[Cite as Ohio Consumers’ Counsel v. Pub. Util. Comm., 127 Ohio St.3d 524, 2010-Ohio-6239.]




 Ohio CONSUMERS’ COUNSEL, APPELLANT, v. PUBLIC UTILITIES COMMISSION
                             OF OHIO ET AL., APPELLEES.

             [Cite as Ohio Consumers’ Counsel v. Pub. Util. Comm.,
                       127 Ohio St.3d 524, 2010-Ohio-6239.]
Public utilities — Natural-gas rates — Straight Fixed Variable rate design —
        Public notice of proposed change in rates — Waiver of objections to
        notice.
(No. 2009-1547 — Submitted October 13, 2010 — Decided December 23, 2010.)
               APPEAL from the Public Utilities Commission of Ohio,
                   Nos. 07-1080-GA-AIR and 07-1081-GA-ALT.
                                 __________________
        CUPP, J.
        {¶ 1} This case marks the third time that we have been called upon to
consider challenges to orders of the Public Utilities Commission of Ohio
(“commission” or “PUCO”) that adopted a Straight Fixed Variable (“SFV”) rate
design. We previously upheld the PUCO’s approval of a modified SFV rate
design for Duke Energy Ohio and Dominion East Ohio.                   Ohio Consumers’
Counsel v. Pub. Util. Comm., 125 Ohio St.3d 57, 2010-Ohio-134, 926 N.E.2d
261. In those cases, we held that the commission’s decisions to allow Duke and
Dominion to abandon the traditional natural-gas rate design used over the past 30
years in favor of a modified SFV rate structure were not unlawful or
unreasonable. Under traditional natural-gas rate design, a small portion of the
utility’s fixed delivery costs is recovered through a low fixed monthly customer
charge with the remaining fixed distribution costs recovered through a rate that
varies with gas usage. The SFV rate design separates or “decouples” the utility’s
recovery of its costs of delivering gas (which are predominantly fixed) from the
                                 SUPREME COURT OF OHIO




amount of gas that customers actually use (which varies from month to month).
Under the modified SFV rate structure approved in the Duke and Dominion cases,
most fixed costs of delivering gas are collected through a higher flat customer
charge, with the remaining fixed costs recovered through a correspondingly lower
variable gas-usage component.
        {¶ 2} In this case, Ohio Consumers’ Counsel (“OCC”) challenges the
PUCO’s approval of an SFV rate design as the method by which Vectren Energy
Delivery of Ohio, Inc., would collect its authorized revenues from the residential
customer class. For the reasons that follow, we affirm the orders of the PUCO
that approved the SFV rate design for Vectren as being within the lawful and
reasonable discretion of the PUCO.
                         I. Facts and Procedural Background
        {¶ 3} On November 20, 2007, Vectren filed an application to increase its
natural gas distribution rates.        Case No. 07-1080-GA-AIR.1              Several parties,
including OCC, intervened in Vectren’s rate case. On September 8, 2008, the
parties filed a joint stipulation and recommendation, resolving all issues except
for the adoption of a new rate design.
        {¶ 4} As to the matter of the rate design, Vectren’s application proposed
a gradual transition to a true SFV rate design that would take place over a period
of two rate-case cycles. Under a true SFV design, all fixed distribution costs are
recovered through a flat customer charge and there is no usage or volumetric
component of the distribution charge. The rate case under review here – the first
rate case of the proposed two-rate-case cycle – involved a two-stage approach.
Under the first stage, Vectren proposed an increase in the flat customer charge
and a corresponding reduction in the volumetric (or usage) charge. Under the



1. Vectren also filed applications seeking approval of an alternative rate plan (case No. 07-1081-
GA-ALT) and authority to continue certain accounting methods (case No. 08-632-GA-AAM).




                                                2
                               January Term, 2010




second stage, Vectren proposed a further increase in the flat customer charge and
a further decrease in the usage charge.
        {¶ 5} As it did in the Duke and Dominion cases, OCC opposed the SFV
rate design. OCC argued in favor of keeping the traditional rate design (low flat
customer charge and higher usage component) and adding a sales-decoupling
mechanism, which would allow Vectren to recover revenues lost as a result of
decreases in customer usage.
        {¶ 6} On January 7, 2009, the PUCO issued its order adopting the
stipulation.   The PUCO’s order also approved the SFV rate design for the
collection of natural-gas distribution rates instead of the decoupling mechanism
advocated by OCC.
        {¶ 7} The PUCO, however, rejected the amount of the flat customer
charge that Vectren had proposed in its application. For the first year of the rate
plan, Vectren’s application proposed that the flat customer charge be set at $10
per month during the summer months and at $16.75 during the winter months.
The commission did not believe that a seasonal approach was appropriate and
therefore decided to set the customer charge at $13.37 per month for the first year
of the rate plan.    The $13.37 customer charge included a volumetric rate
component.
        {¶ 8} The commission also rejected Vectren’s proposed gradual
transition to SFV. Instead, the commission decided that at the end of the first year
(Stage One) of the rate plan, Vectren’s customer charge would be set at $18.37
per month with no volumetric rate. That is, rather than ordering transition to a
true SFV rate design over two rate cases as proposed in Vectren’s application, the
commission ordered that the transition to a full SFV rate structure be implemented
immediately upon expiration of Stage One of the current rate case.
        {¶ 9} OCC filed a timely application for rehearing. The commission
granted rehearing on March 4, 2009, for the purpose of further considering the



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matters raised by OCC’s application. On August 26, 2009, after further review,
the commission rejected OCC’s application for rehearing in its entirety.
       {¶ 10} OCC’s appeal of the commission’s orders is now before us for
final decision.
                            II. Standard of Review
       {¶ 11} “R.C. 4903.13 provides that a PUCO order shall be reversed,
vacated, or modified by this court only when, upon consideration of the record,
the court finds the order to be unlawful or unreasonable.”           Constellation
NewEnergy, Inc. v. Pub. Util. Comm., 104 Ohio St.3d 530, 2004-Ohio-6767, 820
N.E.2d 885, ¶ 50. We will not reverse or modify a PUCO decision as to questions
of fact if the record contains sufficient probative evidence to show that the
commission’s decision was not manifestly against the weight of the evidence and
was not so clearly unsupported by the record as to show misapprehension,
mistake, or willful disregard of duty. Monongahela Power Co. v. Pub. Util.
Comm., 104 Ohio St.3d 571, 2004-Ohio-6896, 820 N.E.2d 921, ¶ 29.               The
appellant bears the burden of demonstrating that the PUCO’s decision is against
the manifest weight of the evidence or is clearly unsupported by the record. Id.
       {¶ 12} Although this court has “complete and independent power of
review as to all questions of law” in appeals from the PUCO, Ohio Edison Co. v.
Pub. Util. Comm. (1997), 78 Ohio St.3d 466, 469, 678 N.E.2d 922, we have
explained that we may rely on the expertise of a state agency in interpreting a law
where “highly specialized issues” are involved and “where agency expertise
would, therefore, be of assistance in discerning the presumed intent of our
General Assembly.” Consumers’ Counsel v. Pub. Util. Comm. (1979), 58 Ohio
St.2d 108, 110, 12 O.O.3d 115, 388 N.E.2d 1370.
       {¶ 13} Moreover, we have long recognized limitations upon our review of
commission orders that establish rates and rate-related classifications. Green
Cove Resort I Owners’ Assn. v. Pub. Util. Comm., 103 Ohio St.3d 125, 2004-




                                         4
                                January Term, 2010




Ohio-4774, 814 N.E.2d 829, ¶ 24. “Our function is not to weigh the evidence or
to choose between alternative, fairly debatable rate structures. That would be to
interfere with the jurisdiction and competence of the commission and to assume
powers which this court is not suited to exercise.” Cleveland Elec. Illum. Co. v.
Pub. Util. Comm. (1976), 46 Ohio St.2d 105, 108, 75 O.O.2d 172, 346 N.E.2d
778. This court’s task is not to set rates; rather, it is only to ensure that the rates
are not unlawful or unreasonable and that the rate-making process itself is
lawfully carried out. AT&T Communications of Ohio, Inc. v. Pub. Util. Comm.
(1990), 51 Ohio St.3d 150, 154, 555 N.E.2d 288.
                                    III. Analysis
                          A. Statutory Notice Requirements
          {¶ 14} In its first proposition of law, OCC contends that the commission
failed to enforce the public-notice requirements in R.C. 4909.18 and 4909.19
when it approved Vectren’s rate-increase application.           According to OCC,
Vectren’s public notice of its rate application failed to convey the substance and
prayer of the SFV rate design and the Stage Two rates.
          {¶ 15} We overrule OCC’s first proposition of law for the reasons that
follow.
            1. OCC did not give the commission an opportunity to correct
                                  the alleged error
          {¶ 16} Vectren filed its rate-increase application on November 20, 2007.
Along with its application, Vectren submitted a proposed newspaper publication
notice for the PUCO’s approval.         In an entry dated January 16, 2008, the
commission found that Vectren’s proposed public notice complied with R.C.
4909.18(E) and 4909.19. Three days later, Vectren began publishing notices in
newspapers throughout Vectren’s service territory.
          {¶ 17} OCC filed a motion to intervene in Vectren’s rate case on
November 5, 2007, which was 15 days before Vectren filed its rate-increase



                                          5
                               SUPREME COURT OF OHIO




application.2   OCC did not, however, raise an objection when Vectren first
submitted the proposed public notice with its rate-increase application. OCC also
did not request that the commission reconsider its January 16, 2008 entry
approving the proposed notice for publication. Instead, OCC first challenged
Vectren’s public notice when OCC filed objections to the PUCO’s Staff Report
on July 16, 2008. This occurred nearly eight months after Vectren first submitted
its proposed public notice to the PUCO for approval, six months after the PUCO
approved the proposed notice, and over five months after the notices had been
published.
        {¶ 18} We hold that OCC’s failure to challenge Vectren’s public notice at
an earlier juncture constitutes a forfeiture of the objection because it deprived the
commission of an opportunity to cure any error when it reasonably could have.
See, e.g., Parma v. Pub. Util. Comm. (1999), 86 Ohio St.3d 144, 148, 712 N.E.2d
724 (“By failing to raise an objection until the filing of an application for
rehearing, Parma deprived the commission of an opportunity to redress any injury
or prejudice that may have occurred”). OCC should have challenged Vectren’s
public notice before it was published in local newspapers, and its decision to wait
five months after publication before raising an objection is fatal to OCC’s claim.
     2. OCC’s counterargument: subject-matter jurisdiction cannot be waived
        {¶ 19} OCC counters that it could not waive this error before the
commission, because this court has determined that the notice provisions of R.C.
4909.18 and 4909.19 are jurisdictional. According to OCC, utilities must comply
with the statutory notice requirements in order for the PUCO to obtain subject-
matter jurisdiction over the utility’s rate application. OCC thus contends that no
waiver occurred at the commission because subject-matter jurisdiction cannot be
waived.

2. Although OCC’s motion to intervene was not granted until August 1, 2008, OCC was able to
participate fully in all proceedings before being granted intervening-party status.




                                            6
                                January Term, 2010




       {¶ 20} Vectren and the PUCO respond that this court lacks jurisdiction to
consider OCC’s claim of lack of subject-matter jurisdiction in the commission
because OCC did not specifically set forth this claim in its application for
rehearing to the commission or in its notice of appeal to this court. See R.C.
4903.10 (“No party shall in any court urge or rely on any ground for reversal,
vacation, or modification not so set forth in the application” for rehearing filed
with the PUCO) and 4903.13 (requiring a party challenging a PUCO order to set
forth the errors complained of in the notice of appeal to this court).
       {¶ 21} We need not consider whether OCC specified this claim on
rehearing, because we find that OCC did not mention its claim of lack of subject-
matter jurisdiction in its notice of appeal to this court. OCC’s notice of appeal
states only that “[t]he PUCO erred in unlawfully approving the utility’s proposed
straight fixed variable rate design when the utility failed to provide adequate legal
notice of the rate design pursuant to R.C. 4909.18 and 4909.19.” The more
general phrase “unlawfully approving” does not equate to the more specific claim
of lack of subject-matter jurisdiction and therefore does not state a claim of lack
of subject-matter jurisdiction in the notice of appeal. Moreover, OCC does not
respond to Vectren’s or the PUCO’s argument that OCC has failed to invoke this
court’s jurisdiction over the claim of lack of subject-matter jurisdiction. That is,
OCC failed to argue that it was not required to raise the claim in its notice of
appeal. Accordingly, we lack jurisdiction to consider OCC’s claim that the notice
requirement implicates subject-matter jurisdiction and therefore could not be
waived at the PUCO. See Ohio Partners for Affordable Energy v. Pub. Util.
Comm., 115 Ohio St.3d 208, 2007-Ohio-4790, 874 N.E.2d 764, ¶ 16.
                                  B. Due Process
       {¶ 22} OCC asserts in its second proposition of law that the failure to
provide proper notice violated customers’ due process rights. According to OCC,
R.C. 4905.70 and 4929.02(A)(4) create protected property interests in customers.



                                          7
                            SUPREME COURT OF OHIO




OCC argues that the PUCO terminated or diminished those interests in this case
without affording customers notice and an opportunity to be heard.
       {¶ 23} We hold that OCC’s due process claim is unavailing because OCC
did not raise its argument on protected property interests in its application for
rehearing. See R.C. 4903.10. OCC also failed to set forth this specific claim in its
notice of appeal to this court. R.C. 4903.13. These failures preclude our review
of this issue. Ohio Consumers’ Counsel v. Pub. Util. Comm., 114 Ohio St.3d 340,
2007-Ohio-4276, 872 N.E.2d 269, ¶ 40. See also Reading v. Pub. Util. Comm.,
109 Ohio St.3d 193, 2006-Ohio-2181, 846 N.E.2d 840, ¶ 16 (as-applied
constitutional challenge must be raised in first instance before the PUCO).
      C. Compliance with Regulatory Practices and Commission Precedent
       {¶ 24} OCC asserts in its third proposition of law that the commission
violated its own precedents and failed to adhere to the regulatory principle of
gradualism when it imposed the SFV rate design on Vectren’s residential
customers. According to OCC, the commission failed to demonstrate a clear need
to abandon the traditional natural-gas rate design used over the past 30 years and
failed to show why prior rate-design precedent was not applicable to Vectren’s
case. OCC contends that the commission’s failure to demonstrate a clear need for
change resulted in rates that were unjust and unreasonable.
       {¶ 25} The arguments that OCC asserts in its third proposition of law are
identical to arguments that we rejected in the Duke and Dominion cases. Ohio
Consumers’ Counsel v. Pub. Util. Comm., 125 Ohio St.3d 57, 2010-Ohio-134,
926 N.E.2d 261, ¶ 13-14.       Because the PUCO gave the same rationale for
adopting SFV in Vectren’s case, our earlier decision is dispositive of this
proposition of law. See id. at ¶ 15-18 (finding that the commission’s policy
decision to adopt SFV was clearly stated and reasonable) and at ¶ 19-20 (holding
that the PUCO is not required to apply gradualism in rate-design cases).
                     D. Energy Efficiency and Conservation




                                         8
                               January Term, 2010




       {¶ 26} Under its fourth proposition of law, OCC maintains that the
commission-approved SFV rate design fails to promote energy efficiency and
discourages conservation in violation of R.C. 4929.02(A)(4) and 4905.70.
       {¶ 27} OCC failed to set forth this proposition of law in its notice of
appeal. We therefore lack jurisdiction to consider the arguments raised here.
Ohio Partners for Affordable Energy, 115 Ohio St.3d 208, 2007-Ohio-4790, 874
N.E.2d 764, ¶ 16.
                        E. Manifest Weight of the Evidence
       {¶ 28} OCC asserts in its fifth proposition of law that the commission’s
approval of the SFV rate design is against the manifest weight of the evidence.
We will address each of OCC’s claims in turn.
                        1. Impact on low-income customers
       {¶ 29} OCC first claims that the commission erred when it approved the
SFV rate design by relying in part on the unsubstantiated theory that low-income
customers benefited from SFV.
       {¶ 30} Contrary to OCC’s assertion, the commission did not find that all
of Vectren’s low-income customers would benefit under the SFV rate design.
What the commission found was that low-income customers are on average high-
use customers.      And because high-use customers benefit from the SFV rate
design, the commission concluded that “low-income customers, on average,
would actually enjoy lower bills under the [SFV] rate design.”
       {¶ 31} Evidence before the commission supported this finding.        Staff
witness Stephen Puican testified that “low-income customers are, on average, not
low usage customers. Because high-usage customers will benefit from the SFV
rate design, and low-income customers are more likely to be high-usage
customers, it is reasonable to conclude that low-income customers are actually
more likely to benefit from SFV.”           Vectren witness H. Edwin Overcast
corroborated Puican’s testimony. Overcast testified that “[b]ased on the analysis



                                        9
                            SUPREME COURT OF OHIO




of actual billing information for VEDO’s [Vectren’s] residential customer and
available Census block group income data for VEDO’s service area, * * * low
income customers in VEDO’s service area consume on average more natural gas
annually than all but the highest income residential customers in VEDO’s service
area.” He further testified that low-income customers would benefit by having
lower winter gas bills under SFV.
       {¶ 32} OCC faults the PUCO for relying on Puican’s testimony while
summarily dismissing the testimony of OCC’s expert witness Roger Colton. In
essence, OCC is asking this court to reweigh the evidence and assign greater
weight to Colton’s testimony than the commission did.        But that is not our
prerogative in PUCO appeals. See Util. Serv. Partners, Inc. v. Pub. Util. Comm.,
124 Ohio St.3d 284, 2009-Ohio-6764, 921 N.E.2d 1038, ¶ 35.
                         2. Impact on low-use customers
       {¶ 33} OCC contends that the PUCO offered no record citation to support
its conclusion that low-usage customers had not been paying the entirety of their
fixed costs under the previous rate design. Likewise, OCC maintains that there is
no record support for the PUCO’s “allegation” that high-use customers were
overpaying fixed costs under the previous rate design.
       {¶ 34} OCC is mistaken that there was no record support for the
conclusion that low-use customers were subsidized under the prior rate structure –
several witnesses testified to this end. Moreover, we have accepted the
commission’s finding that the SFV rate design was intended to remedy inequities
in the prior rate structure caused by high-use customers overpaying their own
fixed costs and subsidizing low-use customers. See Ohio Consumers’ Counsel v.
Pub. Util. Comm., 125 Ohio St.3d 57, 2010-Ohio-134, 926 N.E.2d 261, ¶ 30, 33,
46.
                  3. Impact on low-income, low-use customers




                                        10
                                  January Term, 2010




       {¶ 35} OCC also contends that the commission-approved SFV design is
bad public policy for Vectren’s low-use, low-income residential customers.
According to OCC, the one known effect of the SFV rate design is that some of
Vectren’s low-income and low-use customers will now be forced to subsidize
high-use residential customers.
       {¶ 36} OCC’s assertions of unfair cost subsidization are unfounded. In
order to remedy inequities in the prior rate plan, some low-use residential
customers – including some who are low-income – will pay more under the new
rate design. But low-income and low-use customers will pay more because they
will no longer be subsidized by higher-use customers. See Ohio Consumers’
Counsel v. Pub. Util. Comm., 125 Ohio St.3d 57, 2010-Ohio-134, 926 N.E.2d
261, ¶ 30, 33, 46. It does not automatically follow that low-income and low-use
customers will now be subsidizing high-use customers under SFV. And OCC has
offered no compelling evidence to the contrary.
       {¶ 37} As to OCC’s claim that the PUCO failed to justify terminating
Vectren’s pilot program for low-income customers after one year, OCC
misconstrues the commission’s order. The commission did order that the program
be made available for one year. But the commission also stated that at the end of
the first year, it would “evaluate the program for its effectiveness in addressing
our concerns relative to the impact on low-usage, low-income customers.” Thus,
OCC’s challenge to the pilot program is speculative and does not demonstrate that
the commission’s approval of SFV was against the manifest weight of the
evidence.
                     4. Prospective studies/rush to judgment
       {¶ 38} Finally, OCC claims that the PUCO’s decision to impose the SFV
rate design was in sharp contrast to other policy changes of the commission that
employed more open, deliberate processes and included participation by all
stakeholders. OCC argues that the failure to devote the necessary time to study



                                          11
                            SUPREME COURT OF OHIO




the impact of SFV demonstrates that the commission’s decision is against the
manifest weight of the evidence.
       {¶ 39} OCC made a similar “prospective studies” argument in the
Dominion case, which we rejected. Ohio Consumers’ Counsel v. Pub. Util.
Comm., 125 Ohio St.3d 57, 2010-Ohio-134, 926 N.E.2d 261, ¶ 53-57. This claim
is not well taken for the same reasons. Moreover, the voluminous record in this
case contradicts OCC’s claim that there was a rush to judgment. Likewise, OCC
fully and extensively participated in all proceedings before the commission in
Vectren’s rate-design case, and we find no evidence that it or any other
stakeholder was excluded.
                                   IV. Conclusion
       {¶ 40} In this appeal, OCC challenges how the PUCO designed the rates
for gas-distribution service for Vectren’s residential customers. OCC asks that we
intervene in an area – rate design – that is traditionally within the PUCO’s
expertise.   But OCC has not sustained its burden of showing that the
commission’s order in this case is unlawful or unreasonable or that the rate-
making process itself was unlawfully carried out. AT&T Communications of
Ohio, Inc. v. Pub. Util. Comm., 51 Ohio St.3d at 154, 555 N.E.2d 288.
                                                                 Orders affirmed.
       PFEIFER,    LUNDBERG        STRATTON,   O’CONNOR,      O’DONNELL,      and
LANZINGER, JJ., concur.
       BROWN, C.J., dissents.
                             __________________
       PFEIFER, J., concurring.
       {¶ 41} I concur in the majority decision. Again, the Ohio Consumers’
Counsel (“OCC”) has unsuccessfully challenged PUCO’s approval of a Straight
Fixed Variable rate design. The OCC’s office continues to tilt at windmills, when




                                         12
                                January Term, 2010




it could instead be engaging in a practical way to help Ohioans contain their
energy costs.
       {¶ 42} The OCC could provide great service to Ohio consumers by
working with the General Assembly and utilities to create incentives for utilities
to enter into long-term contracts with natural-gas providers to take advantage of
the current low price of natural gas. As it stands, utilities simply pass on to
consumers the price of natural gas, whatever it is. Utilities are not given a real
incentive to seek out a long-term, low price. In the end, it is a stable, low natural-
gas price that is going to help consumers. Now is the time, while natural gas
prices are at or near historical lows, for the OCC and General Assembly to do
useful work for Ohio’s natural-gas consumers.
                               __________________
       BROWN, C.J., dissenting.
       {¶ 43} I agree with the view expressed by Justice Pfeifer about the
important service that the OCC might provide for Ohio consumers, but I do not
believe that the PUCO’s orders should be affirmed.
       {¶ 44} n my view, the notice published by Vectren did not comply with
R.C. 4909.19. That statute requires that a utility seeking a rate increase publish in
Ohio newspapers a notice that conveys “the substance and prayer” of its proposal.
Similarly, the Vectren notice did not comply with R.C. 4909.18(E), because it
failed to “fully disclos[e] the substance of the application” and “include the
average percentage increase in rate that a representative industrial, commercial,
and residential customer will bear should the increase be granted in full.” I would
therefore vacate the PUCO’s order approving a change of Vectren’s rate design to
a two-stage modified straight fixed variable rate structure.
       {¶ 45} R.C. 4909.18(E) requires a utility seeking a rate increase to first
submit to the commission a proposed notice to be published in newspapers in the
communities the utility serves. The statute requires the utility to fully disclose the



                                         13
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substance of the application. R.C. 4909.18(E) further requires that the notice
“prominently state that any person * * * may file * * * an objection to such
increase * * *. The notice shall further include the average percentage increase in
rate that a representative industrial, commercial, and residential customer will
bear should the increase be granted in full.” (Emphasis added.)
        {¶ 46} Vectren’s application proposed a two-stage transition from the
traditional natural-gas rate design under which it had previously been operating to
a straight fixed variable design.    In the traditional design, a relatively small
portion of the utility’s fixed delivery costs are recovered through a low fixed
monthly customer charge with the remaining fixed distribution costs recovered
through a rate that varies with gas usage. In a straight fixed variable (“SFV”)
design, a utility recovers its costs of delivering gas (which are predominately
fixed) separately from the amount of gas that customers actually use (which varies
from month to month). The expected result of the Vectren proposal to transition to
an SFV design was that most fixed costs of delivering gas would be collected
through a higher flat customer charge, with the remaining fixed costs recovered
through a correspondingly lower component.
        {¶ 47} Vectren undoubtedly was aware at the time it filed its rate increase
application that, as the PUCO ultimately acknowledged, under an SFV rate
design, “there will be some customers who will be better off and some customers
who will be worse off * * *. The levelized rate design will impact low-usage
customers more * * *, since they have not been paying the entirety of their fixed
costs under the existing rate design. High-use customers, who have been paying
more than their share of the fixed costs, will actually experience a rate reduction *
* *.”    Yet nothing in the Vectren notice advised its customers that these
consequences would result if the PUCO approved the change to an SFV design
that Vectren proposed.




                                         14
                                 January Term, 2010




        {¶ 48} Vectren provided to the PUCO a proposed R.C. 4909.19 notice
when it submitted its application for a rate-design change to an SFV design. The
PUCO approved the notice for publication, and it was published. However, in the
entire published notice filling a full newspaper page with fine print, there is only
one fleeting reference relative to two significant aspects of Vectren’s application:
(1) that the proposal included a major change in the fundamental method by
which the way gas rates were calculated and (2) that the rate increases would be
implemented in stages with the amount of increase varying with consumption. As
to these two consequences, the notice contained only this text: “In the
Application, VEDO [Vectren Energy Delivery of Ohio, Inc.] proposes changes to
its rate schedules to reflect increases to the cost of service. Additionally, VEDO
proposes changes to the rate design for Rate 310 (Residential Sales Service) and
Rate 315 (Residential Transportation Service) that initiate a gradual transition to a
straight fixed variable rate for distribution service.”
        {¶ 49} In my view, this notice is deficient because it fails to advise the
public that Vectren sought a major change in the way customers are charged for
natural gas and failed to notify the public that its proposed “gradual transition” to
the new design proposed a two-stage implementation with the first rate increase to
take effect on the effective date of the PUCO order approving rates. A second
and distinct rate increase would be instituted on November 1, 2010.            Upon
implementation, each of the two stages would produce different consequences for
different categories of consumers.
        {¶ 50} Similarly, the notice failed to advise Vectren’s customers of the
“average percentage increase in rate that a representative industrial, commercial,
and residential customer will bear should [Vectren’s] increase be granted in full.”
(Emphasis added.)      R.C. 4909.18(E).         This is so because the rate-increase
application contemplated a second rate increase after implementation of the first
stage of implementation of the SFV design. Yet the notice advised only of the



                                           15
                             SUPREME COURT OF OHIO




percentage increase that would occur if PUCO approved the first-stage increase
described in the rate-increase proposal. The notice failed entirely to advise of the
percentage increase that would be produced upon implementation of the second
stage. Because R.C. 4909.18(E) requires notification of the rate increases that
would result should the proposed increase be “granted in full,” the notice fails to
comply with the statute as a matter of law.
       {¶ 51} In 1977 this court discussed the notice requirement of R.C.
4909.19 as follows:
       {¶ 52} “While generally the published notice required under R.C. 4909.19
need not contain every specific detail affecting rates contained in the application
(indeed, such a requirement would be highly impractical and unnecessarily
expensive), the court notes that the statute does require that the ‘substance’ of the
application be disclosed; i. e., that the essential nature or quality of the proposal
be disclosed to those affected by the rate increases. Although there is no specific
test or formula this court can apply in reviewing challenges made by subscribers
with respect to the sufficiency of the notice provided by a utility, it is clear, given
the purposes of the publication requirement under R.C. 4909.19, that a highly
innovative and material change in the method of charging customers should be
included in the notice.” (Emphasis added.) Committee Against MRT v. Public
Util. Comm. (1977), 52 Ohio St.2d 231, 233, 6 O.O.3d 475, 371 N.E.2d 547.
       {¶ 53} In my view, the change to an SFV design proposed by Vectren
constituted a “highly innovative and material change in the method of charging
customers” that Vectren was required to explain in its R.C. 4909.19 notice. In
notifying its customers that Vectren “proposes changes to the rate design * * *
that initiate a gradual transition to a straight fixed variable rate for distribution
service,” Vectren failed to disclose the essential nature or quality of their
proposal. I believe that R.C. 4909.18 and 4909.19 contemplate that a consumer
be provided meaningful notice—not a cryptic single sentence containing a




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significant proposed change camouflaged by industry jargon and placed within a
full newspaper page of fine print.
       {¶ 54} I do not believe that it would have been unduly burdensome to
provide Vectren’s consumers with basic information as to both the nature of an
SFV rate design and the potential consequences to them of its adoption. In Texas,
a gas utility proposed a significant change in its rate schedule and published a
notice that included the following information:
       {¶ 55} “• ‘The proposed change will have differing impacts on individual
customers, depending on consumption and current applicable rate schedules.’
       {¶ 56} “• A residential customer receiving a bill for 6 Mcf would incur
‘an average increase of approximately $3.59 per month a 9.4% increase’; a
commercial customer receiving a bill for 30 Mcf would incur ‘an average increase
of approximately $13.91 per month or an 8.7% increase’; while ‘[t]he effect of the
proposed changes to rates and services for individual customers, which may be
significant for individual customers, will vary depending on type of service and
consumption.’ ”     Dallas v. RR. Comm. of Texas (Tex.App.2008), 2008 WL
4823225, Util. L.Rep. 27,027.
       {¶ 57} In my view, the PUCO should have required that basic information
of a similar nature be included by Vectren in its published notice.
       {¶ 58} Nor do I agree with the majority that the deficiencies of Vectren’s
published notice may properly be deemed waived based on the failure of the OCC
to complain of the inadequacies of the Vectren notice at an earlier time. First, it is
well established that jurisdictional deficiencies in administrative proceedings
cannot be waived. Time Warner AxS v. Publ. Util. Comm. (1996), 75 Ohio St.3d
229, 661 N.E.2d 1097. And this court has long held that compliance with the
notice requirement of R.C. 4909.19 gives interested parties the constructive notice
of an application necessary to confer jurisdiction on the commission. Duff v. Pub.
Util. Comm. (1978), 56 Ohio St.2d 367, 376, 10 O.O.3d 493, 384 N.E.2d 264.



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Second, R.C. 4909.18(E) requires that the published notice prominently state that
“any person, firm, corporation, or association” may file objections to a proposed
rate increase. It is impossible to determine what parties, if any, might have
appeared and participated in the PUCO proceedings had meaningful and
understandable notice been published.        The OCC should have voiced its
objections to the sufficiency of the newspaper notice in a more timely manner.
However, its failure to have done so cannot be held against unknown persons,
firms, corporations, or associations that potentially would have participated in the
PUCO proceedings had Vectren complied with the notice statutes.
       {¶ 59} Accordingly, I respectfully dissent.
                              __________________
       Janine L. Migden-Ostrander, Ohio Consumers’ Counsel, and Maureen R.
Grady, Joseph P. Serio, and Michael E. Idzkowski, Assistant Consumers’
Counsel, for appellant..
       Richard Cordray, Attorney General, William L. Wright, Section Chief,
and Werner L. Margard III, Assistant Attorney General, for appellee Public
Utilities Commission of Ohio.
       McNees, Wallace & Nurick, L.L.C., Samuel C. Randazzo, Gretchen J.
Hummel, and Lisa G. McAlister, for intervening appellee, Vectren Energy
Delivery of Ohio, Inc.
                           ______________________




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