ohio Supreme Coirt Slip Opinion 1-l l
99 Ohio' 54.3d]
EI.EC. II. LUM. CO. v. PUB. UrIL.
1 mamswis er es cass CLevn.amn Etzerste Iu,viaxAram ConeAwr, Arreu.orr. u I
Pesue Ummas Cowes=== or Ouro er AI APPEU.u1 l
l
[Clbs as Geseis=f Kise.14esa. Co n Puh. Util j
Comm. (1998), - Ohio StJd 1
rome view., c-n r ne c - rp.4 4.nsen, s.s.,
u elleying eisismen af Cer@sd Terntory M reserved 4 symns, Court and smuse maandad so asussisseios se pressed with Asesis when.
l The Pahlie UtGitems Commmindes has judsdistian to asesider a ensepinist allasing that a sale et al=meinery was initisted by a utGay to a retail user udag a j
strov inen to eithstusts the deal for the sole purpsee of.:. - _.
- the i
Certi8sd Territory Act, I.
A% w d 'Z.(
r j
(No. 96444-8utunitted June 5,1996/-Desided q
,1996.)
Ayrsu. from the PabBe UtlBties Canuaission af Olds, No. 96 46kEL-UNC.
1 i
This appeal arose 6eus sa order of the Publie Utoities N'==ia=ia= af Ohio i
("sesumission") that diessissed a mesmplaint sind by appaHant, Cleveland Electric i
IBundnatina Caumany FCEI"). la its aanspleint, CEI aDaged that Asmariaan h)
Ensetric Power Fquaing its t"'i. intervening appeuse Ohle Pomar Company ("0PC"), sold -.;; :^.y through Cleveland Public Power FCPP"). and Q
that CPP la tura esid the elastrisity to e antarvenug appaDes Medkat Center N=pamv FMCC"), in violation or the Certtfled T._., Act.' In other words, l
CET elaims that AEP, threagh its subediary OPC, aEssedly sold aleetnesty in CE1'el erneury.-
4 j
{
i i
OristanDy. MCC parehened power fhuc CEI and redistnbuted it as some of its MCC was a retail sussemer of CEI at thes tama. MCC l
requasand that CEI esevert it than a stadt eastomer to a wholaanne ensesmar.
l
'CEI apparently denied the change. MCC notised CEI that on September 1, j
19es, Mcc weeld amenmaan earvies with CEI and ampdre its power from CPP.
l M933.Bt e.1 se4 e I
L The carded Turtery Ast te est set in
'Emannenby the carded hsythey Act ~
l peestem that, gak tbs engdse est est under ITTI! W tim Ohio consenudse emadspat i
espuumass, uma assunus anspear a assisms a serum inermary we si has she==ime.s riske i
tapsometssewha
- I. REX
- 's -
Esspauh af Osselsed. Cass Womessa l
Unpurser./he Ossahad timman N chmuk er see Causases, 26s " 'gpasswo
' Ans l
- thm Osmalmsd Benemmi cassuamme nursis e spume cause,y j
OsseissiMedlet Lausry W %
bommes er Art.
j m e + >< d. -,-s g i
4 i
i
!t----- -- --
1 l
OP c.
cfP l
2 SUPRFMF. COURT, JANUARY TERM.19M [M Ohio St.3d sneemsst d the ces i
i i
On May 8,1906 CEI fDed a complaint with the maa asuinst MCC. AEP and its generadag sabaubaries, !~u OPQIn n CKI, seen No. 96-458-EL-i r
l UNC,19M WL 735634.
_g Count see of the cuenplaint aBeged that OPC "has arranged to Aarnish service i
i to IMCC) by eeDime 50 MW et sepedty and -W enerzr to (CFP)." CEI l
further aDeged that thpe transaction and the CPPMCC transeedon
- are sua halves of the mens menseensa." CEI ausges that thsee ten tasasse.
tiens "ars absm tr==ah" and were strustand to aremovent the Certised i
Territory Ast. Thus, CEI amatands OPC wlD violate the Certised Terrttery Ast
)y soulag power to MCC.
j
' In enant two, CEI aDeged _that MCC assy be an electrie light snapany as O
l e
/O
/
.dsoned in "A P "Aw4) beseuse at reseus " w to a=
c-CEI further supports this sistan by aDestag that MCC latends in buGd ah. ;.
fascities to take pesar at menenessa vahas=, to ebenge us banag==thnesiegr S(cA and to sed elastristy to n ot'.--
., which wS1 make MCC,if it is not aheedy, an alonese light empany under obis 1 w.
" W " "*
osent three anos.d then CEI taenen.d seneress. e.d disoihuman sysieme in musmas on sentianed earvise ta MCC and its members, and that CEI will snear-
-~
f amanda11ess becauss er the stranded kmstment esseented with MCC leaving CErs systen.
)
l
.OPC and MCC 2Ded esysrats motions se dieniss CErs compimist, alleging in j
pas that tha OPCCPP power purchans agreemast was a whalesale tramanstion
'that is exchaarvely under the j=.iMr., of the Federal Energy Regulatory j
i O
l'a==ta=8= ( FERC7.8 CEI has initieasd a FERO enties seeking to inealidate C
- he agreement for the anle of electridty front OPC to CPP Peteien e/Classisad b
M l" r ca, y ese CM=. No. EL 96 4 400. OFC and MCC also arrued that the CarttSed Terettery Act dess not psevat wheissais tressassions
{
such as the sale besseen OPC.and CPP. CEI constared the sistions to dhumiss, esetseding that the issue bedste the esamuissisa was set the OPOCPP whenseale transaction individnaDv er the CPPMCC emenpt amalaipal agressment indfvidual.
After revisener tbs vertaus arguments by the parties, tbs e dis.
inissed CEra campaint, sustag -
7
[)s
- a. te p,
et ehk entdes.chie Peeer campur has emed as haber of as p +'
sissese Peser.
4 7)\\
i
- d. pommes = es yed : rien as, seem am, two te, uscene, rsac h. m =
i neuise es uds er eleserie ensur en whelmets," dahed as % esis er eisensel eserer to say l
passen sur russis." Sagen ma(d),.TWe la, UAcade.
i 1
I 1
t
)
!i
)
i
i 1
1 4
99 Ohio StJd]
ELEC. II. LUM. CO. v. FUB. UTIL.
3 l
0P18888.Pw h 1 l
" Pursuant to Article XVIII, Section 4, of the Ohio Constitution, munimipalms j
in Ohio nuty own and operate puhHe utDities and may 'contruet with othm far i
any product er servles.' Meromr, the certified territory sesentes (Seestens j
4essJi-Js, Revised Cade) spedScauy serve set an escepties fler asamicipal i
utGities regarding appliention et sortified territories. Thus, even sonstruing CEro allegations in this esse as true, the existing eenstitutional and statutory
}
essetralsts preclude granting the reHer sought by CEL Essed on our assees-nient et the agreed upon fisets and the law, we do not believe that a hearing is warranted er nessesary in this ese to semelve the strictly jurisdientensi lasses j
sised in CErs =npW=+ "
Thas, the w=8= emnisand CErs asugduint beamcas it deterudnad that it j
did not have judsdistian ever either et the toe agreements psNahdag to the sale er einstriadly-the OPGCFP ogressment and the CPF/MCC agrosament.
s The aseme is bedare this seurt upon an appeal an of right.
J.
I Iones Dog Acesse a Popus, Pend T. Anasin and Neles L IAs6sman, for I
appeHant, Cleveland Electric Illarsiasting Campetty.
Assy D. M
-. --,, Atturney General, buens W. Lucimy and Stesem T.
l Neursg AmaMER$ AEterneys General, for appeDee, Public UtiMties C-l sea, Rever a sende Ca L7.4., and serta r. mover, for intemning i
appeDee7Medios! Center Company.
Kdummf J. svedy, Morein I. Resnik and Keein F. Did) k innsivening l
appause70his Power Company.
4
~
Cheefer, WHIcor d 3sote, Jens W. sentine and Jq$lrry L Stee4 urging f
aSrmanes Jbr omacua cimes Ameriana inaWp=1 Power-Ohle,Inc.
n j
CZimeen Citmeen Sentinsfovg ZeJInsseits e Gerigidi Ca, LRA, Jaks Jt..
j
% AnsAeny J. Gert@N, Glenn 3. Kesseen and / seep 4 M. Keyedeu, urging afsmanee ser omicus curies city et Cleveland.
Braarten. J, ne lesse se be deelded today is, in donermianig a sentism to dienies a esopladet befbre the esmanseios aBeging a violation et tho' Certified j
T.._, Ass, een the seassdeslan leek neyond two indevedaal nostraen, over i
videin the ese dedttedly has ne jurimiletion, to deterums irhsther the-7 a
l tendity of the evidense alleges a potential vielstien et the Certl8ed T_, f l
Our resisw at this issue is a qasstion d law. Asserdingly, we address this i
leeue a de meno standard of review. Indise. Enneyy Commmunero q(OAde j
u6 power Ca s Puk Uti& Cenesi. (1886), se Chie St.ad 558, ses, esB N.E.ad 435, 4
.g l
4 i
i r,wek
?
f I
4 5UPREME COURT, JANUART TERM,1996 [W Ohic St.3d ophdes, per Soutm, J.
I Senadant far Disudsaal far Tsaurs to Stats a %
P In a eM1 esas before a court, Kaust appear beyond doubt fran the IC complaint that the plaintiff een preme no set of faens satit!!ag hfzm to ;-,. /'
e/
bar a reemen to disemies esa be senated. O'Drien a Ushervi4
-M Temisses thnien, lar. 0 975), 42 Ohio St.2d 242,710.0.2d ass, ser C1-N.FJht 758, syGabus. Further, h ruling en the motion to dissaise, au material fastaal ausgations of the essplaint nest be taken as tres. See FsG v. Pleen
, Dealer J8addisAney Co. (1985),72 chie stJd 275, see N.EJd iaL 'Ibe enaunis.
non has adopted the same standard la reviewing motions to abendse brought muler R.C. 4905.3f, (a, that al of the useplaissats' Anstaal eDegations most be taken as trum. In we 7biede Premainen Yapurf a faisde KJisen Co. (Sept.17,
'1982), case No. 93-18skEIcGS, at 2.
e.Q
'Ibe grossat emme is brought mader R.C. 49ESAS/Go Certised Saisary Aet.
'!1ms, the holding la foisde Pnsnessa Yepart is not direstly en point in this case.
However, the oosumission's enter of diaminaal to this mestar indleated that it had aanspted all CEI's allegations as true. Ansardingly, the enomdesion must accept an aDagations as tres in detennadag whether to disamas a esmpialat brought under the certised T._, Ast.
In its complaint, CEI ausged that "AEF megotieted direetly with Medien!
1 cenar, other en its own er in songameden with CL-!M. regurung the 80 MW j
sale and purchaos." CEI also aussed T__
-h 1
"The 50 MW transaction between AEP and Cleveland, and the 50 MW trananction between Cleveland and Medkal Centar, are two halves of the same
)
transaction. De purchase is in restity a purchase froen AEP, and the service i
pewided by Cleveland, a wheehar servies to edBestuate the Mediaal Center i
purchaos."
If the above sDegades slaimed by CEI are taken as use, as is rupdad by the
====na-aa's swa senadsnis in evalmstag a motion te disadas, then CEI's esmplalat ansk surwise a medan to dismiss. Wh0e the samamanism may not have a
furW= over either the OPCCPP Wgr the t rr/Mw -
.. s.%
untly, the totality of the evidenes asuid indients that the realintentia of the deal wee to transder elastridqr from GPC to MCC andag :we ladW trama= Mons, which weeM vielses the Cartised T.. =y Act.
In sach as instamen, the emunismen umst look beyond the surman of the two esatransa to ses if tinare was as nadertying deal beteena OPC and MCC, thereby establishing a prima inde mas of a vielstian of the Certised brettery Act.
As prevleesty nameloned, the esmuulselen's prunery vueamming ese *w=g this ceas was its parasivedinck af,turiedksien. Specifically, the sommiadou fasad i
i.
EL' C. ILLL'E CO. v. PUB. W.L.
5 99 Chic St.3d1 E
ochdee. per strisan. J.
that le did sat bass jurisdiction because the CPP/MCC trar.amemon won asempt bass being subject to the Caritfled Territory Amt. The eenunlesien apparvat'.y
- ade a esseery noview of eeunt two et CEPs emaphlat as to wasther MCC was an elastries! suppEer. These was no analya:s et estat three et C5ra semplaint.
Thorudeau, spas rursand, the M* should amsider CErs me.9t in its
,ef!s2407' It is huyertant to sets that we masks se deterndneden as to the esostance or suscisocy et eskisses as to the mer'.tm of emy of CEPs a2egstfeas. Such a detsrudsaties is Apr tha comunisalon alone to make. Howwur, the fact that at
'least thetaDy, two diserste truassations were need in this parshame should not prevent tin eessedemien ews i ' * ; whethee the pure.kaas een:perts with
,{
the certLSed Tardtery est wiisa viesed is its estroty.
J D
i FERC's Jurisdictisa j
The impart et tids dedsisa does est rugstre the m to 6y.h susehen en seen uhase the indesat seurumsat has preempted the said with'
{
regard to the FERC's.
_t"-
- et whelaamis pesar trummastless. The sommes-j ales's review wEl be et the estire eBeged trasensdea devai Orc to Mcc by way (g W crr, est en emelreis et the OPccrP.amerset. Thus, the senadesien would j
not be enerenablug into FERC's judadletion ever the OPC/CPP sentrast.
j Further, in reser Penser Causes. s & ceAgtnieds News ca cted), ets U.S.
205, E5 4LE,86 S.Ct. 644,80,11 L.Ed.3d EIE,645, tbs km Court stated:
= *
- Censsuem mamme se draw a bright une anser meesteined, besseen stets an2 andeetjertellesien * * *. This was dans la tbs (FalaraQ Fever Ast malang j
[FEEC) jurtediation pienery and estandhig 2 to aR whelmsale ennes la interstate G)
N 88edes.
9
- t. % e.d- - s,em -
this =Waa sha8 admet any eathedty of ear State er leanz governmeer, unce 1 stasa 1sw soneersing the 1r=====i= ef eisseric energy d!avetty to a ahuusto t
. z..e d.,ihe.o d sh s.ede..e s denet.r oPC and Mcc by war af CPP), tbs===i= wct b eenninasagwtwther orc
.has ands a sutus dent wek MCC. As etsted atmos. stmE denk are sapidtty endeded heat FERC's metasive juristelen.
IU e
A Mamidpskys Anthedty to Buy er Set Electrietty Purensat
- Astade Ivn4 et the chie constination r
1 Under Artiels XW-
- he,e eartsam pawns,imeteeng ska estinri-p at= w * =& penne, =ar the pr desis er s=,s scwweh is er is to i
j
)
i 1
i i
J j
j
f-i f
C Y7 decASton s
I s
5UFREME co'URT, JANUARY TE1001986 [9s Ohio stad Opude, par Strumm, J.
j he supplied to the===aipamy or its inhabhants, and may sentraat with others j
for any such predact er earvies.* Sesman 4. Article XVIII of the Ohio Constits-j tian. The Cartdied Terrttery Act ausspts been its severage==aiatam== seung j
puraamma ta Artiale XVIII at the Ohio Cansdtation. R.C. 4SBL30(A). However, j
this asu3does met erisesruta a smalapality's powers to bar or eeD eiseertetty hq veder Areale ZvIII, of the Chie F=^=h e not a readt of this l
epimoa, aar aheald it N aba practisal result. Rather, this doetsien is to nrevent a oE mety han
_ r -- the canised T-.:-., A.6 by
- -P wer.
n 2
entity to which it amanot seR under the Ast, by insertlag a h sman' an i
/*
to i
legittunse the deal as as easy a ses facty altuatisek sash as the ease at N
d bar, 1 a,,
esaplaint aDeges that there was an agressment between OPC anM MCC to elastrisity tem OPC to MCC nelag CPF as the streur man eendett, i-that the asummisdes has judsdistion to hear a semplaint ausging a visisessa of the Certified Territary Act. Failure to ranch this narreur factual threshold will result i
in a f=Ihwe to aseta a eleim upon which reuet sesid be senseed.
(-
'!be eenmundse is fees to And, based en the evidenes, that ensk transaction j
stands on its own toertt and was not menety a eben transmettaa, and that each i
eentractual transestaos anst be hemored ingenBees of whether the other saaneet presseda. Eessedslty, tids desistan absuld preide a delisses balanes by pressev-l ing a===Wranty's right to emely purebase eleseristty persuant to the Ohio Constitution, yet preventing staines tram etrcumventing the Carstead T.
Act on the rare seension isken tAwre is evidence that shows that a udilty has used a strsw man to sesstasas a aals of al r.,R, fler the sola purpose of streatsvent. -- t.h tt.
in-g the Certified Territary Act. A
.:: :y, we hold Publie utilities 1
ca==fda= bas junediction to sensider a complaint
.g that a sale af 1
eleetristty was initimaad by a stuity to a retaQ amar unias a stesw anan to efectuses the deal for the sels purpons af arcussvaating the Certidad Territory Act.
IV O
w Conclusion Witida these narrow dsRaitions, we find that CEI's esmplaint ses out saf5-i a
eiect =Haym+4a== to withstand a mensa ta dismiss der lack of jurie:Bation. '!he l
eomademien fkilsd to take tbs essense af CEI's allegations as tnae ihr purposes er i
a menen en disemia, relytag solely en its teehnisal analysis et a lack of jurisdistsee over the sepeats W
'Iberefore, the smart reveress the eseandselen's enmissal of CEra esoplaint and romands the sense to the====8-with instructions to rusastsee CEI'm j
' complaint and pressed with a hesetag en the esma.
order m m ed
. and somas funended.
j i
4 j
l 1
I
99 Ohio StJol
' ELEC. ILLUM. CO. v. PUB. UTII 7
e
._, opini per >= sins..f.
Dooma F.E. Swsswur.Przys and Coor JJ., ammeur.
Douma J., eoneurs separately.
Mass. C L and Rammer J., di====+
Doands, J., saaeurring. I agree with the well-russened and anushtened
$sdgment of the majority. I wrtes separusely to address tbs disenst.
Emeding the acarity spanen and the dissent together, one wonders if we are talidag shout the amuse mee. Contrary to what the dissent any haply, au that the majadly desides todayis that the Pubile Utnities ms s== ef Ohio cruGr) nest held a hearing to dotarudas whether Asiarisma Elastris Pseur ("AEP) and its mahmidiary, Ohis Power Campany c'OPC"1 essend a shaan tr====*iaa in masset enk Cisselnad Publie Power ("CPF") to een einstrisily to Medien! Center cesapear (=Medce")in v al as== et the castised Tseressey Ass.
a Both the anWeetty and dissant are agreed that a direst asle of elastdeity area.
OPC to MadCe would be a vielstion d R.C. 4sEMB. R.C. 4ssE40(A), of the Centt$ad T.., Act, guarantmas ansk aimende supplier "the eselesive right to furnish einstrie servios to au elastric land senters [ta, costamass] located b.
peessasty er la the astase withis its eartised tevenury a * *
- In tide ames, the d*
eminave 94 to Aarnish electridty to MedCo (a land estar er eastsumer within ibe sesmung dM 4ee8A1(E] of the CertiSed Territory Act) helangs to Cleveland Elaenzte IDandandag Company ("CEI"). Thna, OPC,Qanapeti.
tor of CEZ, snur est inrede CErs seetualve tarflusry.
s Q%4 na Cartdaad Tarittery Ast (R.C. 4ses.81 d seg.), however, meplistely curves out an asseptism for amminipal utilities regardlag tile applianden af the Act. Itis well e esha.hed ehet, ya.eu t i. se.v
- 4. Ane xvur er th. ons. ca eaueren, municipsbess nasy own and operste pubile utGities ths preduet er service of
<*g which is or is as he suppnad a the smassepaksy er te w-=.
and smay contreet w' a othes for my suak predsat er servies."
Sr. puas DIG. Conest 084B),149 Ohle St.847,FT 0.0.6 AJeron 30,78 N.EJd see; P/es a Ciasummesi (1948k 142 Ohle St. 101,25 0.0. 284,50 N.EJd 112; Eiy unie ses-g Ca n. Public Dtil Conan. 0540) 137 Ohle St. 255,18 0.0.10,3 N.EJd 500;(3d.
gr Eds. a caimsmane useRI. Ils onde St. ans,1so N.E. set. h eretame. the W.r**N munidpsuty in tbs assa herein is asespeed bass the Care 6ed Territory As when a opermes. Crp, ins sentir, sur the purpsee c een.dme p er i. e.rve in.
s aurumpality er its tabakttants. It asqr also escure by enstract $ross another Gety a predmet er servies ihr the menestystey's needs.
1r:
Bsessur, this asas est perset a manidpal stoity to est merely as a seuduit isr j
the transfer of alsstraday from an outshie utoity Anne the municipauty. If this.
were.W them a munidpality seuld est up a publie stuity operassen, ampare pewu Arena en eusside uiGisy, and souvey that power to its===1dral i
e
-r-
-,r.,
-.y_.-.-
,4 a
m
l I
a gUPREME COURT, JANUARY TERM, 2004 [to Ohte st.Sd Densedng Oshmen, per Meyer, CJ.
inh =Maarm without ever operattag a genersting feeGRy. T2ds would result in the negating af the laudaiory purposes of the Certified Temtery Act. Clearly, this would be impernnedbla.
l ne essent calls MedCo's amerimies en ssenal --==rM==
" h diesent a
j makes, I beBeve, the.asjerstyis point. What we and the should be esasarmed with is whether AEP, CFC, CFF and MadCo have "artmDf or j
otherwise ernsted a series of treassedans whish, taken togscher, nonersvese the l
laws of this state.
l N PUCO was spedfiselly created by the Ohio legisisurs to headle these types of Assoas, and it has the aspertise to do so. Thus, we grant the====8==daa paradanian to review such matters. The dissant broadcas sur arder er a heartng j
fate the proposities that a muussipaHey sammet boy misstrisity than other eisetrie
~j your prehlers.
ne aq)srey opbden does not say ihas a munidpakyimmy met aantest with as outside suppuer of power to antidyits needs. A heme <ule unnessipame may stilt i
elast not to sommest with its assal pubile staity to supply the mwpality's energy reqstruments. What the madertty is saying, houwwer, is that when, as l
here, anegatises of foul play me mada, the PUCO may look beyond two ladividual i
contracts to deturndas whether the totauty of the sentreets evideness a sham trea==reiaa la direet vennstian of the Certified Territory Act. That is na the
. m endsden holds. m other insam are 14 to amether day when they are properly presented in ennes eendng before the sourt. Accordagly, I concur.
}
Motsa, CJ., dissenting. Beennas the majority dension applias Section 4 Maele XVIII et the Oldo Constitutsen and the Certified Territury Act t'Ast")in vinistise of plain language and eartain Intest. I must.,M dissent.
CEI ='--- < _'; - that the====I=='=t has no jatodistion over either the Ohio PosseCPP esserest er the CPF/MedCo contreet. Yet CEI asked the seands-i sic d
w eds es, e is.h here.d is, inch of 3.ri.diese. a.d -.
j senes of estion under the Act. Shaply put, MedCo's arteal emnpliance with the l
plain words in the Ast to rednee its smargy easts does not violate the Act and i
dose met meste en estisamble slaim under the Anets pressetty hafers the sommie.
afos er this asurt. b Inajority dension rasches beyond the aEagations con-tained a CETs sempiskt a trase an eBegalien that there assaaRy is a contreet betuosa Ohio Power sad MadCa: the only passible flectus! cirinnastamos which eenid vielsee the Art and sive rise to a ease of action between these parties.
Seesian 4 Article XVIIIffthe Oido.- enn y,wigen r
l Ang -
' ", '% assy asquire, monstrust, sun, Isass and opsveds witida ar-withest its estparnas lindte, any y=6He maihey tAs pedus er aarner af stesk in i
Tk 1
i 1
1 m
s s
99 Ohle Stad)
ELEC. ILLUM. 00. v. PUB. UTIL.
s Densmear pwsm, per Myrer, CJ.
o er 4 to be eupplied to 14s newsiespsMy or its (nAseissata and may costrust settA others)br any serk produst er arrvies. ' * * " mmphania added.)
Untf today this preshden meant that a mindeipelity could choose to contract with any whh smorgy provider Asr the prevision et onwgy to the municipal mhahtaunts. This is the Wenation ne longer.
Moreover, the Act espuusly provides:
a * *
- In the event that a==wp=1
, <- refuse la sreat a aransme or contress ser elesade earvise within its boundaries to an einstric supplier whees' eartised territory is lasluded within the municipality, any adher sisserw suppiner wisy sees ene naissisipal eerporation sander s JhuseMas er sensrust with ths mandsipsienywesten - (Empheds added.) R.C. 483EJBCA),
The misin worils of the statute here, until today, meant that a hane. rule munisipatty eschi elast met to sentreet 1sith its leest publie utihty to supply the rgy require =e== not, m emed, eenid
==4 with r ser energyposider etsta ebenes to supply these needs.
m agerny densism wat have the sobet at ul *r these rights or the municipality. It wEl disseursge munice alMas fruen contreeting with the Ohio r
electrial supplier at ther chaies to estistr the energy needs of the manie:pality.
Ea-t -W wishes in parehnen energy senspethtvaly to supply the needs et hs citizens, it anast either buy frun the leal pohEc utility er go outside the state et Ohie to sedstr las smarsr me.dm. H- -- : s -
' ' "" wn! he unnsser so
/s antisfy their energy requirements ihna a nonAoen, Ohle energy,.h. seek as
\\.h.
Ohfe Power in this case, beesuse such a purchase would erente the very ren!
thrust of possihte Act litigaden at the esamission by the aggrieved loen! public utolty.
-u, OW's W essesy F '- a will iese the _,,2
', toaan w
large biseks af eleetde mergy in tbs wholemnis market to Ohio's homemale
'!bese sales =0i Iludy be furied out at stare in the thee at peaantial Act Etigation by leen! pubile utilities. Neither monialpalinhebitante nor Ohio's loop. cost energy producers basafit hem such a etrennstones.
h m is a eremeure at stammen, anj We mash, asy amarase only that (
jornadiation cuadarred spa it bystatute. Fins ForuwrAaf a M Uiit Conwn.
cess),15 Ohle etJd sp 54, est NA8d 2007,1101: Casesem Juerere d W Co. s pid. UML Caussi. G995),13 Ohie St.3d 1 E, 647 NXad 138,141; Cohsetim s. Penser ca. s pid. Dtit Cowan, nest),87 Ohle StJd 885,97,630 N.IJd 55, K A enmipisint that Atils to trigger tbs esamission's juris5etion is subiest as dismissal. Ese cieriammei a M Util Cenent. Q918), N Olde St.sd 279, su N.FJd me; Joseen come -a=4u corp s. M DEL Canum, asso).
N Chie St.3d 33, la 0.OJd 478,414 N12d 1981.
e u --- --
=
m
_.. -.-.-~_--.- - -_
}
c.
i*
I 1
j 10 SUFREME COURT, JANUARY TERM. less CBS Ohio StJd Danaths opladen, per Merir, CJ.
I he General Assembly has m.,
- presenbed the commission's====y l
authority ever numeipal utiXty opersness. Ins ennummelas has y
j empress authaney the veinsamry and forced sh=d===r of stikty andlities j
and servises insida munimpal Ibnits mader the Mmer Ast, R.C. 4906J0 and j
4906J1 (State er ruf. Espp v. Dayton Pouer e LipM Co. [1987},10 Ohio St.2d j
14, 29 0.0Jd 9, 55 N.EJd 50), and the sesas has the antherity as oestrol j
=*==' utSky astians in situations involvfag statseide puhhe health and andsty, i
for example, water ausridsson (censsa v. Wndemon Defsk 44 Olde StJd se,7s
.o.oJd as, af N.EJd itsk and appewn! of sewage pridesas (Delmsere Cay. E of Conenws a t'ala==b [1306), as Olde StJd 179. Isa,28 OBR 154.158-188,497 W I Sd1112.1117).
But tbs assumission has as satherity ever a asundefpal deedsden as pathese power fnun a pubes uninty. Bestian 4, Arttelo XVIII et the Oldo Censmudan prweides that==Mr*8== have the right to abesse their wholanale energy suppliers. nis riskt h not suhket to santueery restnetson er m --m wmew er contreL Lenh a Puk UtG. Crnesi. Qatt), la Oldo St. 388,181 N.E.
196, paragraph two of the syDabus; In to C1, '- d (Jtesslents (Struthore asse), 45 Obie m.3d Wr, ses N.EJi 'l94, m.,' ene and three of the syllabes. Aassed Leser v. Luent Issal Ke4 eel D6d. Q982k 2 Ohio St.3d 18,2 033 su,442 N12d 449; Csienneur v. Pne. Udit Genene. Q979), EB Ohio StJd 427,12 0.0Jd SE1,300 N.EJd 1901; Coimmi6ms s Ohio Pouer Siting Cenum.
(1979), 58 Olde stJd 4R5,12 0.0Jd SSE,390 N.EJd 1808. Thus, CFF had the enestitutional authority to sentreet with Ohie Power to puruhase electrisal energy. Massover, the terms of that centreet are not sutdest to aanuaiadaa 3 vise. Link, suswe, at paragraph =o of the syllabus: In ve Commisant of itseidente q(StrudAweg supo, at purnsraph three of the syDabas. See, also, Weseerr a Greenes 0890), SS Ohie St.8d 180,181,554 N.EJd 1188,1184-118L CPP also had tbs amissive right to.esstrust with and seu electrient energy to MedCo, a nsteil eastsamer within CFP's servise tardtery. This undettered right is espressly ressenised by the Act:
'TN)othing la (the CarttSed Territary Ast] abaB hupair the power d =naWel
_M to require banchiese or contreets isr the pewielen et elsetne servisse within thsk huundanas * * *." R.C. 4035.8B(A).
"Necklag===*=Imad in (the Aet) shan be saastrued to asset tbs right of munidpal earpersenes a genmune, wesamir, distrew., er een eissate emersr.
na dghes sad powere et maaksps! earpnestsens as tbsy asist en er naar the ammise done et this anmien to esquin, mestreet, own, bass, or sysress in any mammer a puhEn utsty er to supply the esmos er ynninet * *
- neder Seedse 4 Artisie Zvm, obis ceasettatsas in any passa of the simas is not asseted by tihe e
l i*
i i
se Ohle StJd)
ELEC. ILLUM. CO. v. PUE. ITIIL.
n hashe opussa. per Moe. C1 Acr.)." 3.C. 4ssa.87.fDus, the essatussion had no sunnerity a reguinte er h
l a.anwise s.tml se CPP/EdCe m agreement.
j M3 Mae napartsat$, jurisdictie ever wholessis power pashness liks the Ohio 1
PosenCPP armaw has augmussly been,.
' hv WJ law. Under the Federal Power Ast, sectisa 884, 'Dtis 188.s.Ceds, the FERC has esclustve f )~
J'""
over the asis of wheissals enestds emersy. Se Unised Staams
{
{
'Supeme Cart he bagpsabhaked se preempdvs eEen at the Federal Power l
a i
a * = congress meant to drse a brisht Bne ensity samuradaad.
4"JW and sederst judadissan * *
- was m
Act by g
i maktar IFERC) juisdhsian sad estandina it to an wholesale salm in J
[
ist f thans -idsk Congress has made 7 l
.,se isis. by a sienn. rems w Co
. se one " '4 ablad to%
. mdise. ca.
j (1984),375 U.S. 305, E15 a16, N 5.Ct. Get, E51,11 L.Ed.2d 05,648. Intrastate j
whetsmale transnessous, Ilks the ese at her, are siss sumsidered en be mens in i-aturstata asummeres and preempted by the Feders! Power Ast. Fedsurrouse g i
Consa s F!srids Anser a LipAs Co. Ge7r), 404 U.S. 488, 92 5.Ct. 537. 30
}
L.EdJd 600.
i na maisetty holds that the es% has sensammt jurisdiction over an i
anaged aban trenesstian under the Ass. I disagres. If preemptian retains any j
ferns whatsesver, than the annumissian annot have anneurritat furisdiction over j
this missasien. Persnamt to sostion anmh), '!1 ale is, U.S.Ceda, ths sham i
transastion" of which CEI samplains is abject to the FERC's juisdiction. Only
'the FERC has ths entharity over this sentinet.
Araetseing Rasserts ser-viess Inc. v. Pu&. f#il. Comm Q987),84 Ohle St.2d 517 N.EJd 540. In fact, -
0 j
CEI has, c ' _ _ t this, bdtistsd a FERC presseding under this section to
^
j invahdata the Ohio PowenCPP power sentract. #stition er CFl. (Nov. 2,19961 l
FERC Desbet No. EL 064 000, at 4,14.
l Taas is not a my abas the amendesten mish met be,w ;d"-_ s, c aide j
- naster at some later dsts. If the FERC agrees with CEI that this atuation ensatas a sh s.es. as rEnc hs. th. a.aseiy i. sea. d.w a.
i Ohio PowenCPP whsissale pseer esatrast. Armed with the FERC's "shama treassation" finding, the aar==iami-weeld than have jurisdietion to detunnine CEra daneses nadar the Amt. Rosever, absent such a FERC findlar, the i
commismen escreetly held that it has as right to render say detision related i
the subsammes at a esmarest that is
' '- :7 within FERC's demain. GE l
Wertshing Asasseek Servisen Inc., empre.
1 Even if we eenid put aside the detsumstive issue af judsdiction, the questaan i~
se the heart of this mas is whether Ohie Power and MedCo essensand to seu go i
af pseur in % of the Ast. If CEI aDaged that they did, then the i
i e
1 i
i i
l 1
q*
a
=
l.*'
hom%
1 i
J liOiSL$5E" COURT, JANUARY TERM,190s (se Ohio St.ad l
12 i
Dummhr opense, per byer, cJ.
l complaint was not subjest to being dismissed, bemuse the complafat would have ausged a(press Jinns)velation af CEra entiSad territory under the Act.
However, the sempielns sostains ne such aHagsmoa.
N== d==* eneses in seems one then:
)
(1) OWo Power "has arranged to Annish electric servios to (MadCo] by selling j
60 MW W capasily and MM energy to (CFFD
?
(2) Ohio Power "megehstad dkustly with (MedCo) * *
- tegentling the 50 MW sale and purehass';
(3) CPP win bill MedCo unJar the same authod that Oldo Power was billing (
CPP fte the 503gorpower:
(4) tiu Obie PowenCPP and CPP/MadCo power agreements "are two halves of i
the essee unassettes":
l (5) these two taasectises "ure shun transestises" structured to circonvent
.e - a.d j-(g) Oldo Power wiu violate the Act by seHing power through CPP to MedCo.
I Neitbar the essuniesien mer the sourt is required to aanspt allagstians in a j
esepinist es true whiah ese esseredissed by desunente setashed to the a==gdaine See Stads es vel Eduards it roledo City SannelINat. Ad. (Edn, (1995),12 Ohio St.ad los, 100,647 N.EJd TDs, tog. ne two sentracts bedere us today are l
totaDy indepsadant of each other, and Adly aflhetuate the power transfer in C' pl questies name entrasts do not impose redpresal ehugsmens upon meh other.
As a =* et that. Artimie lok of the CPF/MedCe agroanent syndflanuy states that it erestas no tidrd,M CPP is not required to use Ohio Power as the party benefidaries and that the only parties to the J
agremnant are CPP and.
l seurue et its amargy nadar the CFF/MedCo contreet. AdditionaDy, CPP is oblismaed to posside Madce with all of its energy needs under Aresale 1.1 et the l
CPP/MedCe agenament, lacinding any ameuats over 50 MW, while Ohio Power, i
j on the other hand, is obligated only so prevkie 80 MW to CFF. Massover, Article i
EJ et the CPF/MedCe agreement spesi5eally contempistas interesansetion with j
mwhoisaals electrie providamp Two halves of a whalet no documsmas oisesty sents otheretse.
O % g-,tQ QQ Further, abanges in hiding yrsations and anthods betwoon a = -- "-9 " y and its ruesG essessnese hose as mesetag under the Ast. Her de V -$ r Po wS f" O j
j becomen MedCo and Oldo Power without earne type of contreet. Adddiennuy, j
every pasty to this sagenen agrees that these swa power seausse are aos j
esbject to the asumission's jurisdienen. De fast that tids eBeged " arrange-rname"la ngulaned by and addest to a remedy et Fr.RC, under sostism as4Eth),
'litle 16 U.S. Cede does met vast the comassaion with jurisdision to hear CErs I
i 1
i
(
)
l t
I
i.
i e
e i
i j
i i
i l
99 Ohio StJd)
ELEC. IIIUM. CO. v. FUB. UTIL.
la Deanha opths. per mye. cJ.
Under these circunstances, the emannesion was free to que'stian the aBegations j
~
in CETs suspinist and dotarmine that this emnpimint did not est forth reason-abis grounds for a complaint." The auerstions in count see do not tdgser
-,,,w.m-p In esent two. CEI aEages that:
l C) altheagh CE! asvar reined the issos bedses this complaint, MedCo is an destrie Eght osapear under Chio law bessume it seus the power that it buys Dem
}
M toits member /swaars; a
(I) MedCe tatsads at sens pdat la the Atture/to buDd additional thcotties to j
taba power at tremedesima voltsgu, change as tens M ' O ressrihng ins
===h==4=ners, and seu einstdeur is aseensbeetweers; (3) these abegus wiD make MedCa, If k is not already, e eiestde light
'emmenarunear oeneinw; and i
j" (4) amor the changes, MedCo viu be esGing einstristty to its messbudseners la i
viabeten of the Aet.
1 Sysedsetos fkhas changes in h011ag methods as manbeewwaars, the ocastrue.
I tism et facGities to take power at trW voltases._ sad speedstion that
[S l
MedCe may prevkis electricity to new imembefewners de ast vsaista the Act.
%i.
Nor de they sesvert a resee enstasaur af ever sixty peere into an aleetne supplier i
that.fs subject to the Aet. Simply stated, speadative Assure estivity which may or may not acuar is met the basis for a valid seaplaint at tbs comunission. Classiend i
s puh. Uh7. Conni. 0900),64 Okie StJd 209,216 417,18 0.OJd 418,423 425,
~
414~N.EJd 718,128.
amaanny, the.-.-d property semend abas -1==e i-suppliers Of that is what Medce is in tids ese) la adstenes besars Janeury 1,1977 see mennyt fkun hha Ast. In,e CRJ,' ames No. 36 488 EL-UNC, Entry at 7, Igen WL 780886.
ugra. ThereAme, even if MedOs. wars=== lased an einstrie supplier under the Act, i
Medce is samupt hess the Ast untS it estantly provides energy to new sussemers j
etherwise vielshe that Aet. The eeniassian ad not err in deterstains that there as reassaabis grounds far CEra emmplaint. CEI argoes here sad in 4
fts FERC compkins that there h a sentreet between Med for the sale of 50 as pseur. CEra eneplaint sen does set suppset these arguments. Absent that opsesse alisuuten, the annuale-l sies has no huisdissen ever the olde Power /CPP/MedCe pseer transdur. Even sf the esmyisimainsladed that spedse anaguden, I sarisamly questism whether the
.e edsessa has Jessedisuse e r e pe=ir transeur in lisht at the reder 1 j
Power Aet's.j=ta' lid *= ever " sham tW under Seedna esE0i), Title J
l i
4 i
t I
o 14 SUPR23G COUltT. JANUARY TERM, 1984 (98 ONo StJid hemesag Opusa, per Meyer, CJ.
UACode, and the schwerledged inek of judedledon by the an==twan em-either power essernst.
For the fbrogehig reasons, I respostihDy dfseent.
Emmacs, J, amasars la tbs Amegoing diamanting optaion.
I i
e I
i 1
l l
4 4
L I
l i
i
+
4 9
I a
u i
i-W I
l
\\
l A
SUPREME COURT OF OHIO COLUMBUS i
i j
ANNOUNCEMENT t,
1:00 P.M.
WEDNESDAY l
August 21,1996 i'
i MERIT DOCKET 1
l 95-2444. Cleveland Elec. Illum. Co. v. Pub. Util. Comm.
Appeal from the Public Utilities Commission of Ohio, No. 95-458-EL-UNC.
j Order reversed and cause remanded.
/
l Douglas F.E. Sweeney, Pfeifer, Cook and Stratton, JJ., concur.
j Douglas, J., concurs separately.
l Moyer, C.J., and Resnick, J., dissent.
I l
i j
I a
i i
i i
i j
1a.<usun m
-u--ma,.m-+.a n
-a,m.
w-a w
.a.am k
6 O
PLEASE NOTE THESE SUMMARIES ARE PREPARED BY THE COMMUNICATIONS DIRECTOR FOR THE CONVENIENCE OF THE MEDIA. THEY ARE NOT TO BE CONSIDERED HEADNOTES OR SYLLABI OF THE COURT.
INTERESTED PERSONS ARE URGED TO OBTAIN COPIES OF THE ACTUAL DECISIONS 'SO THAT THE FULL TEXTS OF HIE COURT'S OPINIONS CAN BE CAREFULLY STUDIED.
i i
i i
i 4
i i
.i i
i 1
j i
j l
i i,
l-o 1
)
Case No. 95-2444 Cleveland Electric Illuminting Company, Appellant v. Public Utilities l
Commission of Ohio, et al., Appellees l
Appeal from the Public Utilities Commission of Ohio, No. 95-458-EL-UNC i
The PubUc Utilities Commission of Ohio has jurisdiction to consider a complaint alleging the sale of electricity to a municipal power company was an j
attempt to circumvent the Certified Territory Act of the power company in the city, the Supreme Court of Ohio held today.
The utilities commission had dismissed the compbrint filed by the l
l Cleveland Electric Illuminating Coinpany on the ground that municipal power companies are specifically excepted from application of the Certified Territory i
Act.
I Writing for the majority of the Court, Justice Evelyn L. Stratton said the utilities commission has the power to determine if the complaint of" sham I
transactions" was true.
' Cleveland Electric Illumi=%g sold power to Medical Center Company as a retail customer. Ma&mj Center resold the electricity to its members-awners.
i Medical Center had asked to be treated as a whblesale customer. When Cleveland
~
Electric illuminating would not make the change, Medical Center announced it would start buying power from Cleveland Public Power, a municipal plant.
Cleveland Public Power said it would purchase power from Ohio Power Company, a subsidiary of American Electric Power.
l l
Cleveland Electric Illuminating charged that the municipal light plant was being used as a " straw man" for the sole purpose of circumventing the Certi5ed l
Territory Act. It charged the plan actually provided for the sale of electricity by l
Ohio Power Company to Medical Center Company.
I i
s 1
I i
3
l-Cleveland Electric Illuminatirig Company also charged that Medical Center j
Company planned to build additional facilities and to sell electricity to non member / owners. It said this would cause financialloss to Cleveland Electric l
Illuminating. The Public Utilities Commission granted motions to dismiss filed i
by Ohio Power Company and Medical Center Company stating that it had no j
jurisdiction to consider the contracts.
l "While the commission may not have jurisdiction over either the OPC/CPP contract, or the CPP/MCC contract Individually, the totality of the evidence could indicate the real intention of the deal was to transfer electricity from OPC to MCC i
using two independent transactions, which would violate the Certified Territory Act.
l "In such an instance, the commission must look beyond the surface of the i
two contracts to see if there was an underlying deal between OPC and MCC,"
I' Justice Stratton said. However, the court made it clear it was not deciding the case on the merits, but merely remanding he case to the Public Utilities Commission to l
considerthe allegations.
i She said that although the federal govemment had given regulation of wholesale power transactions to Federal Energy Regulatory Commission, the public utilities commission review would not encroach on federaljurisdiction, since it would involve the whole tra6saction and notjust the pact between Ohio Power Company and Cleveland Public Power.
The case was remanded to the Public Utilities Commission.
Concurring were Justices Andrew Douglas, Francis E. Sweeney, Paul E.
l Pfeifer, and Deborah L. Cook. Justice Douglas also concurred separately. Chief Justice Thomas J. Moyer and Justice Alice Robie Resnick di==-a'd I
"'Ihe commission has no authority over a mual@l decision to purchase power from a public utility," Chief Justice Moyer said.
I "CPP also had the exclusive right to contract with and sell electrical energy l
to MedCo, a retail customer within CPP's service territory.
j i
l h
i
e 4
i "The two contracts before us today are totally independent of each other, and fully effectuate the power transfar in question. These contracts do not impose reciprocal obligations upon each other."
}
l He said other charges by Cleveland Electric Illuminating were speculative and were not the basis for a valid complaint to the commission.
I
-3 0-
)
i l
Jones, Day, Reavis & Pogue, Paul T. Ruxin and Helen L. Liebman, for appellant, Cleveland Electric Illuminating Company.
i j
Betty Montgomery, Attorney General, Duane W. Luckey and Steven T.
Nourse, Aadistant Atrarneys General, for appellee, Public Utilities Commission.
i.
l Bell, Royer & Sanders Co., L.P.d., and Barth E. Royer, for intervening appelles, Medical Centar Company.
I Edward J. Bray, Marvin I. Resnick and Kevin F. Duffy for intervening l
appellee, Ohio Power Company.
i i
'Chester, Wilcox Saxbe, John W. Bentine and Jeffery L. Small, urging affirmance for amicus curiae, American Municipal Power-Ohio, Inc.
I Climaco, Climaco, Sa-in= tare, Lefkowitz & Garofoli Co., L.P.A., John It Climaco, Anthany J. Garofoli, Glenn S. Kransen and Joseph M. Hegedus, urging i
affirmanca for amicus curiae, City of Cleveland.
i
't i
i 3
5 i
/
4
,o CERTIFICATE OF SERVICE I hereby certify that I have on this 30th day of August, 1996, caused the foregoing pleading to be sent by first class mail to all parties on the list compiled by the Secretary of the Commission in this proceed ng.
D f3 Robert S. Waters Jones, Day, Reavis & Pogue 1450 G' Street, N.W.
Washington, D.C. 20005-2088 Attorney for The Cleveland Electric Illuminating company 4