# Appendix — Cleveland Electric Illuminating Co. v. Public Utilities Commission > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385011_0046%3A2 ## Record - **Collection:** Supreme Court brief - **Document type:** Appendix - **Published:** January 1, 1983 - **Citation:** 464 U.S. 802 ## Text a a : sme Court, U.S B3°49 FILED JUL 12 198° a ALEAY In the Supreme Court of the United States October Term, 1982 THE CLEVELAND ELECTRIC ILLUMINATING COMPANY, Appellant, VS. THE PUBLIC UTILITIES COMMISSION OF OHIO, Appellee. On APPEAL FROM THE SUPREME CouRT OF OHIO APPENDIX ALAN P. BUCHMANN Of Counsel: Counsel of Record RicHarD W. McLaren, JR. Aan D. WricHtT Squire, Sanders & Dempsey Vice President-Public 1800 Huntington Building Affairs and Legal Cleveland, Ohio 44115 Craic I. SMITH (216) 687-8500 The Cleveland Electric Illuminating Company Attorneys for Appellant, 55 Public Square The Cleveland Electric Cleveland, Ohio 44113 Illuminating Company TABLE OF CONTENTS OF APPENDIX Appellant's Notice of Appeal To The Supreme Court of The United States (filed July 7, 1983) Dayton Power & Light Co. v. Pub. Util. Comm., 4 Ohio St. 3d 91, 447 N.E. 2d 733 (1983) Cleveland Electric Illuminating Co. v. Pub. Util. Comm., 4 Ohio St. 3d 107, 447 N.E. 2d 746 (1983) Consumers’ Counsel v. Pub. Util. Comm. (CEI), 4 Ohio St. 3d 111, 447 N.E. 2d 749 (1983) . Opinion and Order of the Public Utilities Commission of Ohio in Case No. 81-1378-EL-AIR — January 5, 1983) - LS res ieheoins Entry of The Public Utilities Commission of Ohio in Case No. 81-146-EL-AIR (filed May 12, 1982) Opinion and Order of the Public Utilities Commission of Ohio in Case No. 81-146-EL-AIR (filed March 12, 1982) Journal Entry of Ohio Supreme Court Denying Rehear- ing in Case No. 82-165 (filed July 29, 1982) Journal Entry and Mandate of Ohio Supreme Court Dismissing Appeal in Case No. 82-165 (filed July 7, 1982) Entry on Rehearing of the Public Utilities Commission of Ohio in Case No. 81-1096-EL-COI — December 9, 1981) Opinion and Order of the Public Utilities Commission of Ohio in Case No. 81-1096-EL-COI (filed October 21, 1981) Journal Entry of Ohio Supreme Court Denying Motion for Stay in Case No. 80-1480 (filed September 11, 1981) PAGE 261 264 Journal Entries of Ohio Supreme Court Denying Re- hearing in Case Nos. 80-1547, 80-1528, and 80-1480 (filed September 1, 1981) —.___ Consumers’ Counsel v. Pub. Util. Comm. (CEI), 67 Ohio Se.2d 153, 423 N.E. 2d 820 (1961) — Rehearing Entry of the Public Utilities Commission in Case No. 79-537-EL-AIR (filed September 3, 1980) __ Opinion and Order in Case No. 79-537-EL-AIR of the Public Utilities Commission of Ohio (filed July 10, 1980) Order On Motions For Summary Disposition, in Docket No. ER 81-612-000 of the Federal Energy Regulatory Commission (filed April 14, 1982) ____ Letter of Federal Energy Regulatory Commission Staff directing immediate write-off (dated July 7, 1982) Ohio Statutes: Ohio Revised Code §§ 4905.13, 4905.18, 4905.20, 4905.22, 4909.15; Ohio Administrative Code § 4901:1-9-05 - PAGE 308 400 419 422 FILED JULY 7 1983 SUPREME COURT OF OHIO JAMES WM. KELLY, Clerk IN THE SUPREME COURT OF OHIO CASE NO. 82-989 THE CLEVELAND ELECTRIC ILLUMINATING COMPANY, Appellant, THE PUBLIC UTILITIES COMMISSION OF OHIO, Appellee. Appeal From the Public Utilities Commission of Ohio Case No. 81-146-EL-AIR In the Matter of the Application of The Cleveland Electric Illuminating Company for Authority to Increase Its Filed Schedules Fixing Rates and Charges for Electric Service NOTICE OF APPEAL TO THE SUPREME COURT OF THE UNITED STATES ANTHONY J. CELEBREZZE, JR. Attorney General RoBErT S. TONGREN Harris S$. LEVEN Assistant Attorneys General Public Utilities Commission of Ohio 375 South High Street Columbus, Ohio 43215 Attorneys for Appellee WILuiAM A, SPRATLEY, Ohio Consumers’ Counsel MARTIN J. MARz STEVEN M. SHERMAN GrETCHEN J. HUMMEL Associate Consumers’ Counsel 137 East State Street Columbus, Ohio 43215 Attorneys for Intervening Appellee, Office of Consumers’ Counsel ALAN P, BUCHMANN RicHARD W. McLAREN, JR. SeumeE, SANDERS & DEMPSEY 1800 Huntington Building Cleveland, Ohio 44115 (216) 687-8500 ALAN D. WRIGHT, Vice President — Public Affairs and Legal Craic I, SMiru, Senior Counsel The Cleveland Electric Illuminating Company 55 Public Square Cleveland, Ohio 44113 (216) 622-9800 Attorneys for Appellant, The Cleveland Electric Illuminating Company 3 IN THE SUPREME COURT OF OHIO CASE NO. 82-989 THE CLEVELAND ELECTRIC ILLUMINATING COMPANY, Appellant, Vv. THE PUBLIC UTILITIES COMMISSION OF OHIO, Appellee. Appeal From the Public Utilities Commission of Ohio Case No. 81-146-EL-AIR In the Matter of the Application of The Cleveland Electric Illuminating Company for Authority to Increase Its Filed Schedules Fixing Rates and Charges for Electric Service NOTICE OF APPEAL TO THE SUPREME COURT OF THE UNITED STATES Notice is hereby given that The Cleveland Electric Illuminating Company, Appellant before the Ohio Supreme Court, hereby appeals to the Supreme Court of the United States from the final judgment of the Supreme Court of the State of Ohio entered into these proceedings on April 13, 1983 affirming the March 17, 1982 Opinion and Order of the Public Utilities Commission of Ohio in Case No. 81-146-EL-AIR. 4 This appeal is taken pursuant to 28 U.S.C. § 1257(2). Of Counsel: ALAN D, WRIGHT, Vice President — Public Affairs and Legal Craic I. SMiru, Senior Counsel The Cleveland Electric Illuminating Company 55 Public Square Cleveland, Ohio 44113 (216) 622-9800 ALAN P, BUCHMANN, Counsel of Record RicHarp W. McLaren, JR. Squire, SANDERS & DEMPSEY 1800 Huntington Building Cleveland, Ohio 44115 (216) 687-8500 Attorneys for The Cleveland Electric Illuminating Company CERTIFICATE OF SERVICE I hereby certify that true copies of the foregoing Notice of Appeal were served on all parties of record by United States Mail, first-class, postage prepaid, to their last known addresses, this 7th day of July, 1983. ANTHONY J, CELEBREZZE, JR. Attorney General Rosert §, TONGREN Harris §, LEvEN Public Utilities Commission of Ohio 375 South High Street Columbus, Ohio 43215 Attorneys for Appellee, The Public Utilities Commission of Ohio WILLIAM A, SPRATLEY, Ohio Consumers’ Counsel MARTIN J. MARZ STEVEN M. SHERMAN GRETCHEN J. HUMMEL Associate Consumers’ Counsel Office of the Consumers’ Counsel 137 East State Street Columbus, Ohio 43215 Attorneys for Intervening Appellee, Office of Consumers’ Counsel ALAN P. BUCHMANN, Counsel of Record for Appellant, The Cleveland Electric Illuminating Company 5 Dayton Power & Light Co. v. Pub. Util. Comm. 4 Ohio St. 3d 91, 447 NE 2d 733 (1983) DECISION AND OPINION OF THE SUPREME COURT OF OHIO Dayton Power & LicHT CoMPANY, APPELLANT, U. Pusiic Utitities COMMISSION OF OHIO ET AL., APPELLEES. Public Utilities Commission: post-test-year wage adjust- ment disapproved, when; increased excise tax levy imposed by Am. S. B. No. 448 is a recoverable “nor- mal” expense, when, R. C. 4909.161; Fifth and Four- teenth Amendments not violated by denial of utility’s request to treat expenditures associated with can- celled generating plant as amortizable costs, R. C. 4909.15 (A)4). 1. Payment of any type of increased excise tax levy after November 15, 1981 shall be considered to be a normal expense incurred by a public utility in the course of rendering service to the public. (R. C. 4909.161, con- strued ), 2. The Public Utilities Commission’s disallowance of a utility's request to treat its expenditures associated with a cancelled generating plant as amortizable costs pursuant to R. C, 4909.15(A)(4) does not violate the Fifth and Fourteenth Amendments to the Constitution of the United States. (No, 82-526 — Decided April 13, 1983.) Appea from the Public Utilities Commission of Ohio. [92] This appeal is taken from an order of the Public Utilities Commission of Ohio (hereinafter “commission” ) granting appellant, the Dayton Power & Light Company (hereinafter “DP&L”), a rate increase in case No. 81-21- EL-AIR. DP&L filed its application to increase rates for 6 Dayton Power & Light Co. v. Pub. Util. Comm. 4 Ohio St. 3d 91, 447 NE 2d 733 (1983) electric service with the commission on April 4, 1981. The commission designated the period beginning October 1, 1980 and ending September 30, 1981 as the statutory test period and set March 31, 1981 as the date certain. After public hearings were held, the commission issued an order on February 3, 1982. The order inter alia denied DP&L’s requests (1) to include a post-test-year wage adjustment, (2) to allow recovery for installment payments of a one percent gross receipts tax payable after the test year, and (3) to amortize its investment in a cancelled power plant. DP&L applied for a rehearing on the aforementioned issues, which the commission denied.’ On November 20, 1979, DP&L and the Utility Work- ers of America entered into an agreement providing for a 7.48 percent wage increase effective October 25, 1981, approximately one month after the designated test year ended. Appellant sought to adjust the hourly wage rate to be used in calculating its cost of service to reflect the October 25, 1981 wage increase. The proposed adjustment would have raised the average hourly wage rate from $9.76 to $10.3194. The commission denied this adjustment on authority of Consumers’ Counsel v. Pub, Util. Comm. (1981), 67 Ohio St. 2d 372 [21 0.0. 3d 234]. Appellant also requested an adjustment to allow the full recovery of tax payments made pursuant to Am. S. B. No. 448, which imposed a temporary one percent gross receipts tax on utility companies effective January 1, 1981. The commission had allowed recognition of the one percent gross receipts tax in DP&L’s most recent prior rate case, case No, 80-687-EL-AIR, but the rates established in that 1The commission did grant a limited rehearing in connection with changes in the treatment of investment tax credits prompted by the Economic Recovery Tax Act of 1981. This matter is not, how- ever, before this court. 7 Dayton Power & Light Co. v. Pub. Util. Comm. 4 Ohio St. 3d 91, 447 NE 2d 733 (1983) case were not in effect long enough to allow DP&L to recover the total amount paid pursuant to Am. S. B. No. 448. In its order the commission overrode its staff's recom- mendation* and denied rate recognition for the balance of one percent temporary tax payments, distinguishing the instant case from case No. 80-687-EL-AIR for the follow- ing reasons: “In applicant's prior case, as in those other rate pro- ceedings wherein we approved an allowance for the tem- porary one percent increase in the gross receipts tax, rate recognition of the increase was clearly required in the rates authorized were to reflect the cost of providing serv- ice during the period the rates were to be in effect °°°. However, the same factors are not at work here, for al- though the temporary increase was in effect during the test period [93] and a payment at the increased rate was made subsequent to the test period, the obligation to pay the tax at the increased rate has now terminated °°*°. As we have held on so many occasions as to make citation unnecessary, it is not the Commission’s function to provide for dollar-for-dollar recovery of specific past expenses, but to provide a reasonable future earnings opportunity. Ac- cordingly, there should be no allowance in this proceeding for the temporary one percent increase in gross receipts tax imposed by Am. Senate Bill No. 448.” In its application for rehearing DP&L argued that the enactment of R. C, 4909.161, effective November 15, 1981, mandated full recovery of the tax payments in question. The commission declined to modify its order, finding that “the cited statute [R. C. 4909.161] does provide for recov- “The staff recommended “that full recovery be allowed but that applicant [appellant] be required to file tariffs containing reduced rates upon full recovery of the one percent increase.” 8 Dayton Power & Light Co. v. Pub. Util. Comm. 4 Ohio St. 3d 91, 447 NE 2d 733 (1983) ery of certain excise tax increases; but we think it apparent that the legislation cannot logically be interpreted to per- mit recovery of a tax increase which had expired long before the rates set in this case became effective.” Appellant's application proposed an adjustment pro- viding for the amortization of $4,796,000 in expenditures associated with the cancellation of construction of the Killen Generating Station Unit 1 (hereinafter “Killen” ). The commission denied the amortization, citing Con- sumers’ Counsel v. Pub. Util. Comm. (1981), 67 Ohio St. 2d 153 [21 0.0. 3d 96}. The Office of Consumers’ Counsel (hereinafter “OCC”) has been granted leave to intervene as an appellee. The cause is now before this court upon an appeal as of right. Mr. Stephen F. Koziar, Jr., Smith & Schnacke Co., L.P.A., Mr. Charles J. Faruki, Mr. Paul L. Horstman and Mr. D. Jeffrey Ireland, for appellant. Mr. William J. Brown, attorney general, Mr. Marvin I. Resnik and Mr. Donn D. Rosenblum, for appellee. Mr. William A. Spratley, consumers’ counsel, Mr. Timothy C. Jochim and Ms. Janine L. Migden, for inter- vening appellee. Sweeney, J. This appeal presents three issues for re- view. The first is whether the commission erred in dis- approving appellant's proposed post-test-year wage adjust- ment. The second is whether the commission properly denied recovery of the increased excise tax levy imposed by Am. S. B. No. 448. The third is whether the exclusion of the Killen expenditures pursuant to R. C. 4909.15( A) (4) amounts to the confiscation of appellant's property in violation of the Fifth and Fourteenth Amendments to the Constitution of the United States 9 Dayton Power & Light Co. v. Pub. Util. Comm. 4 Ohio St. 3d 91, 447 NE 2d 733 (1983) Before proceeding further, we note that “[t]he scope of this court’s review of commission orders is set forth in R. C. 4903.13, which states in pertinent part: “*“A final order made by the public utilities commis- sion shall be reversed, vacated, or modified by the supreme court on appeal, if, upon consideration of the record, such court is of the opinion that such order was unlawful or unreasonable.” [94] “‘ “Under the ‘unlawful or unreasonable’ stand- ard specified in R. C. 4903.13, this court will not reverse or modify an opinion and order of the Public Utilities Com- mission where the record contains sufficient probative evidence to show that the commission’s determination is not manifestly against the weight of the evidence and is not so clearly unsupported by the record as to show mis- apprehension, mistake or willful disregard of duty,” Columbus v. Pub. Util. Comm. (1979), 58 Ohio St. 2nd 103, 104 [12 0.0. 3d 112]. See also, Consumers’ Counsel v. Pub. Util. Comm. (1979), 58 Ohio St. 2d 108, 110 [12 O.0. 3d 115]; Ohio Utilities Co. v. Pub, Util. Comm. (1979), 58 Ohio St. 2d 153, 164 [12 0.0. 3d 167]; Duff v. Pub. Util. Comm. (1978), 56 Ohio St. 2d 367, 370 [10 0.0. 3d 493]; General Motors Corp. v. Pub. Util. Comm. (1976), 47 Ohio St. 2d 58 [1 O.0. 3d 35], paragraph two of the syllabus; Cleveland Electric Illuminating Co. v. Pub. Util. Comm. (1975), 42 Ohio St. 2d 403 [71 0.0. 2d 393], paragraph eight of the syllabus. We assess the appel- lant[’s] objections with this standard of review in mind.’ Consumers’ Counsel v. Pub, Util. Comm. (1981), 67 Ohio St. 2d 153, 155-156 [21 O.0. 3d 96].” Armco, Inc. v. Pub. Util. Comm. (1982), 69 Ohio St. 2d 401, 404-405 [21 0.0. 3d 361]. 10 Dayton Power & Light Co. v. Pub. Util. Comm. 4 Ohio St. 3d 91, 447 NE 2d 733 (1983) I The issue of post-test-year wage adjustments has twice been before us recently. In Consumers’ Counsel v. Pub. Util. Comm, (1981), 67 Ohio St. 2d 372 [21 0.0, 3d 234] (hereinafter “EOG”) this court reversed an order of the commission granting the East Ohio Gas Company a 9.4 percent wage annualization to reflect an increase in wage rates, which increase went into effect after the designated test year had ended. After reprising the ap- plicable statutes, R. C. 4909.15 (A) (4), 4909.15(C), and 4909.15(D)(2)(b), we determined in EOG that the labor adjustment granted by the commission did not represent the type of anomalous condition for which inclusion of costs not incurred during the test period would be per- missible.’ As we noted in EOG, supra, at page 374, the General Assembly has expressly endorsed the test-year methodology: “The language of R. C. 4909.15 is unequivocal. Rate increases are based on costs of rendering utility service during the test period. The dates of the test year follow directly from the date the utility chooses to file for its rate increase. Aware that its employee labor contract was about to be renegotiated, the utility company filed the application with the commission at a time which caused the test year to end prior to the beginning date of the new contract. The adjustment which EOG sought on re- hearing to take into account its increased labor costs aris- ing from that contract would violate the test-year concept embodied in R. C. 4909.15.” (Emphasis sic. ) Appellant seeks to distinguish EOG on its facts and argues in its first [95] proposition of law that “[a] utility's *Compare EOG with Bd. of Commrs. v. Pub. Util. Comm. [1982], 1 Ohio St. 3d 125 ( post-test-year adjustment for line clear- ance allowed. ) ll Dayton Power & Light Co. v. Pub. Util. Comm. 4 Ohio St. 3d 91, 447 NE 2d 733 (1983) labor expense, as determined under Rev. Code § 4909.15 (A)(4), includes a known and measurable increase in wage rates pursuant to a contract negotiated and executed prior to the end of the test period.” The significance that appellant attributes to the fact that it had already com- mitted itself to the subject wage agreement while the new wage package in EOG had not been negotiated prior to the end of the test period is unwarranted. In the sec- ond case previously alluded to involving post-test-year wage adjustments, Ohio Water Service Co. v. Pub. Util. Comm. (1983), 3 Ohio St. 3d 1, we were presented with facts virtually identical to those presented herein. Ohio Water Service's wage agreement with its employees had been negotiated and the obligations had become fixed prior to the test year. The disputed wage increase in Ohio Water Service went into effect one day after the test period ended. Relying on our analysis in EOG, we held that the commission did not err in excluding the post-test- year wage adjustment. The same rationale applies to the case at bar. Thus, while we acknowledged in EOG and Ohio Water Service that the test-year data are not immu- table and have upheld appropriate exceptions in previous cases,* exceptions must remain exceptions, and ad hoc tinkering with the statutory formula is not to become the rule. We recognized as much in Consumer's Counsel v. Pub. Util. Comm. (1981), 67 Ohio St. 2d 153 [21 0.0. 3d 96] (hereinafter “CEI”), in discussing the exceptions lan- guage contained in R. C. 4909.15(D)(2)(b), where we stated, at page 165, that “°°°® the General Assembly un- doubtably did not intend to build into its recently revised (1976) ratemaking formula a means by which the com- mission may effortlessly abrogate that very formula.” ‘See, e.g., Bd. of Commrs., supra, fn. 3. 12 Dayton Power & Light Co. v. Pub. Util. Comm. 4 Ohio St. 3d 91, 447 NE 2d 733 (1983) Moreover, the commission itself came to a similar conclu- sion regarding test-period data under the revised rate- making formula when it expressed doubt in a previous DP&L case, case No. 76-88-GA-AIR, as to whether it could continue its former practice of routinely permitting ad- justments for known and measurable post-test-year cost changes. The commission stated, at page 6 of its opinion: “°°° Although the argument for post-test-year adjust- ments of this nature [l]oses force when dealing with much more current test years’ and although the practice may be prohibited by Section 4909.15(C) Revised Code, the prin- ciple [annualization of certain costs at levels existing at the end of the test year] remains controlling with respect to cost changes which occur within the test period.” EOG, Ohio Water Service, and now the case at bar simply con- firm what the commission surmised in 1976 with respect to the General Assembly’s intentional circumscription of the commission's authority to grant the type of post-test-year adjustment requested by appellant in its application. As one commentator has noted, “ °°*° adjusting only for se- lected changes is repugnant to the test year’s theoretical roots — its usefulness is capturing for simultane- [96] ous observation the dynamic interrelationship among revenue, expenses and investment.” ‘ Note, The Use of the Future ‘The commission's recognition of “much more current test years” is borne out in the instant case as appellant filed a notice of intent to apply for a rate increase in October 1981 with another planed for mid-1982. *OCC witness Miller expressed this view, stating that “*** [selectivity] is the problem I have with the whole annualization procedure. It's not so much that I disagree with the fact that some figures may not be more properly adjusted, but all things should be looked at and adjusted has been my problem.” See, generally, Catalant, Rate Making in an Inflationary Context: Theories and Applications, 110 Pub. Util. Fort., April 15, 1982, at page 53. 13 Dayton Power & Light Co. v. Pub. Util. Comm. 4 Ohio St. 3d 91, 447 NE 2d 733 (1983) Test Year in Utility Ratemaking (1972), 52 Boston U. L. Rev. 791, 796. Accordingly, appellant's contention that R. C, 4909.15 mandates inclusion of the post-test-year wage adjustment is without merit.’ Il Appellant asserts in its second proposition of law that “Revised Code § 4909.161 mandates that the public utilities commission approve rate schedules which will permit a public utility to fully recover in its rates the increased excise tax levy resulting from the 1% additional gross re- ceipts tax imposed by Am. Senate Bill N. 448.” As pre- viously noted, the commission disallowed recovery of DP&L’s tax payments made pursuant to Am. S. B. No. 448 that had not been recovered under the rates established in case No. 80-687-EL-AIR. Am. S. B. No. 448, which imposed an additional one percent tax on gross receipts, became effective on January 1, 1981 and expired June 30, 1981. Appellant paid the increased tax levy in four installments in January, March, June, and December 1981. The first three installment payments were made within the test year but prior to the November 15, 1981 effective date of R. C. 4909.161. The December payment was made outside the test period but after R. C. 4909.161 took effect. The com- mission acknowledged R. C. 4909.161 in denying rehearing TAppellant also asserts that “*°*® [t]he rates established °** without recognition of the known and measurable wage increase are unreasonable and confiscatory,” but offers little to support the contention. The record does contain exhibits comparing the actual payroll expenses for September 1981 ($7,255,717) and November 1981 ($7,183,568), but appellant does not refer to these or any other calculations in making the argument that denial of the post-test-year wage adjustment is somehow confiscatory. Based on these figures, moreover, it would be difficult for appellant to argue unrepresenta- tiveness, much less, confiscation. 14 Dayton Power & Light Co. v. Pub. Util. Comm. 4 Ohio St. 3d 91, 447 NE 2d 733 (1983) but declined to make the adjustment sought by DP&L for the reason “that the legislation cannot logically be inter- preted to permit recovery of a tax increase which had expired long before the rates set in this case became effec- tive.” While we find no fault with the commission’s iogic, we are compelled to disagree with its reading of R. C. 4909.161, at least insofar as the commission denied recov- ery of the December payment or any portion thereof not previously recovered. R. C. 4909.161 states as follows: “Notwithstanding the provisions of Chapters 4905. and 4909. of the Revised Code, the payment of any type of increased excise tax levy shall be considered to be a normal expense incurred by a public utility in the course of rendering service to the public, and may be recovered as such in accordance with an order of the public utilities commission. Any public utility required to [97] pay any such increased excise tax levy may file with the public utilities commission revised rate schedules which will permit full recovery on an interim or permanent basis in its rates, of the amount of any resultant increased tax payments and the commission shall promptly act to ap- prove such schedules.” The statute sets forth the broad rule that “the pay- ment of any type of increased tax levy shall be considered to be a normal expense.°°°®” This provision is keyed to “payment” of a tax irrespective of whether the tax upon which the payment has been made remains in effect or has expired. Ordinarily the commission would be empow- ered to deny recovery for an anomalous expense and, indeed, we do not disturb the commission's disallowance of the unrecovered portions attributable to the January, March and June 1981 installments paid on the temporary one percent gross receipts tax. The General Assembly's 15 Dayton Power & Light Co. v. Pub. Util. Comm. 4 Ohio St. 3d 91, 447 NE 2d 733 (1983) enactment of R. C. 4909.161 has, however, established as a matter of law that payment of any type of increased excise tax levy after November 15, 1981 shall be consid- ered to be a normal expense incurred by a public utility in the course of rendering service to the public. Thus, the commission erred in disregarding the plain language and import of R. C. 4909.161 when it denied recovery of the December installment payment (or the unrecovered bal- ance thereof) in the current case. The record does not reflect the precise amounts of the installments paid pursuant to Am. S. B. No, 448 or the amount of the tax that has been recovered pursuant to the rates set in DP&L’s previous rate case. We find it necessary, therefore, to reverse and remand the cause to the commission for further proceedings to determine (1) the amount of the installment paid in December, the full recovery of which is mandated by R. C. 4909.161, and (2) to prevent a possible over-recovery, the amount, if any, of monies previously recovered under the rates set in case No. 80-687-EL-AIR attributable to the December installment. Upon making these determinations, the com- mission shall modify its order so as to allow appellant to recover the difference between the December one percent excise tax payment and any monies already recovered thereon. il A In its final proposition of law appellant challenges the constitutionality of the commission’s disallowance of DP&L's request to treat its investment in the cancelled Killen facility as amortizable costs. Before proceeding to appellant's specific contentions regarding Killen, it is ap- propriate for us to review the historical development 16 Dayton Power & Light Co. v. Pub. Util. Comm. 4 Ohio St. 3d 91, 447 NE 2d 733 (1983) underlying current federal constitutional doctrine respect- ing utility ratemaking. The leading federal constitutional cases involving claims of confiscatory utility rate orders establish two fundamental precepts. The first is that “°° ® he who would upset the rate order °°° carries the heavy burden of mak- ing a convincing showing that it is invalid because it is unjust and unreasonable in its consequences.” FPC vy. Hope Natural Gas Co. (1944), 320 U.S. 591, 602 [98] See, also, Permian Basin Area Rate Cases (1968), 390 U. S. 747, 767. The second precept is that a challenged rate order must be “viewed in its entirety,’ FPC v. Natural Gas Pipeline Co. (1942), 315 U. S. 575, 586; Hope Natural Gas Co., supra, at page 602, to determine whether the rates set pursuant to the order fall within “the broad zone of reason- ableness.” Permian Basin Area Rate Cases, supra, at page 770.° ‘A third important precept to be drawn from the federal cases, that “[t]he Constitution does not bind rate-making bodies to the service of any single formula or a combination of formulas,” Natural Gas Pipeline Co., supra, at page 586; Hope Natural Gas Co., supra, at page 600; Permian Basin Area Rate Cases, supra, at page 800, need not concern us because the General Assembly has prescribed a statutory ratemaking formula for the commission to follow in con- tradistinction to the broad grant of authority delegated by Con- gress to the Federal Power Commission (and now FERC) to establish rates under the Natural Gas Act as amended, Sections 717 et seq., Title 15, U. S. Code. Accordingly, it is unnecessary to reprise the constitutional for- mula based on the rule of Smyth v. Ames ( 1508), 169 U. S. 466, 547 (“fair return upon *** value”), the controversy engendered by Smyth during the years of its ascendancy, see, e.g., Missouri, ex rel. Southwestern Bell Tel. Co., v. Pub. Serv. Comm. ( 1923), 262 U. S. 276, 289 ( Brandeis, ].. concurring), or the prudent investment theory proposed by Justice Brandeis in Southwestern Bell to sup- plant Smyth and provide a more workable mode of constitutional analysis. 17 Dayton Power & Light Co. v. Pub. Util. Comm. 4 Ohio St. 3d 91, 447 NE 2d 733 (1983) The historical background from which these precepts developed was summarized by Justice Black in his dissent- ing opinion in McCart v. Indianapolis Water Co. (1938), 302 U. S. 419, 427-428: “For the first hundred years of this Nation’s history, federal courts did not interfere with state legislation fixing maximum rates for public services performed within the respective states. The state legislatures, according to a custom which this Court declared had existed ‘from time immemorial’ decided what those maximum rates should be. This Court also said that ‘for protection against abuses by legislatures the people must resort to the polls, not to the courts.’ It was not until 1890 that a dividend court [in Chicago, M & St. P. Ry. Co. v. Minnesota (1890), 134 U. S. 418] finally repudiated its earlier constitutional inter- pretation and declared that due process of law requires judicial invalidation of legislative rates which the courts believe confiscatory. The dissenting Justices adhered to the long existing principle that regulation of public utilities was a ‘legislative prerogative and not a judicial one.” (Footnotes omitted. ) In Natural Gas Pipeline Co., supra, Justice Black expanded upon his McCart history lesson in a concurring opinion joined by Justices Douglas and Murphy where he once again expressed his deep disagreement with the notion that “ ‘due process’ means no less than ‘reasonable- ness judicially determined’ °** which, in the words of Justice Holmes, makes the sky the limit of judicial power to declare legislative acts unconstitutional, the conclusions of judges, substituted for those of legislatures, become a broad and varying standard of constitutionality.” 315 US., at page 600. Justice Frankfurter, concurring separately, took issue with Justice Black's historical exegesis, stating, at page 609, that “|wihile the doctrine of ‘confiscation, 18 Dayton Power & Light Co. v. Pub. Util. Comm. 4 Ohio St. 3d 91, 447 NE 2d 733 (1983) as a limitation to be enforced by the judiciary upon the legislative power to fix utility [99] rates, was first applied in Chicago, M & St. P. Ry. Co. v. Minnesota, 134 U.S. 418, that decision followed principles, expounded in Stone v. Farmers’ Loan & Trust Co., 116 U. S. 307, especially at 331. °°*® Mr. Chief Justice Waite, who delivered the opin- ion in the Stone case as well as in the earlier decision in Munn vy. Illinois, 94 U. S. 113, was therefore the author of the doctrine of ‘confiscation’ and its corollary, ‘judicial review. His view was shared by such stout respecters of legislative power over utilities as Mr. Justice Miller °°° Mr. Justice Bradley °°* and Mr. Justice Harlan. The latter, indeed, agreed with Mr. Justice Field that the regulatory power exercised in the Railroad Commission Cases, 116 U. S. 307, constituted an impairment of the obligation of contract. By no one was the doctrine of judicial review more emphatically accepted, and applied in favor of a public utility, than by Mr. Justice Harlan in the decision and opinion in Covington & Lexington Turn- pike Co. vy. Sandford, 164 U. S. 578, especially at 591-95.” While we are not here concerned with whether Jus- tice Black or Justice Frankfurter was more faithful to the muse of history, we do find it significant that Justice Frankfurter did not take exception to Justice Black's char- acterization of Natural Gas Pipeline Co, as “°°* a new chapter in the regulation of utility rates °°° [which] erases much which has been written in rate cases during the last half century °°*°.” Id., at page 602. The majority opinion in the 1944 Hope Natural Gas Co. case essentially adopted the theory of legislative hegemony in the sphere of economic regulation expressed in the Natural Gas Pipe- line Co. concurrence. The court stated, at page 601, “that the ‘authority of Congress to regulate the prices of com- modities in interstate commerce is at least as great under 19 Dayton Power & Light Co. v. Pub. Util. Comm. 4 Ohio St. 3d 91, 447 NE 2d 733 (1983) the Fifth Amendment as is that of the States under the Fourteenth to regulate the prices of commodities in intra- state commerce. 315 U. S. p. 582. Ratemaking is indeed but one species of price fixing. Munn v. Illinois, 94 U. S. 113, 134. The fixing of prices, like other applications of the police power, may reduce the value of the property which is being regulated. But the fact that the value is reduced does not mean the regulation is invalid.” In Permian Basin Area Rate Cases, supra, the court deferred to the legislative will as expressed by Congress administrative surrogate, the Federal Power Commission, so completely that Justice Douglas, the author of the Hope Natural Gas Co. opinion, was compelled to dissent in an ironic turnabout. 390 U. S., at pages 829-845. In the words of one commentator, “with the Permian decision the Court has completed a long circle back to almost where it started in Mun [v. Illinois (1876), 94 U. S. 113] 92 years previous. The Constitution no longer provides any special protection for the utility investor. Regulation is deemed no different from any other governmental action; it can ‘limit strin- gently’ the profitability of his investment in endeavoring to balance the ‘broad public interest entrusted to its pro- tection.’” Bernstein, Utility Rate Regulation: The Little Locomotive That Couldn't (1970), Wash. U.L.Q. 223, 259-260. Although utility companies continue to appeal allegedly confiscatory rate orders that state courts have [100] upheld as constitutional, the United States Supreme Court in recent years has been disinclined to hear these appeals and has dismissed them sum- marily either for want of a substantial federal question, see, e.g., Appalachian Power Co. vy. West Virginia Pub. Service Comm. (W. Va. Oct. 10, 1977), unreported, appeal dismissed (1978), 435 U. S. 901; South Central Bell Tel. Co. vy. Louisiana Pub, Serv. Comm. (La. 1977), 20 Dayton Power & Light Co. v. Pub. Util. Comm. 4 Ohio St. 3d 91, 447 NE 2d 733 (1983) 352 So. 2nd 964, appeals dismissed (1978), 437 U. S. 911; California Assn. Of Utility Shareholders v. California Pub. Util. Comm. (Cal. July 19, 1979), unreported, appeal dis- missed (1979), 444 U. S. 986; C & SOE vy. Pub. Util. Comm. (1980), 64 Ohio St. 2d 175 [18 0.0. 3d 389], appeal dismissed (1981), 452 U. S. 933; or for want of a properly presented federal question, see CEI, supra (67 Ohio St. 2d 153 [21 O.O0. 3d 96] ), appeal dismissed (1982), pee AG , 71 L. Ed. 2d 455, appeal dismissed (Jan. 11, 1983), 51 U.S.L.W. 3507. The high court’s sum- mary dispositions of the aforementioned appeals at the least suggest that the court has implicitly recognized the commentator’s conclusion that “the Constitution no longer provides any special protection for the utility investor.” It is against this federal constitutional backdrop that we now view appellant’s specific contentions regarding the disallowed Killen expenditures. Il B Appellant contends that “[a]n interpretation of Rev. Code § 4909.15(A)(4) which excludes from a_ utility's cost of service the accumulated costs associated with the cancellation of a planned generating facility is unconsti- tutional as applied to that utility, and violates the Fifth Amendment applied to the Federal Constitution.”* Spe- cifically, DP&L argues that denying recovery of the Killen expenditures amounts to the confiscation of its property and urges us to overturn our decision in CEI. *The confiscation clause of the Fifth Amendment applies to the states through the Due Process Clause of the Fourteenth Amend- ment. See Webb's Fabulous Pharmacies, Inc. v. Beckwith (1980), 449 U.S. 155, 21 Dayton Power & Light Co. v. Pub. Util. Comm. 4 Ohio St. 3d 91, 447 NE 2d 733 (1983) In CEI, supra, we held in the syllabus that “[t]he Public Utilities Commission’s treatment of a utility's in- vestment in terminated nuclear generation stations as amortizable costs to be recovered from the utility’s rate- payers is inconsistent with the ratemaking formula con- tained in R. C. 4909.15 and is unreasonable and unlawful.” Several of the constitutional arguments advanced by ap- pellant are similar to the statutory arguments that we con- sidered and rejected in CEI. For example, appellant would rely on R. C. 4905.22 to support its contention that Killen expenditures “were incurred in order to provide necessary and adequate service.”"® The commis- [101] sion in CEI phrased its argument in virtually identical terms. We ad- dressed this argument, at pages 163-164, stating as follows: “The commission urges that ‘an expenditure by a util- ity can be considered a cost of rendering the public utility service if it fails in fact to achieve its intended purpose °°° lif] the expense was reasonably calculated to provide [future] utility service at a reasonable cost.’ The under- pinnings for the commission rationale may be found in those statutory provisions that require utilities to main- tain adequate service presently and for the foreseeable future. See, e.g., R. C. 4905.22 (adequate service and facilities ). “Notwithstanding the provisions that impose a duty on utility companies to plan for the future, the question under R. C, 4909.15(A)(4) remains whether the cancelled plant expenditures represent ‘[t]he cost to the utility of RK. C. 4905.22 provides in pertinent part: “Every public utility shall furnish necessary and adequate service and facilities, and every public utility shall furnish and pro- vide with respect to its business such instrumentalities and facilities, as are adequate and in all respects just and reasonable. °**” 22 Dayton Power & Light Co. v. Pub. Util. Comm. 4 Ohio St. 3d 91, 447 NE 2d 733 (1983) rendering the public utility service for the test period.’ Test period considerations aside, what the company sought and what the commission granted was the amortization as service-related costs of an investment that never pro- vided any service whatsoever to the utility's customers.” “°°? The now terminated nuclear plants represented a major capital investment that ultimately would have been included in the rate base under R. C. 4909.15(A)(1), had the projects not been cancelled. It is our opinion that R. C. 4909.15(A)(4) is designed to take into account the normal, recurring expenses incurred by utilities in the course of rendering service to the public for the test period. °°° “The extraordinary loss sustained by CEI in connec- tion with the terminated nuclear plants cannot be trans- "Cf. West Ohio Gas Co. v. Pub. Util. Comm. (1935), 294 U. S. 63, 78 (Stone, J., concurring) : “e°*The property for which constitutional protection is invoked is that ‘used and useful in the public service,’ not the enlarged busi- ness of the future which petitioner hopes to obtain through the present expenditure of money. I know of no constitutional principle upon which this expenditure must be taken from the pockets of the patrons of the present business, any more than the cost of future service lines required to carry on the new business. ***” Although Justice Stone made the above-quoted statement to express his disagreement with the expansive constitutional protec- tion afforded “prudent outlay” by his brethren, his narrower con- ception of that which the constitution protects became the majority position in Natural Gas Pipeline Co., an opinion delivered by Chief Justice Stone. Moreover, Justice Stone joined the Hope Natural Gas Co., majority, which delimited the constitutional inquiry even further by deleting the references to “constitutional requirements” and “the limits of due process” that the concurring justices in Natural Gas Pipeline Co. found objectionable. 23 Dayton Power & Light Co. v. Pub. Util. Comm. 4 Ohio St. 3d 91, 447 NE 2d 733 (1983) formed into an ordinary operating expense pursuant to R. C. 4909.15(A)(4) by commission fiat. The commis- sion’s statement that ‘[c]ancellation does not create a past loss, but gives rise to a current cost’ is unpersuasive. Under this rationale we question whether there could ever be a ‘past loss’ the return of which would not be recoverable in future ratemaking proceedings notwithstanding the commission’s assertion to the contrary. °°°” Appellant further contends that the commission, in denying the Killen amortization on the strength of this court’s decision in CEI, disregarded the constitutional re- quirement announced in FPC v. Hope Natural Gas Co., [102] supra (320 U. S. 591), at page 603, that “[t]he rate- making process °°°® involves a balancing of the investor and the consumer interest.” Appellant asserts that it “and all Ohio utilities are disadvantaged in the capital markets where they must attract capital in order to plan for the future and to provide adequate facilities under Rev. Code § 4905.22 because the utilities must inform their investors that they may not be permitted to earn a rate of return on this investment if the facilities which are prudently planned and necessary today are cancelled in the future.” This same argument was presented under the rubric of “policy” in CEI where we stated, at pages 167-168: “We are mindful of the policy considerations that prompted the commission's decision. The commission, CEI, and the amici argue strenuously that to rule as we have today will seriously disadvantage Ohio utilities in capital markets thereby ‘drivjing] up the return on invest- ment required by investors in Ohio utilities. This gloomy scenario, however, does not imbue the commission with the authority to rewrite the statutes. The statutes in ques- 24 Dayton Power & Light Co. v. Pub. Util. Comm. 4 Ohio St. 3d 91, 447 NE 2d 733 (1983) tion contain no provisions insulating investors from the type of losses sustained in the cancelled-plants venture. “If, as has been argued, these are parlous times for the utilities industry, and if, therefore, in order to attract and retain investment capital, utility companies must not only be granted a fair and reasonable rate of return pur- suant to statute but must also be assured the return of capital invested in failed projects that would otherwise not be recoverable under the ratemaking formula, then the commission and the utilities should petition the Gen- eral Assembly to enact changes in the ratemaking struc- ture so as to provide this extra modicum of protection for the investors. Absent such explicit statutory authorization, however, the commission may not benefit the investors by guaranteeing the full return of their capital at the ex- pense of the ratepayers. Under the ratemaking formula now in effect consumers are not chargeable for utility investments and expenditures that are neither included in the rate base nor properly categorized as costs. What we previously stated in a rate base case is applicable to the case at bar: ‘°°° [t is only proper that their [the investors’] venture be found operational before they commence to recoup their capital outlays from the consumers.’ Con- sumers’ Counsel v. Pub. Util. Comm. (1979), 58 Ohio St. 2d 449, 456-457 [12 0.0. 3d 378].” In Consumers’ Counsel vy. Pub. Util. Comm. (1979), 58 Ohio St. 2d 449 [12 O.0. 3d 378] (hereinafter “Toledo Edison” ), this court held that the Davis-Besse Unit 1 gen- erating station. which was not “used and useful in render- ing the public utility service” pursuant to R. C. 4909.15 (A)(1). could not be included in the utility's rate base. Toledo Edison made a constitutional argument similar to that presented herein to which we responded, at page 456: 25 Dayton Power & Light Co. v. Pub. Util. Comm.. 4 Ohio St. 3d 91, 447 NE 2d 733 (1983) “Toledo Edison argues that to deny inclusion of the unit in its rate base would be tantamount to the confisca- tion of its property in violation of its constitutional right to due process of law. In Columbus Gas & Fuel Co. v. Pub. Util. Comm., supra (292 U. S. 398), the Supreme Court addressed the issue of [103] whether gas fields not yet in service should be included in the rate base. Justice Cardozo, speaking for the court, stated, at page 406: “There will be no need in the computation of the rate base to include the °°° value of fields not presently in use, unless the time for using them is so near that they may be said, at least by analogy, to have the quality of working capital. °*°® Postponement of °*° profit until the state of imminent or present use is not an act of confisca- tion, but a legitimate exercise of legislative judgment.’ “ooo “It would be inequitable to prematurely shift the risk of plant failure from the utility's investors to the rate- payers by the inclusion in the rate base of highly complex and innovative technology which has not been proven to be reasonably free from significant design or construction defects. The initial risk of failure is appropriately borne by investors, who have undertaken the project and who will ultimately profit from its success.” While we again note that Toledo Edison involved rate base consideration under 4909.15(.A)(1), as opposed to matters relating to cost of service under R. C. 4909.15 (A)(4), the analogy is a fair one insofar as it indicates that the General Assembly has adopted a consistent posi- tion in balancing investor and consumer interests in utility ratemaking. Pursuant to the statutory ratemaking formula investors are issued a fair and reasonable return on prop- 26 Dayton Power & Light Co. v. Pub. Util. Comm. 4 Ohio St. 3d 91, 447 NE 2d 733 (1983) erty that is determined to be used and useful, R. C, 4909.15 (A)(2), plus the return of costs incurred in rendering the public service, R. C. 4909.15(A)(4), while consumers may not be charged “for utility investments and expendi- tures that are neither included in the rate base nor prop- erly categorized as costs.”* We see no constitutional in- firmity in the balance thus struck by the General Assembly. Appellant also presents an elaborate argument prem- ised on the Federal Energy Regulatory Commission (FERC) Uniform System of Accounts, 18 C.F.R., Part 101, which Ohio utilities are required to follow pursuant '2Am. Sub. S. B. No. 378 as passed by the Senate included the following language, offered to amend R. C, 4909.154: “In its establishment of just and reasonable rates for public utilities under section 4909.15 of the Revised Code, the public utilities commission shall allow any expenditures incurred in the provision of public utility services unless such expenditures are found by the commission to have resulted from imprudent man- agement.” This proposed amendatory language was deleted by the House of Representatives and did not reappear in the final version of the bill. See Am. Sub. S. B. No. 378. Although Section 7 of Am. Sub. S. B. No. 378 as passed by the Senate, stated that, “Section 4909.154 of the Revised Code, as amended in Section 1 of this act, is not intended to reverse Con- sumers’ Counsel vy. Public Utilities Commission (1981), 67 Ohio St. 2d 153 [21 0.0. 3d 96], with respect to those specific capital costs that were disallowed in that case,” the “any expenditures” language of the amendment would have broadened the range of allowable expenses considerably. That the General Assembly chose not to enact this proposed provision is further evidence that our decision in CEI comports with the legislative intention underlying the ratemaking statutes. 27 Dayton Power & Light Co. v. Pub. Util. Comm. 4 Ohio St. 3d 91, 447 NE 2d 733 (1983) to Ohio [104] Adm. Code 4901:1-9-05," to support in- clusion of its Killen expenditures. We were treated to sim- ilar accounting-based contentions in CEI but found it un- necessary to discuss them in our opinion because as OCC notes, “it is not the Uniform System of Accounts which governs public utility ratemaking, but rather the Ohio Revised Code.” (Emphasis sic.) Thus, the controlling fac- tor for ratemaking purposes is not whether the Killen ex- penditures must be accounted for under Account 182, “extraordinary property losses,” as appellant claims, or whether these expenditures should be assigned to Account No. 121, “nonutility property” or Account No. 426.5, “other deductions,” as OCC suggests. While we have acknowl- edged the Uniform System of Accounts in previous opin- ions, see, e.g., Consumers’ Counsel v. Pub, Util. Comm., supra (58 Ohio St. 2d 108 [12 0.0. 3d 115] ), at page 112; Toledo Edison, supra, fn., at pages 455-456, we have never held and do not hold today that accounting practice and '§Ohio Adm. Code 4901;1-9-05 provides in pertinent part: “The system of accounts and records, identified and designated as ‘Uniform System of Accounts Prescribed for Public Utilities and Licensees, effective January 1, 1961, as adopted by the Federal Power Commission, is adopted by this Commission effective as of January 1, 1961, for electric light companies operating within the State of Ohio which are subject to the jurisdiction of the Federal Power Commission except to the extent that the provisions of said Uniform System of Accounts are inconsistent in any way with the outstanding orders of this Commission pertaining to the accounting treatment to be followed with respect to emergency facilities and the Federal income tax results thereof and with respect to acceler- ated depreciation and the Federal income tax results thereof. This Commission reserves to itself the right to require the creation and maintenance of such additional accounts as may hereafter be pre- scribed, to cover the accounting procedure of such electric light companies operating in the State of Ohio. ***” 28 Dayton Power & Light Co. v. Pub. Util. Comm. 4 Ohio St. 3d 91, 447 NE 2d 733 (1983) the ratemaking provisions of the Revised Code are func- tionally equivalent."* We rejected sub silentio this line of argument based on the Uniform System of Accounts in CEI and expressly reject it in the case at bar.’ In its final argument appellant asserts that “[e]xclu- sion of the costs associated with the cancellation of Killen Unit No. 1 guarantees that DP&L will be unable to earn a fair and reasonable rate of return.” There is little eviden- tiary support for this contention. As the commission stated in its order, DP&L “objected to the staff's reversal of the company’s [proposed Killen] adjustment, but presented no witnesses relative to the subject and did [105] not ad- dress the matter on brief.”"® This failure to present evi- dence relating to Killen and the effect thereof on the rates set by the commission may perhaps be explained if, as it appears, appellant's position is that excluding the Killen expenditures is confiscatory as a matter of law. Per se con- fiscation in a utility rate case may exist as an abstract premise, but the constitutional cases make it clear that a “The commission acknowledged the distinction between ac- counting and ratemaking in its opinion dated March 17, 1982, in case Nos. 81-146-EL-AIR and §1-1565-EL-UNC, stating, at page 28, that “although we cannot allow an amortization allowance for ratemaking purposes, for book purposes the applicant is authorized to amortize the balances assignable to the terminated nuclear units over an appropriate period of time, not to exceed 15 years.” See Consumers’ Counsel v. Pub. Util. Comm, (1983), 4 Ohio St. 3d 111. Appellant's argument based on the Uniform System of Ac- counts is further flawed by its internal inconsistency. As OCC recognized, “[a]ppellant did not and cannot explain the contradic- tion between its apparent recognition that Account 182 covers ‘ex- traordinary property losses’ and its simultaneous claim that Account 182 relates to ‘normal expenses.’ ” At oral argument appellant briefly mentioned Killen but presented no argument relating thereto, relying instead on its briefs. 29 Dayton Power & Light Co. v. Pub. Util. Comm. 4 Ohio St. 3d 91, 447 NE 2d 733 (1983) successful challenge must demonstrate that the rate order when reviewed in its entirety falls outside the “broad zone of reasonableness,” Permian Basin Area Rate Cases, supra, at page 770, and the “heavy burden” of establishing un- reasonableness must be borne by the challenger. Hope Natural Gas Co., supra, at page 602. Appellant's expert testified that “the °°° [CEI] ruling serves to increase the risk associated with common stock ownership of electric utitlities in this state,” but did not attempt to quantify this perceived additional risk. More- over, there is nothing to suggest that the commission did not take this purportedly greater risk into account in its order."’ In determining the cost of equity capital the com- mission concluded that 16.44 percent was a “reasonable estimate,” even though 16.44 percent was in “the upper half of the °°*° [cost of capital] range °°°.” The commis- sion selected this figure after finding “*°*® it imprudent to dampen any optimism that may exist in the investment community with respect to the possibility that this com- pany may be emerging from its extended financial crisis by authorizing an unduly conservative equity earnings opportunity in this proceeding.” The commission’s rate of return summary stated that “[a]pplying a cost of equity "The commission order did not specifically refer to “the in- crease in investment risk resulting from the [CEI] decision,” as did the order in case Nos. 81-146-EL-AIR and 81-1565-EL-UNC (at page 40), but it is quite clear that the commission is fully cognizant of CEI. Indeed, it is the commission's position that the instant appeal “concerns the definition of risks*** [and CEI] merely de- fined the economic risks and benefits under Ohio law. One of the risks is that investors, not consumers, will be required to pay for plants which will never provide service to ratepayers. This, of course, may make Ohio untilities’ capital and debt less attractive to investors, but it does not make rates confiscatory.” 30 Dayton Power & Light Co. v. Pub. Util. Comm. 4 Ohio St. 3d 91, 447 NE 2d 733 (1983) of 16.44 percent to the equity component of the capital structure approved herein produces, when combined with the findings relative to long-term debt and preferred stock, a weighted cost of capital of 12.11 percent. The Commis- sion is of the opinion that a rate of return of 12.11 percent is sufficient to provide applicant reasonable compensation for the electric service it renders customers affected by this application.” It follows that if the 16.44 percent cost of equity component is within the upper half of the range, then the 12.11 percent rate of return is also within the upper range. Thus, even if appellant were correct in its assertion that the Killen exclusion precludes it from earning its authorized rate of return, there is nothing in the record to suggest that any reduced rate of return attributable to the Killen exclusion would not still be constitutional be- cause “°*°*® any rate selected °°° from the broad [106] zone of reasonableness °°*° cannot properly be attacked as confiscatory.” Permian Basin Area Rate Cases, supra, at page 770. To prevail, appellant must prove not only the unrea- sonableness of the Killen exclusion but also the confiscatory effect this exclusion had on the rates established by the commission, viewing the rate order “in its entirety.” Hope Natural Gas Co., supra, at page 602. We are unprepared to say that appellant has carried this “heavy burden” in either respect. In CEI we held that a utility's investment in cancelled generating facilities could not be treated as amortizable costs to be recovered from the utility's rate- payers under the statutory ratemaking formula, Appellant's arguments in the instant case are but variations on the statutory and policy arguments we found wanting in CEI, and we find them no more appealing when attired in con- stitutional raiment. Moreover, even these unpersuasive constitutional contentions lose whatever force they might 31 Dayton Power & Light Co. v. Pub. Util. Comm. 4 Ohio St. 3d 91, 447 NE 2d 733 (1983) have had in the absence of any showing that the commis- sion’s order “viewed in its entirety” is confiscatory. The rule is clear: “*°° If the total effect of the rate order can- not be said to be unjust and unreasonable, judicial inquiry °°° is at an end.” Hope Natural Gas Co., supra, at page 602. The total effect of the commission's rate order cannot be said to be unjust and unreasonable and therefore our judicial inquiry is at an end. Accordingly, we hold that the commission's disallowance of DP&L’s request to treat its Killen expenditures as amortizable costs pursuant to R. C. 4909.15(A)(4) does not violate the Fifth and Fourteenth Amendments to the Constitution of the United States. For the reasons hereinbefore stated the decision of the commission is affirmed in part and reversed in part and the case is remanded to the commission for further proceedings consistent with this opinion. Judgment accordingly. CeLEBREZZE, C.J., W. Brown, C. Brown and WILson, J.J., concur, Locuer and Hotes, J.J., concur in part and dissent in part. Wison, J., of the Second Appellant District, sitting by assignment. Locuenr, J., concurring in part and dissenting in part. I concur in Parts I and III of the majority opinion. As to Part Il, however, I dissent. This court has traditionally upheld the test-year con- cept. Part I of the majority opinion, Consumers’ Counsel v. Pub. Util. Comm. (1981), 67 Ohio St. 2d 372 [21 O.0. 3d 234], and Ohio Water Service Co. vy. Pub. Util. Comm. (1983), 3 Ohio St. 3d 1, enhance that tradition. Neverthe- less, the majority fails to recognize that the issue in Part 32 Dayton Power & Light Co. v. Pub. Util. Comm. 4 Ohio St. 3d 91, 447 NE 2d 733 (1983) II is essentially the same as that in Part I: whether this court will reverse the decision of the Public Utilities Com- mission to exclude a post-test-year expense from consider- ation. Both Consumers’ Counsel, supra, and Ohio Water Service, supra, lead to the same conclusion. We should affirm the decision of the Public Utilities Commission [107] because: (1) the requested expense was incurred after the test year, and (2) the utility decided when to file its rate case. See Consumers’ Counsel, supra, at pages 374-376. We should not apply or construe R. C. 4909.16]. Nothing in that provision suggests that it was intended to supersede the test-year concept. Furthermore, its applica- tion may violate the constitutional prohibition against the retroactive application of statutes, see Secion 28, Article II of the Ohio Constitution, and the statutory presumption in favor of prospective laws, see R. C. 1.48, because of R. C. 4909.161 became effective after the original tax liability accrued and after the test year. Accordingly, I would affirm the decision of the Public Utilities Commission as to all three issues before this court. Homes, J., concurring in part and dissenting in part. I agree with the majority's resolution of the second and third issues. However, with respect to the first issue, the denial of appellant's post-test-year wage adjustment, I dissent on the basis of my dissenting opinions in Con- sumer’s Counsel vy. Pub. Util. Comm. (1981), 67 Ohio St. 2d 372, 376 [21 O.0. 3d 234], and Ohio Water Service Co. v. Pub. Util. Comm. (1983), 3 Ohio St. 3d 1, 4. 33 Cleve. Elec. Illum. Co. v. Pub. Util. Comm. 4 Ohio St. 3d 107, 447 NE 2d 746 (1983) DECISION AND OPINION OF THE SUPREME COURT OF OHIO CLEVELAND ELecrric ILLUMINATING COMPANY, APPELLANT, 0, Pusiic Uritities COMMISSION OF OHIO ET AL., APPELLEES Public Utilities Commission; expenditures associated with four terminated nuclear generating stations not amor- tizable, when; private property not unconstitutionally confiscated by R. C. 4909.15(A)(4); Commission's find- ings of fact adequate, when, R. C. 4903.09. (No. 82-989 — Decided April 13, 1983. ) AppEaL from the Public Utilities Commission of Ohio. This is an appeal by the Cleveland Electric Iluminat- ing Company (hereinafter “CEI” or “company”) from an order of the Public Utilities Commission (hereinafter commission”) fixing the company’s rates and charges for electric service.’ CEI had proposed an adjustment provid- ing for the amortization of expenditures associated with the cancellation of four nuclear [108] generating stations.’ The commission denied the amortization, citing Con- sumers’ Counsel v. Pub. Util. Comm. (1981), 67 Ohio St. 2d 153 [21 O.0. 3d 96], wherein this court first considered the expenditures here under discussion. 'The same order of the commission, case Nos. 81-146-EL-AIR and 81-1565-EL-UNC, decided March 17, 1982, is the subject of the appeal taken by the Office of Consumers’ Counsel in case No. 82-1004, Consumers’ Counsel v. Pub. Util. Comm. (1983), 4 Ohio St. 3d 111, decided this date. *For a description of the facts leading up to the termination of the facilities in question, see Consumers’ Counsel, infra, at page 154. 34 Cleve. Elec. Illum. Co. v. Pub. Util. Comm. 4 Ohio St. 3d 107, 447 NE 2d 746 (1983) CEI sought rehearing of Consumers’ Counsel, supra, which we denied by entry dated September 1, 1981, CEI then appealed to the United States Supreme Court, which dismissed for want of a properly presented federal ques- tion. See 71 L. Ed. 2d 455 (Jan. 25, 1982). On October 21, 1981, in case No, 81-1096-EL-COI, the commission again considered the same expenditures and ordered a reduction in CEI’s rates as mandated by Consumers’ Counsel, supra. CEI’s appeal from that deci- sion was dismissed, on July 7, 1982, without opinion by this court in Cleveland Elec. Illum. Co. v. Pub. Util. Comm., case No. 82-165. On appeal, the United States Supreme Court again dismissed the cause for want of a properly presented federal question. See 51 U.S.L.W. 3507 (Jan. 11, 1983). The Office of Consumers’ Counsel has been granted leave to intervene as appellee. The cause is now before this court upon an appeal as of right. Mr. Alan D. Wright, Mr. Craig I. Smith, Messrs. Squire, Sanders & Dempsey, Mr. Alan P. Buchmann and Mr. Richard W. McLaren, Jr., for appellant. Mr. Anthony J. Celebrezze, Jr., attorney general, Mr. Marvin I. Resnik, Ms. Marsha R. Schermer and Mr. Harris S. Leven, for appellee Public Utilities Commission. Mr. William A. Spratley, consumers’ counsel, and Mr. Martin J. Marz, for intervening appellee Office of Con- sumers’ Counsel. Per Curiam. In the present appeal, CEI advances three propositions of law. First, CEI urges this court to re-examine its holding in Consumers’ Counsel, supra; sec- ond, CEI challenges the constitutionality of R. C. 4909.15 (A)(4); and third, CEI contests the adequacy of the commission's opinion and order. 35 Cleve. Elec. Illum. Co. v. Pub. Util. Comm. 4 Ohio St. 3d 107, 447 NE 2d 746 (1983) The question whether the expenditures associated with the four terminated nuclear generating stations may be included in test year expenses as allowable operating expenses was addressed by this court in Consumers’ Coun- sel, supra. In that case we held in the syllabus that: “The Public Utilities Commission’s treatment of a util- ity’s investment in terminated nuclear generating stations as amortizable costs to be recovered from the utility's rate- payers is inconsistent with the ratemaking formula con- tained in R. C. 4909.15 and is unreasonable and unlawful.” In the present case, we are confronted with exactly the same issue arising out of exactly the same set of facts. We are no more persuaded by ap- [109] pellant’s argu- ments today than we werc when they were originally ad- vanced in Consumers’ Counsel. We adhere to our position taken in that case for the reasons expressed therein. Appellant suggests, however, that such an interpre- tation of R. C. 4909.15(A)(4) constitutes a confiscation of private property in violation of the Fifth and Fourteenth Amendments to the United States Constitution. We re- cently addressed this precise constitutional question in Dayton Power & Light Co. v. Pub, Util. Comm. (1983), 4 Ohio St. 3d 91. After a thorough review of the applicable constitutional standards, we determined that R. C. 4909.15 (A)(4) does not violate the Fifth and Fourteenth Amend- ments, stating, at pages 103-106. “ee? Pursuant to the statutory ratemaking formula investors are assured a fair and reasonable return on prop- erty that is determined to be used and useful, R. C. 4909.15(A)(2), plus the return of costs incurred in render- ing the public service, R. C. 4909.15(A)(4), while con- sumers may not be charged ‘for utility investments and expenditures that are neither included in the rate base nor properly categorized as costs, [Footnote omitted.] We see 36 Cleve. Elec. Illum. Co. v. Pub. Util. Comm. 4 Ohio St. 3d 107, 447 NE 2d 746 (1983) no constitutional infirmity in the balance thus struck by the General Assembly. “eo00 “°° Per se confiscation in a utility rate case may exist as an abstract premise, but the constitutional cases make it clear that a successful challenge must demonstrate that the rate order when reviewed in its entirety falls outside the ‘broad zone of reasonableness’ [Permian Basin Area Rate Cases (1968), 390 U. S. 747, 770] and the ‘heavy burden’ of establishing unreasonableness must be borne by the challenger. [FPC v. Hope Natural Gas Co. (1943), 320 U. S. 591, 602. } “eo0 “°°° The rule is clear: *°°° If the total effect of the rate order cannot be said to be unjust and unreasonable, judicial inquiry °°° is at an end. °°°” (Emphasis added. ) Moreover, the Constitution imposes no methodological strictures on ratemaking authorities. See Dayton Power & Light Co., supra, at page 98, fn. 8. CEI has not demonstrated that the rate order in its entirety is confiscatory. The commission submits that CEI’s failure to do so “precludes a finding of confiscation in this case.” The commission specifically adjusted the cost of common equity upward to reflect the perceived increased risk to investors as a result of this court’s decision in Con- sumers’ Counsel, supra. See the commission’s order in case No. 81-146-EL-AIR, at page 40, and Consumers’ Counsel v. Pub, Util. Comm. (1983), 4 Ohio St. 3d 111. This adjust- ment buttresses the conclusion that the instant order falls *The commission states in its brief: “*** [T]he Commission would submit that its rate of return finding, which CEI has not claimed is insufficient or even assailed, precludes a finding of confiscation in this case.” 37 Cleve. Elec. Illum. Co. v. Pub. Util. Comm. 4 Ohio St. 3d 107, 447 NE 2d 746 (1983) within the broad zone of reasonableness. Thus, even if appellant were correct in its assertion [110] that the ex- clusion based on R. C, 4909.15(A)(4) is improper, there is nothing in the record to suggest that the commission’s order, viewed in its entirety, would not still be constitu- tional because “any rate selected °°* from the broad zone of reasonableness °°° cannot be attacked as confiscatory.” Permian Basin Area Rate Cases, supra, at page 770. The law set forth in the second paragraph of the syllabus in Dayton Power & Light Co., supra, is controlling here: “The Public Utilities Commission’s disallowance of a utility's request to treat its expenditures associated with a cancelled generating plant as amortizable costs pursuant to R. C. 4909.15(A){4) does not violate the Fifth and Fourteenth Amendments of the Constitution of the United States.” We likewise reject appellant’s final contention that the commission failed to render adequate findings of fact pursuant to R. C. 4903.09.* R. C. 4903.09 states, in pertinent part: “In all contested cases °*°* the commission shall file °°° findings of fact and written opinions setting forth the reasons prompting the decisions arrived at °°°.” The purpose of R. C. 4903.09 is to provide this court with sufficient details to enable us to determine, upon appeal, how the commission reached its decision. See General Tel. Co. v. Pub. Util. Comm. (1972, 30 Ohio St. 2d 271 [59 O.O. 2d 338]. In the present case, we find that ‘Specifically, CEI contends that the commission has failed to adequately explain its conclusions on three issues; (1) the computa- tion of the allowance for funds used during construction, (2) the evidentiary ruling made as to a particular exhibit, and (3) the determination of the allowable amount of fuel inventory. 38 Cleve. Elec. Illum. Co. v. Pub. Util. Comm. 4 Ohio St. 3d 107, 447 NE 2d 746 (1983) the commission’s order and opinion contained reasoning that adequately responded to CEI’s claim. Indeed, where pertinent, the report alluded to specific passages from the transcript to support its rationale.’ Accordingly, we find no violation of R. C. 4903.09. For the above stated reasons, the order of the com- mission is affirmed. Order affirmed. CELEBREZZE, C. ]., STEPHENSON, SWEENEY, C. BROWN and J. P. CeLesrezze, JJ., concur. Howes, J., concurs separately. Locuer, J., concurs in judgment only. STEPHENSON, J., of the Fourth Appellate District, sit- ting for W. Brown, J. [111] Hotmes, J., concurring. I concur in the court's resolution of the first issue, which relates to the amortiza- tion of the cancelled nuclear generating stations, solely on the basis of stare decisis. However, I believe that the proper approach to this question was set forth in Justice Paul W. Brown’s dissenting opinion in Consumers’ Counsel v. Pub, Util. Comm. (1981), 67 Ohio St. 2d 153, 168 [21 0.0. 3d 96}, which I joined. *R. C, 4903.09 contains no requirement that the commission's findings of fact or reasonings be correct. Accordingly, we make no comment on the commission's actual disposition of the issues in- volved in CEI’s third proposition of law. 39 Consumers’ Counsel v. Public Utilities Comm. 4 Ohio St. 3d 111, 447 NE 2d 749 (1983) DECISION AND OPINION OF THE SUPREME COURT OF OHIO CONSUMERS COUNSEL, APPELLANT, V. Pusiic Urtitities COMMISSION OF OHIO ET AL., APPELLEES, Public Utilities Commission: rate base for determining rate increase may not include customer-supplied funds, when; adjustment for flotation costs proper, when; increased “perceived risk to investors” following court decision properly considered in determining rate of return on common equity; expenditures associated with four terminated nuclear units amortizable, when, R. C. 4905.13. (No. 82-1004 — Decided April 13, 1983.) AppEAL from the Public Utilities Commission of Ohio. On January 30, 1981, Cleveland Electric Hluminating Company (company) notified the Public Utilities Com- mission of Ohio (commission) of its intent to file an appli- cation for an increase in rates, and of its intent to use the twelve months ending December 31, 1982 as the test period and March 31, 1981 as the date certain. The commission approved the proposed date certain, but directed the com- pany to file its application and supporting exhibits on the basis of a test period with the approved date certain as the mid-point, as well as on the basis of the fully projected test year ending December 31, 1982. On May 5, 1981, the company formally applied to the commission for the authority to increase its rates and charges for electric service to its customers. Depending on whether the 1980-1981 or 1982 test year is used, the company sought additional gross annual revenues of $134,834,473 or $135,293,271. The commission, by order 40 Consumers’ Counsel v. Public Utilities Comm. 4 Ohio St. 3d 111, 447 NE 2d 749 (1983) dated May 27, 1981 accepted the application, assigned this rate case number 81-146-EL-AIR, and on June 17, 1981 granted appellant, Office of Consumers’ Counsel the right to intervene. Briefing and hearings followed in due course. In its opinion and order dated March 17, 1982, the commission approved a rate increase based on the fully projected test year. It allowed the company a return on common equity of 17.30 percent, and further found an overall [112] rate of return of 12.25 percent, upon a rate base of $1,900,527,000, to be fair and reasonable. The new rates would generate approximately $1,166,292,000 in gross annual operating revenues, an increase of $106,977 ,000. The cause is now before this court upon an appeal as of right.’ Mr. William A. Spratley, consumers’ counsel, Ms. Deborah A. Ballam and Mr. Martin J. Marz, for appellant. Mr. Anthony J. Cc'*brezze, Jr., attorney general, Mr. Marvin I. Resnik and Mr. Harris S. Leven, for appellee. Messrs. Squire, Sanders & Dempsey, Mr. Alan P. Buchmann and Mr. Richard W. McLaren, Jr., for inter- vening appellee. Per Curiam. R. C. Chapter 4909 requires the commis- sion to determine just and reasonable rates for services rendered by our state's public utilities. Consumers’ Counsel raises questions of law and fact in this appeal from the commission's order, claiming the rate increase allowed therein to be unlawful and unreasonable. We consider these claimed errors under our bifurcated standard of re- view well-stated by Justice Pau! Brown: ‘Case No. 82-989 Cleveland Flec Illum. Co v. Pub. Util Comm. (1983). 4 Ohio St 3d 107. decided this date also arises from the same rate case Cleveland Electric Mluminating Co., the appellant in that case. is intervening appellee here 41 Consumers’ Counsel v. Public Utilities Comm. 4 Ohio St. 3d 111, 447 NE 2d 749 (1983) “As to questions of fact, this court has repeatedly enunciated the rule that orders of the commission will not be reversed unless they are manifestly against the weight of the evidence or are so clearly unsupported by the record as to shown misapprehension, mistake or willful disregard of duty. [Citations omitted.] “As to question of law, however, this court has com- plete, independent power of review. Legal issues are ac- cordingly subjected to more intensive examination than are factual questions.” Consumers’ Counsel v. Pub. Util. Comm. (1979), 58 Ohio St. 2d 108, 110 [12 0.0. 3d 115]. We address the contentions of Consumers’ Counsel in the order in which they arise in the calculation of the rate increase. As with every application for an increase in rates, the commission first determined the appropriate rate base valuation as of the date certain. R. C. 4909.15(A). Con- sumers’ Counsel challenges the calculation of the rate base, contending the commission as a matter of law im- properly failed to deduct from working capital an amount equal to the company’s accrued nuclear fuel disposal ac- count balance. At the date certain in this rate case, the accumulated balance was $3,126,000. Since the granting of the company’s 1978 application for a rate increase, the commission has allowed the inclu- sion in current operating expenses of deferred costs for the disposal of spent nuclear fuel used at the Davis-Besse Nuclear Power Plant. The spent fuel is presently being accumulated and stored at a temporary site, with ultimate disposal method and cost yet to be determined. It is ex- pected that permanent disposal will occur in the late [113] 1980's, hut this future expense is allowed to be in- cluded in current operating expenses on the principle that the cost will be incurred due to present operations of 42 Consumers’ Counsel v. Public Utilities Comm. 4 Ohio St. 3d 111, 447 NE 2d 749 (1983) Davis-Besse. The amounts included in operating expenses are based on estimates prepared by the United States De- partment of Energy and these customer contributions are kept in a reserve fund by the company, available for in- ‘estment. Revenues from investment of the fund are re- ined to the general fund. In Cincinnati v. Pub. Util. Comm. (1954), 161 Ohio St. 395 [53 0.0. 304], paragraph five of the syllabus, this court held: “In fixing telephone rates, customers’ contributions in the form of accruals [sic] for the payment of taxes, deposits to secure payment of customers’ bills for service or as advances on installation charges, and collections of rents to be paid at future dates, which will be constant with reasonable certainty in the foreseeable future and which are available for investments in materials and supplies, or for use as working capital, should be used as an offset on the allowance for working capital, including investments in materials and supplies necessary for the normal opera- tions of the company and for plant maintenance and re- pair.” (Emphasis added. ) The principle underlying this holding is that investors in public utilities should be permitted to earn a return only on that property for which they have supplied funds, not on funds contributed by customers. Consumers’ Counsel, supra, at 115. By deducting such deposits from working capital, the company’s cash flow generated by the cus- tomer - supplied account is offset by the hypothetically equivalent reduction in revenues caused by the smaller rate base. Since Cincinnati, this court has consistently applied the principle that a utility may not earn a return on cus- tomer-supplied funds which are “constant with reasonable certainty and available for investments.” Consumers’ 43 Consumers’ Counsel v. Public Utilities Comm. 4 Ohio St. 3d 111, 447 NE 2d 749 (1983) Counsel, supra; Cleveland Elec. Illum. Co. v. Pub. Util. Comm. (1975), 42 Ohio St. 2d 403 [71 0.0. 2d 393], paragraph nine of the syllabus. Conversely, when such an account is not “constant with reasonable certainty,” as with customer deposits in the form of budget billing bal- ances, no offset against working capital and concomitant reduction in rate base are required. Cleveland v. Pub. Util. Comm. (1982), 7 Ohio St. 2d 290, 294 [24 O.O. 3d 370]. In the instant case, the commission justified permit- ting the company to earn interest on the accrued nuclear fuel disposal account without a compensating rate base deduction by stating its intent that the monies earned be used to pay the higher costs expected when actual dis- posal occurs in the future. The commission speculates that the amounts charged to current customers will be insuffi- cient to cover actual disposal costs and further speculates that the return earned on the account will be available to offset this additional expense. We note the inherent uncertainty of the estimated cost of permanent disposal and the possibility that such costs may in fact be less than expected. [114] We also note the inability of the commission or company to track pre- cisely the funds earned by this account. Given these facts, we are not persuaded that an exception to the general rule of law should apply. It is uncontroverted that the cus- tomer-supplied funds in this account are constant with reasonable certainty and are available for investments. Accordingly, working capital should be offset in the amount of the accrued nuclear fuel disposal account, there- by reducing the rate base. This, in effect, will deny the company a return on accrued customer-supplied funds. By failing to order such an offset, the commission erred as a matter of law and its decision must be reversed. 44 Consumers’ Counsel v. Public Utilities Comm. 4 Ohio St. 3d 111, 447 NE 2d 749 (1983) Having determined the appropriate rate base and operating expenses, the commission next considered capital structure, fixing the relative percentage of debt, preferred stock and common equity. It then determined what it believed to be the correct cost for each of these com- ponents. After the commission ascertained the cost of capital components, it assigned rates of return which must be “fair and reasonable.” From these rates, an overall cost of capital is derived, which is equated with the fair rate of return, and when applied to the rate base, together with expenses, results in the permissible rates to be charged the customer. Consumers’ Counsel disputes the calculation of cost of common equity. It contends the adjustment of the baseline cost of equity to account for a flotation costs’ improperly included an increased risk to investors as a result of this court’s decision in Consumers’ Counsel v. Pub, Util. Comm. (1981), 67 Ohio St. 2d 153 [21 0.0. 3d 96] (hereinafter “CEI’). In that case, this court disallowed the recovery of the costs of four cancelled nuclear plants. Consumers’ Counsel here does not dispute that some adjustment was appropriate for flotation costs, but argues that the com- mission has misused the concept in order to guarantee a return of invested capital in the terminated units. Whether the figure derived by the commission to reflect flotation costs is correct is a question of fact, there being no dispute that some adjustment for flotation costs is appropriate. Although Consumers’ Counsel proposed a different amount, there was sufficient evidence in the record to support the commission's decision to adopt its *Flotation costs are incurred with the issuance of new or previ- ously unissued stock and includes direct issuance costs such as underwriting fees and printing costs, and indirect costs such as dilution in the value of company stock already on the market. 45 Consumers’ Counsel vy. Public Utilities Comm. 4 Ohio St. 3d 111, 447 NE 2d 749 (1983) staff's proposal. In fact, the same range for /lotation costs was upheld by this court in Consumers’ Counsel v. Pub. Util. Comm. (1981), 67 Ohio St. 2d 303, 310 [21 0.0. 3d 191]. Moreover, nothing in the record evidences any improper considerations underlying the approved amount. Accordingly, we find the flotation cost adopted by the commission neither unreasonable nor against the manifest weight of the evidence. With respect to the return on common equity, the commission first adopted a range of 17.02 percent to 18.13 percent. This range, derived by the commission staff, gives the commission discretion in selecting a specific point [115] within the range to adjust the return on common equity for the specific facts of the case presented. Although it typically chooses the midpoint of the recommended range, in this case the commission noted two factors which per- suaded it to alter this practice. First, the selection of the projected test year as the operating period for rate making purposes was believed to offer the company “a better opportunity to earn its authorized return.” This factor, if viewed alone, would support the selection of the low point of the recommended range. The second factor specifically considered by the com- mission was “the increase in investors’ perceived risk” fol- lowing release of our decision disallowing recovery of the cost of the four cancelled nuclear plants. The commission had as evidence of the increased risk a relative decline in price for common stock following our announcement of that decision, and the lowering of the company’s bond rating by Standard & Poor's, this court's holding being cited as a factor in that action. Consequently, the commission select- ed 17.30 percent as the appropriate return on common equity, a figure midway between the low point and mid- point of the recommended range. 46 Consumers’ Counsel v. Public Utilities Comm. 4 Ohio St. 3d 111, 447 NE 2d 749 (1983) Consumers’ Counsel contends that consideration of the increased risk found to arise from our decision in CEI when calculating return on common equity violates the holding that ratepayers not pay for the terminated units. The determination of the rate, however, was based on empirical data presented by the company’s rate of return witnesses, which testimony was considered relevant to that determination. R. C. 4909.15(A)(2) requires the commission to de- termine a fair and reasonable rate of return to the utility. The question whether a decision of this court may have so increased the perceived risk to investors as to require a higher rate of return on common equity is one the com- mission may consider a factor in its decision. We do not find the commission’s action in this regard “so clearly unsupported by the record as to show misapprehension or mistake or willful disregard of duty” and accordingly, find no error. Finally, in a related issue Consumers’ Counsel chal- lenges the commission’s decision to authorize the utility to amortize the balances assignable to the four terminated nuclear units over an appropriate period of time not to exceed fifteen years. This book amortization does not affect the rates paid by customers. It is an accounting pro- cedure available as an alternative to writing off the cost of the terminated facilities (the company’s share being approximately $50 million) in a single year. Such book- keeping methodology is not governed by the ratemaking statutes. See Dayton Power & Light Co. vy. Pub. Util. Comm. (1983), 4 Ohio St. 3d 91. Rather, the commission has express statutory authority under R. C. 4905.13 to prescribe the manner in which a utility must keep its 47 Consumers’ Counsel v. Public Utilities Comm. 4 Ohio St. 3d 111, 447 NE 2d 749 (1983) books of account. The authorization in this case does not contravene the decision in CEI and does not appear so unreasonable as to justify reversal. Accordingly, the decision of the commission is re- versed for its failure to include an offset to the rate base by the amount in the accrued nuclear fuel [116] disposal account, affirmed in all other respects, and the cause re- manded for further proceedings in accordance with this decision. Judgment accordingly. CELEBREZZE, C. J., STEPHENSON, SWEENEY, Hotes, C, Brown and J. P. CeLesrezze, JJ., concur. Locuer, J., concurs in part and dissents in part. STEPHENSON, J., of the Fourth Appellate District, sit- ting for W. Browy, J. Locuenr, J., concurring in part and dissenting in part. I concur in the holding of the majority requiring that CEI remove the accrued nuclear fuel disposal account balance from the rate base. I concur in the judgment only as to the accounting treatment of the costs of the cancelled nuclear plants. Otherwise, I dissent. In Consumers’ Counsel vy. Pub. Util. Comm. (1981), 67 Ohio St. 2d 153 [21 0.0. 3d 96] (“CET”), we refused to allow CEI to amortize as costs to be recovered from its ratepayers approximately $56,400,000 which it had invested in four cancelled nuclear power plants. Regrettably, the majority opinion signals an abject retreat from the stand. What CEI condemned, today’s holding condones. Our decision in CEI reaffirmed the fundamental principle of rate base analysis. That is a plant must be 48 Consumers’ Counsel v. Public Utilities Comm. 4 Ohio St. 3d 111, 447 NE 2d 749 (1983) used and useful before the PUCO includes it in the rate base. “If, as has been argued, these are parlous times for the utilities industry, and if, therefore, in order to attract and retain investment capital, utility companies must not only be granted a fair and reasonable rate of return pursu- ant to statute but must also be assured the return of capital invested in failed projects that would otherwise not be recoverable under the ratemaking formula, then the commission and the utilities should petition the Gen- eral Assembly to enact changes in the ratemaking struc- ture so as to provide this extra modicum of protection for the investors. Absent such explicit statutory authoriza- tion, however, the commission may not benefit the in- vestors by guaranteeing the full return of their capital at the expense of the ratepayers. Under the ratemaking formula now in effect consumers are not chargeable for utility investments and expenditures that are neither in- cluded in the rate base nor properly categorized as costs. What we previously stated in a rate base case is applicable to the case at bar: “°°° It is only proper that their [the investors’] venture be found operational before they com- mence to recoup their capital outlays from the consumers.’ Consumers’ Counsel v. Pub. Util. Comm. (1979), 58 Ohio St. 2d 449, 456-457 [12 O.O. 3d 378].” (Bracketed mate- rial sic.) CEI, supra, at 167-168, CEI, therefore holds that CEI’s investors must bear the entire cost of the cancelled plants. [117] In this case, the PUCO expressly allowed CEI to recover an increased return on capital due to an “in- crease in investors’ perceived risk associated with the Court’s [CEI] decision.” The commission accomplished this by raising the rate of return from 17.02 to 17.30 per- 49 Consumers’ Counsel v. Public Utilities Comm. 4 Ohio St. 3d 111, 447 NE 2d 749 (1983) cent.* This approach by the PUCO allows CEI to gain indirectly, by means of an increased rate of return, what we prohibited it from receiving directly, by means of amortization, in CEI, The burden of the (supposedly ) in- creased risk, therefore, is back on the consumers con- trary to our observation in CEI that “°°° the commission may not benefit the investors by guaranteeing the full return of their capital at the expense of the ratepayers.” CEI, supra, at 167. Regrettably, today’s decision marks the second time that the majority of this court has turned its back on CEI. See Consumers’ Counsel v. Pub, Util. Comm. (1982), 1 Ohio St. 3d 22 (“Consumers’ Counsel |1982)"). In that case, a procedural subterfuge prevailed over precedent to ensure that the utility would receive payment for its share of the expenses paid toward the same cancelled nuclear plants which were involved in CEI, Consumers’ Counsel (1982), supra, at 25 (Locher J., dissenting ). Today, this court falls prey to a combination of se- mantic and statistical confusion. This is ironic indeed be- cause: (1) the United States Supreme Court dismissed CEI's appeal for want of a properly presented federal question, Cleveland Elec. Illum. Co. v. Office of Consum- ers’ Counsel (Jan. 25, 1982), U.S. , 71 L. Ed. 2d 455; and (2) we have recently reaffirmed the holding of CEI and upheld its constitutionality in Cleveland Elec. Illum. Co, v. Pub, Util, Comm, (1983), 4 Ohio St. 3d 107 (“CEI [1983]”): “In the present case, we are confronted *The PUCO also adjusted the rate of return upward in order to compensate CET for flotation costs. See footnote 2 of majority opinion, We should also reverse and remand the decision of the commission for a determination of the extent to which the adjust: ment allows a return on investor capital in the cancelled plants and instruct the commission to reduce the rate of return accordingly. 50 Consumers’ Counsel vy. Public Utilities Comm. 4 Ohio St. 3d 111, 447 NE 2d 749 (1983) with exactly the same issue arising out of exactly the same set of facts. We are no more persuaded by appellant's argu- ments today than we were when they were originally ad- vanced in [CEI]. We adhere to our position taken in that case for the reasons expressed therein.” CEI (1983), supra, at 108-109. We should have summarily reversed the PUCO’s hold- ing as to investor risk and flotation costs because CEI is res judicata. That is, CEI stands for the proposition that ratepayers are not to pay for these cancelled nuclear plants. This rule should apply whether the mechanism used to subvert the “used and useful” principle is called “amortiza- tion” or anything else. The majority, however, desolates CEI, Accordingly, I would remand this case to the PUCO for a determination as to the extent to which the rate of return includes elements of compensation for the nuclear plants and a reduction of the rate of return consistent with that determination. 51 Opinion and Order, PUCO Case No, 81-1378-EL-AIR Opinion and Order of the Public Utilities Commission of Ohio (Filed January 5, 1983) BEFORE THE PUBLIC UTILITIES COMMISSION OF OHIO In the Matter of the Application of | The Cleveland Electric Illuminating Company for Authority to Amend Case No. and Increase Certain of its Filed{ 81-1378-EL-AIR Schedules Fixing Rates and Charges for Electric Service. ~_ 4 OPINION AND ORDER The Commission, coming now to consider the above- entitled application filed pursuant to Section 4909.18 Re- vised Code, and the Staff Report of Investigation issued pursuant to Section 4909.19 Revised Code; having ap- pointed its attorney examiner, Barth E. Royer, pursuant to Section 4901.18 Revised Code to conduct a public hearing and to certify the record directly to the Commis- sion; having reviewed the testimony and exhibits intro- duced into evidence at the public hearing commencing October 12, 1982 and concluding November 10, 1982; and being otherwise fully advised in the premises, hereby issues its Opinion and Order. History of the Proceedings: The Cleveland Electric Iluminating Company, the applicant herein, is an Ohio corporation engaged in the business of supplying electric service and steam heating 52 Opinion and Ord2r, PUCO Case No. 81-1378-EL-AIR service in this state. As a public utility within the defini- tion of Section 4905.02 Revised Code, an electric light company within the definition of Section 4905.03(A ) (4) Revised Code, and a heating company within the defini- tion of Section 4905.03(A)(9) Revised Code, applicant is subject to the jurisdiction of this Commission pursuant to Sections 4905.04, 4905.05, and 4905.06 Revised Code. The company provides retail electric service to some 713,000 customers in a 1,700 square mile service territory which encompasses the greater Cleveland area as well as all or parts of nine northeastern Ohio counties. Applicant also provides steam heating service to some 350 customers within the City of Cleveland, but it is the company’s electric operations which are the subject of this proceed- ing. The company’s present rates for electric service were established by Order of this Commission in Cleveland Electric Illuminating Company, Case Nos. 81-146-EL-AIR and 81-1565-EL-UNC (March 17, 1982), as subsequently modified by the Commission’s Entry on Rehearing in the consolidated docket of May 12, 1982. On November 13, 1981, The Cleveland Electric Illu- minating Company served and filed a notice of its intent to submit a permanent electric rate increase application pursuant to Section 4909.18 Revised Code as required by Section 4909.43(B) Revised Code and Rule 4901-7-01 Ohio Administrative Code. As a part of this prefiling noti- fication, applicant requested that February 28, 1982 be fixed as the date certain for the valuation of property and that the twelve months ending December 31, 1983 be established as the test period for the analysis of accounts. By its Entry of December 9, 1981, the Commission ap- proved the date certain proposed by the company, but found that the company should submit an analysis of accounts based upon a test year with an ending date of 53 Opinion and Order, PUCO Case No. 81-1378-EL-AIR August 31, 1982, in addition to the fully-projected test year analysis proposed in its prefiling notification. The instant application was submitted March 19, 1982, and was accepted for filing as of that date by Com- mission Entry of April 14, 1982. The form of legal notice proposed by the company was also approved. On May 28, 1982, applicant filed a notice requesting approval of cer- tain amendments to the form of notice initially approved so as to reflect the change in its existing rates resulting from the Commission’s Entry of Rehearing of May 12, 1982, in the consolidated cases referred to above. The Commission approved the revised form of notice by Entry of June 23, 1982. In accordance with the provisions of Section 4909.19 Revised Code, the staff of the Commission conducted an investigation of the matters set forth in the application and the related filings. A written report of the results of the staff investigation was filed September 7, 1982, and was served as provided by law. Objections to the staff report were timely filed by the applicant and by inter- venors Consumers Counsel, City of Cleveland, Indus- trial Electricity Consumers, Senior Citizens, et al.', Fair Rates Campaign Coalition’, and the Ohio Cable Television ‘Pursuant to the attorney examiner's Entry of October 6, 1982, the participation of intervenor Senior Citizens, et al. has been limited to rate design and tariff questions (See Senior Citizens Coalition v. Public Utilities Commission, 69 Ohio St. 2d 625 [1982] ). Accordingly, intervenor's objections relating to other matters have been stricken (Tr. II, pp. 74-75). *Pursuant to the attorney examine:’s Entry of October 15, 1982, the participation of intervenor Fair Rates Campaign Coalition has also been limited to rate design and tariff questions, and its objec- tions relating to other matters have been stricken (Tr. IV, p. 3) 54 Opinion and Order, PUCO Case No. 81-1378-EL-AIR Association.’ Intervenor United States Steel Company filed no objections, and did not subsequently participate in the proceeding. Pursuant to the Commission's Entry of September 22, 1982, the public hearing of this matter commenced Octo- ber 12, 1982, at the State Office Building, 615 West Superior Avenue, Cleveland, Ohio, Chairman Jon F. Kelly presiding. The purpose of the Cleveland hearing was to afford members of the public affected by the application the opportunity to present statements concerning the proposed increase. The hearing was reconvened October 18, 1982, at the offices of the Commission, 375 South High Street, Columbus, Ohio, before attorney examiner Barth E. Royer and concluded November 10, 1982. The recorded transcript of the proceeding and the exhibits admitted into evidence have now been certified to the Commission by its examiner for its consideration. Appearances: Messrs. Alan D. Wright, Vice President—Public Af- fairs and Legal, and Craig I. Smith, Senior Counsel, Cleve- land Electric Illuminating Company, 55 Public Square, Cleveland, Ohio, and Messrs. Squire, Sanders and Demp- sey, by Messrs. Alan P. Buchmann and Richard W. Mc- Laren, 1800 Union Commerce Building, Cleveland, Ohio, on behalf of the applicant, The Cleveland Electric Ilumi- nating Company. 8The Ohio Telephone Association filed objections to the Staff Report recommendations relating to the question of pole attach- ment rates at the time it filed its petition for leave to intervene. However, the petition for leave to intervene was denied by the attorney examiners Entry of October 8, 1982, a ruling affirmed by the Commission in its Entry of November 3, 1982. Accordingly, those objections should be dismissed 55 Opinion and Order, PUCO Case No. 81-1378-EL-AIR Mr. William J. Brown, Attorney General of Ohio, by Messrs. Marvin I. Resnik, Harris $. Leven and Donn D. Rosenblum, Assistant Attorneys General, 375 South High Street, Columbus, Ohio, on behalf of the Staff of the Public Utilities Commission of Ohio. Mr. William A. Spratley, Consumers’ Counsel, by Messrs. Martin J. Marz and Steven M. Sherman, Associate Consumers’ Counsel, and Ms. Anne L. Hammerstein, Legal Intern, 137 East State Street, Columbus, Ohio, on behalf of the Office of Consumers’ Counsel, intervenor. Mr. James E. Young, Director of Law, City of Cleve- land, by Mr. Craig A. Glazer, Assistant Director of Law, Room 106, City Hall, 601 Lakeside Avenue, Cleveland, Ohio, on behalf of the City of Cleveland, intervenor. Bell and Randazzo, Co., L.P.A. by Messrs. Langdon D. Bell and Samuel C. Randazzo, and Ms. Judith B. Sanders, 21 East State Street, Columbus, Ohio, on behalf of Air Products and Chemicals, Inc., Aluminum Company of America, ELKEM Metals Company, General Motors Corporation, Jones & Laughlin Steel Corporation, L.C.P. Chemicals and Plastics, Inc., PPG Industries, Inc., Sohio Industrial Products, and Union Carbide Corporation (here- inafter “Industrial Electricity Consumers’), intervenors. Mr. Joseph P. Meissner, Cleveland Legal Aid Society, 1223 West 6th Street, Cleveland, Ohio, on behalf of the Senior Citizens Coalition, the Greater Cleveland Welfare Rights Organization, Inc., and the Western Reserve Alli- ance, Inc. (hereinafter “Senior Citizens, et al.”), intervenors. Messrs. Vorys, Sater, Seymour and Pease, by Mr. Wil- lian S. Newcomb, Jr., 52 East Gay Street, Columbus, Ohio, and Messrs. Hogan and Hartson, by Messrs. Gardner F. Gillespie and Paul Glist, 815 Connecticut Avenue, Wash- ington, D.C., on behalf of the Ohio Cable Television Asso- ciation, intervenor. 56 Opinion and Order, PUCO Case No. 81-1378-EL-AIR Mr. James A. Draper, 33 Public Square, Suite 810, Cleveland, Ohio, on behalf of the Fair Rates Campaign Coalition, Intervenor. . Messrs. Wayne I. Emery and Kenneth P. Pepperny, 600 Grant Street, Room 1569, Pittsburgh, Pennsylvania, on behalf of the United States Steel Company, intervenor. Commission Review and Discussion: This case comes before the Cominission upon the ap- plication of The Cleveland Electric Illuminating Company, pursuant to Section 4909.18 Revised Code, for authority to increase its rates and charges for electric service to jurisdictional customers. Applicant alleges that its existing rates are insufficient to provide it reasonable compensation for the service it renders, and seeks Commission approval of rate schedules which would yield some $233,262,000 in additional gross annual revenue based on test-year opera- tions as analyzed herein. ALLOCATIONS Because the instant application affects only the com- pany’s retail electric sales, it is necessary to allocate prop- erty, revenues, and expenses to insure that the rates ultimately authorized reflect only the cost of providing jurisdictional electric service. The staff generally adopted the allocation factors proposed by the applicant, noting that these allocation factors had been derived through the same methodology approved by the Commission in appli- cant’s recent cases (S.R., pp. 3-4). Intervenor City of Cleve- land objected to the staff's acceptance of applicant's allocation methodology, but did not pursue the matter at hearing or on brief. The objection is overruled. 57 Opinion and Order, PUCO Case No, 81-1378-EL-AIR RATE BASE The following table compares the original company and staff estimates of the value of applicant's property used and useful in rendering electric service to jurisdic- tional customers as of the date certain of February 28, 1982. Objections to the staff's rate base valuation will be discussed under appropriate subheadings below. Jurisdictional Rate Base (000's Omitted) Applicant! __ Staff? Plant In Service $2,551,996 $2,579,861 Less: Depreciation Reserve 614,829 618,135 Net Plant In Service $1,967,167 $1,961,726 Plus: CWIP 421,265 383,131 Working Capital 183,025 119,469 Less: Other Items i 165,542 Jurisdictional Rate Base $2,572,457 $2,298,784 ‘App. Ex. 1B, Sched. B-1 2S.R., Sched. 7 Plant In Service: As the above table indicates, the difference between the date certain plant in service values initially proposed by the applicant and the staff is relatively small. There are, however, a number of issues relating to the plant in service determination which must be addressed. Land and Land Rights: Because the schedules submitted with the application were developed prior to the Commission's decision in Cleveland Electric Illuminating Company, Case No. 81- 58 Opinion and Order, PUCO Case No. 81-1378-EL-AIR 146-EL-AIR (March 17, 1982), the rate base valuation originally proposed by the company did not reflect the Commission’s determination that certain company-owned land parcels were larger than reasonably necessary to support the utility installations located thereon. Applicant did report these land exclusions in its subsequent filings (App. Ex. ID, Sched. B-2.7), but calculated the associated rate base deductions using a method which differed from that employed by the Commission in the prior case (App. Ex. ID, WPB-2.7.b; Tr. IV, pp. 9-10, 18-19). The Com- mission determined the amount to be excluded by simply multiplying the booked original cost of the total site by the percentage represented by the acreage determined not to be used and useful. The Commission acknowledged that this calculation implicitly assumed that all land at a given site had a uniform per acre value, but observed that no evidence had been presented upon which to base a determination of the relative value of the included and excluded portions, even had we wished to undertake an analysis of this type. Applicant’s witness Moore contends that the site land exclusions as calculated by the company for purposes of this case recognize the difference in value between the included and excluded property, but we find the witness’s presentation on this subject to be less than persuasive (Tr. IV, p. 22). The Commission notes, how- ever, that applicant has now identified that portion of the booked original cost of the site properties in question which represent acquisition costs (Tr. IV, p. 12). As we have held on a number of prior occasions, capitalized ac- quisition costs should not be included as a part of the deduction for excess land (See, e.g., Ohio Edison Com- pany, Case No. 78-1567-EL-AIR [January 30, 1980]). Thus, the exclusions must be recalculated so as to apply the percentages determined in the last case to the booked cost less acquisition cost of each of the site properties (App. 59 Opinion and Order, PUCO Case No, 81-1378-EL-AIR Ex. ID, WPB-2.7.b). This produces a total deduction for excess land at the Keppler Substation, the Quaker Sub- station, the Buckeye Substation, the Mayfield Service Cen- ter, and the Parma Radio Station of $79,482. In Cleveland Electric Illuminating Company, Case No. 79-537-EL-AIR (July 10, 1980), the staff recom- mended exclusion of three of applicant's ash disposal sites based on its conclusion that the capacity of these areas to receive fly ash had been exhausted. The Commission agreed that two of the sites were not used and useful, but included the company’s Vine site in rate base upon a showing that it could still accommodate fly ash and that it was also used to store bottom ash, some of which was eventually sold to municipalities for use as road cinders. In the instant case, the City of Cleveland objected to the staff's failure to investigate whether the Vine site should still be regarded as used and useful, and questioned how the site, which was described as being almost filled to capacity several years ago, could still be capable of receiv- ing fly ash. Staff witness Fox acknowledged that the staff had not made an on-site inspection of the Vine ash disposal site in connection with its investigation in this case in light of the small dollar amount involved, but in- dicated that the staff had confirmed, through company personnel, that the property was still being used for ash disposal (Staff Ex. 3, pp. 21-22). Applicant's witness Moore expressly so testified (Tr. IV, pp. 97-99), and there is no evidence to the contrary. This objection should be overruled. Davis-Besse Gatehouse: Based on the results of its field inspection and _ its review of certain job orders, the staff concluded that a new gatehouse at the Davis-Besse nuclear plant had been improperly transferred to plant in service prior to the 60 Opinion and Order, PUCO Case No, 81-1378-EL-AIR date certain and recommended that applicant's investment in the facility be reclassified to construction work in prog- ress for purposes of this case (S.R., p. 14). Applicant ob- jected, contending that the first floor of the gatehouse was actually in service at date certain and that the invest- ment should be recognized in rate base as plant in service and not through the construction work in progress allow- ance (App. Ex. 3A, p. 3). As both the applicant and the staff recognize, the treatment accorded the date certain investment in the first floor of the gatehouse, now fixed at $1,382,407 (App. Ex. 28, p. 5), becomes material only if the statutory limitation on the construction work in progress allowance comes into play (See Section 4909.15 Revised Code). Thus, although the matter has been the subject of considerable debate, the question may well prove rather academic. It certainly has become needlessly complicated. Applicant has clearly documented that the first floor of the gatehouse, which houses personnel processing facili- ties, was in service as of February 28, 1982, the date cer- tain in this proceeding (App. Ex. 3A, Appendix A; App. Ex. 3B; App. Ex. 28, pp. 1-5). Staff witness Weiss, al- though noting that there was still some clean-up, land- scaping, and maintenance work being performed at the time of the staff's inspection in May of 1982, apparently does not dispute that part of the gatehouse facility was in use at date certain (Tr. IX, pp. 142-145a; Staff Ex. p. 4; App. Ex. 19). The staff's position, however, is that the first floor of the gatehouse is only a part of a larger project, which also includes the second floor of the gatehouse, as well as an adjacent parking area, and that because the job orders covering this other construction had not been com- pleted by date certain, the entire “project” should be re- garded as construction work in progress. The staff's argu- ment mistakes the fundamental point. Although the defini- 61 Opinion and Order, PUCO Case No, 81-1378-EL-AIR tion of what constitutes a “construction project” within the meaning of that term as employed in Section 4909.15 (A)(1) Revised Code may be significant for purposes of determining whether some particular construction activity is eligible for inclusion in the construction work in progress allowance in a given case, this is all irrelevant where the question is merely whether certain property should be in- cluded directly in rate base. That issue is controlled by the statute’s “used and useful” criteria, standards which the first floor of the gatehouse clearly satisfied. Accordingly, the Commission finds that applicant's objection should be sustained, and that the jurisdictional portion of the com- pany’s date certain investment in the Davis-Besse gate- house should be restored to rate base. Through a related objection, intervenor City of Cleve- land questioned the staff's finding that the company’s plant ledgers and continuing property record (CPR) rep- resented a reliable source of original cost data (S.R., p. 14), in light of the staff's recommendation with respect to the Davis-Besse gatehouse. The short answer, of course, is that the Commission has rejected staff recommendation in question, thereby confirming the reliability of the rec- ords. However, staff witness Weiss did respond to this objection through his pre-filed testimony and upon cross- examination (Staff Ex. 2, pp. 5-6; Tr. IX, pp. 176-177), and we find nothing in the record to suggest that the staff's evaluation of the reliability of the company’s rec- ords was incorrect. Intervenor has not pursued the ques- tion on brief. The objection is overruled. Beaver Valley Common Facilities: This Commission has consistently held that where an applicant utility's ownership interest in a generating sta- tion is limited to a unit still under construction, it is im- proper to include the utility’s share of the common facili- 62 Opinion and Order, PUCO Case No. 81-1378-EL-AIR ties in rate base until such time as the unit, itself, receives rate base recognition, notwithstanding the fact that the common facilities were completed in connection with a unit already in service (See, e.g., Cleveland Electric Illu- minating Company, Case No. 79-537-EL-AIR [July 10, 1980] ). In such circumstances, the Commission has direc- ted that the common facilities be classified as plant held for future use, with no depreciation to be accrued or AFUDC charged against the subject property (Cleveland Electric Illuminating Company, supra). It has become apparent, however, that this practice works a rather un- reasonable result, for the utility is denied both rate base recognition as well as AFUDC on the common facilities even though their construction could not have proceeded in any other fashion. As discussed in our decision in Toledo Edison Company, Case No. 81-620-EL-AIR (June 9, 1982), the Commission cannot remedy this problem by simply authorizing a resumption of AFUDC, as such a measure would produce a conflict with FERC accounting procedures which require that AFUDC on common facili- ties cease when the first unit is placed in service. However, where a state commission expressly authorizes the practice, the FERC will accept the accrual and deferral of carrying charges associated with a utility's share of common facili- ties, equivalent to AFUDC, with the accrued deferral charges to be added to the value of the common facilities when those facilities are determined to be used and use- ful for state ratemaking purposes (Staff Ex. 8, pp. 9-10). This was the treatment approved in Toledo Edison Com- pany, supra, in connection with that company’s ownership interest in the common facilities at the Beaver Valley nuclear plant. Applicant also owns a share of the common facilities at Beaver Valley by virtue of its ownership interest in Beaver Valley Unit No. 2, and has objected to the staff's 63 Opinion and Order, PUCO Case No. 81-1378-EL-AIR failure to recommend that it be permitted to adopt the accounting treatment approved for Toledo Edison. At hearing, staff witness Montgomery agreed that applicant should be authorized to accrue and defer carrying charges, equivalent to AFUDC, on its investment in the Beaver Valley common facilities (Staff Ex. 8, pp. 9-10), and the Commission so finds. Consistent with the Toledo Edison Company, decision, supra, and Mr. Montgomery's recom- mendation, the authorization to begin accruing carrying charges shall be regarded as prospective in nature, and we will not at this time approve the one time “make up” pro- posed by applicant's witness Chopp to recognize carrying charges from the time the common facilities were placed in service in 1976 to the present (App. Ex. 5A, p. 27). Other Items: At hearing, applicant's witness Moore identified two necessary corrections to applicant's proposed plant in service figures (Tr. IV, pp. 4-6). The first correction was to reverse a previous adjustment so as to exclude certain property not yet actually in service as of date certain (App. Ex. 1B, Sched. B-2.2). The second correction ex- cluded certain equipment at the Elden Substation which the Commission had determined not used and useful in Cleveland Electric Illuminating Company, Case No. 81- 146-EL-AIR (March 17, 1982). Both the adjustments will be approved. Depreciation Reserve: Section 4909.05(H) Revised Code requires that the Commission determine the proper and adequate reserve for depreciation to be deducted from the original cost of applicant’s used and useful property. The staff recom- mended that applicant's booked reserve be used as a start- 64 Opinion and Order, PUCO Case No. 81-1378-EL-AIR ing point in this analysis, but proposed an adjustment to restate the reserve as if the new depreciation accrual rates, which became effective March 1, 1982 as a result of Case No. 81-839-EL-AAM, had been in place throughout the test year (S.R., p. 16; S.R., Sched. 9-1). As discussed infra, all parties agree that these new accrual rates should be used to annualize depreciation expense, but applicant has objected to the adjustment to the reserve. The argu- ments raised by the company in support of this objection are essentially identical to those considered and rejected by the Commission in Cleveland Electric Illuminating Company, Case No. 80-376-EL-AIR (May 1, 1981) and Cleveland Electric Illuminating Company, Case No. 81- 146-EL-AIR (March 17, 1982), wherein we approved similar ratemaking adjustments to the booked reserve. For those reasons previously stated, and consistent with staff witness Fox's recommendation in this case (Staff Ex. 3, pp. 7-8), the Commission again overrules this objection (See also Toledo Edison Company, Case No, 80-377-EL-AIR [April 9, 1981] and Dayton Power and Light Company, Case No. 80-687-EL-AIR [July 15, 1981]). Applicant has also objected to the staff's failure to reduce the depreciation reserve associated with applicant's share of Bruce Mansfield Unit No. 3, on the theory that although book depreciation accruals began when the plant went into service in September of 1980, no depreciation expense was recognized in rates until May of 1981 when Cleveland Electric Illuminating Company, Case No. 80- 376-EL-AIR, stipra, was decided. Applicant advanced this same argument in its last rate case, and we again find the objection to be without merit (Cleveland Electric IMlumi- nating Company, Case No. 81-146-EL-AIR, supra). As staff witness Fox testified in this case, the notion that rates are designed to recover specific past expenses, or that these expenses are somehow traceable to actual dollars 65 Opinion and Order, PUCO Case No, 81-1378-EL-AIR of revenue generated by those rates, mistakes the nature of the ratemaking exercise (Staff Ex. 3, pp. 6-7). The objection is overruled. The Commission is of the opinion that a jurisdictional depreciation reserve of $618,135,000 as recommended by the staff is proper and adequate for purposes of this case. Deducting this amount from the original cost of includable property results in a finding of jurisdictional net plant in service of $1,963,736,000. Excess Capacity: Consumers’ Counsel and the City of Cleveland both objected to the staff's failure to propose an adjustment for excess capacity in light of the finding in the Staff Report that applicant's installed generating capacity exceeds the level calculated through the staff's 20 percent and 15 per- cent reserve margin tests ($.R., Sched. 8.2). Consumers’ Counsel did not pursue its objection, but the City of Cleve- land has once again flailed away at this issue, ignoring everything the Commission and the Supreme Court have had to say with respect to this subject in the past (See, e.g., Columbus and Southern Ohio Electric Company, Case No. 77-545-EL-AIR [March 31, 1978]; Cleveland Electric Illuminating Company, Case No, 79-537-EL-AIR [July 10, 1980]; Dayton Power and Light Company, Case No. 81- 21-EL-AIR [February 3, 1982}; Cleveland Electric Illu- minating Company, Case No. 81-146-EL-AIR [March 17, 1982]; City of Cleveland vy. Public Utilities Commission, 63 Ohio St. 2d 62 [1980]), and disregarding the expert testimony, including that of its own witness, in this case (Staff Ex. 3, pp. 15, 22-24; App. Ex. 15; Tr. XIII, pp. 51- 55). We have repeatedly explained that reserve require- ments are company-specific, and that the 20 percent and 15 percent “standards” used by the staff are merely rules of thumb. We have pointed out that it is impossible for a 66 Opinion and Order, PUCO Case No, 81-1378-EL-AIR company to add increments of capacity at a rate which will lead to a precise match with some theoretically ideal reserve margin at every point in time, and that increased construction lead-times and the size of units being added today have made attaining and preserving this match even more difficult. We have also explained the conceptual problems which attend a rate base adjustment for excess capacity. Finally, we have identified the real area [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385011_0046%3A2. Public record. Not legal advice.