Ohio Supreme Court sides with FirstEnergy in $43M renewable credit refund case

Dive Brief:

The Ohio Supreme Court ruled 6-1 Jan. 24 that the state's Public Utilities Commission cannot order FirstEnergy to refund $43.4 million to customers that it spent on renewable energy credits in an effort to comply with the state's clean energy directives.
Justices determined that allowing regulators to force the refund would amount to "unlawful retroactive ratemaking," and said any fix to the problem would need to come from the state's legislature.
PUCO Chairman Asim Haque said in a statement that the commission is still reviewing the court's decision, but added that regulators were concerned the decision "will have negative impacts on the agency’s ability to protect Ohio’s utility customers."

Dive Insight:

Ohio utility regulators do have the ability to invalidate a tariff, "but it may exercise this power prospectively only," the Supreme Court said in its ruling.

"The rule against retroactive ratemaking thus bars the commission from ordering a refund or otherwise adjusting current rates to make up for overcharges under previously recovered rates," the court said. "It is the statutory scheme that requires this result, and therefore, it is a matter for the General Assembly to remedy, not this court," the ruling added.

After directing FirstEnergy to increase its use of renewable energy, the commission said it paid too much for renewable energy credits and made "imprudent" purchases in 2010. PUCO ordered a refund amounting to about $5/month per customer and in 2014 the utility appealed to the Ohio Supreme Court, according to the Toledo Blade.

PUCO officials expressed concern regarding the decision. "Our ability to effectively audit utility expenses is one of our most important regulatory responsibilities," Haque said.

The Office of the Ohio Consumers’ Counsel (OCC) called the ruling "disappointing."

The court's decision "highlights one of the worst ways that Ohio's rate-setting process is unfair ‎to utility consumers — the law allows FirstEnergy and other utilities to keep unlawful charges instead of giving millions of dollars in refunds to consumers,” said OCC spokesman Dan Doron, according to The Blade.

The decision was clear cut but not unanimous. Justice Judith French wrote in a partial dissent that "FirstEnergy was authorized to recover only prudently incurred [renewable energy credit] costs and the commission determined that those costs were imprudently incurred."