# Motion to Dismiss — 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%3A3 ## Record - **Collection:** Supreme Court brief - **Document type:** Motion to Dismiss - **Published:** January 1, 1983 - **Citation:** 464 U.S. 802 ## Text Case No. 83-43 IN THE SUPREME COURT OF THE UNITER STATES October Term, 1982 THE CLEVELAND ELECTRIC ILLUMINATING COMPANY, Appellant, vs. THE PUBLIC UTILITIES COMMISSION OF OHIO, and OFFICE OF CONSUMERS' COUNSEL, Appellees. ON APPEAL FROM THE SUPREME COURT OF OHIO MOTION OF APPELLEE, OFFICE OF THE CONSUMERS' COUNSEL TO DISMISS APPEAL, OR IN THE ALTERNATIVE, MOTION TO AFFIRM WILLIAM A. SPRATLEY CONSUMERS' COUNSEL MARTIN J. MARZ Associate Consumers' Counsel Counsel of Record GRETCHEN J. HUMMEL STEVEN M. SHERMAN Associate Consumers' Counsel Office of the Consumers' Counsel 137 East State Street Columbus, Ohio 43215 (614) 466-1312 ATTORNEYS FOR APPELLEE TABLE OF CONTENTS Page Table of Authorities....... cece eevevvees ii Statement of the CaSe@... cee e eevee vseees 1 Motion to Dismiss and in the Alternative, Motion to Affirm........ ll Argument in Support of Motion Of, REE AE ea er a rr eee 11 Argument in Support of Motion OR Re era ree a 32 Og EPPS CCE EEE CEE ELECT TTC Te 50 ii TABLE OF AUTHORITIES Cases Page Bluefield Water Works Co. v. Public Service Commission, 262 U.S. 679 C1OZS) ac ccccccccccccccccccecs 38, 39, 40 e cI in Cc a Vv fice of the Consumers' Counsel, et al., United States Supreme Court Case No. 81-1002 (February 25, 1982): 71 L.Ed.2d 455 C19SZ) on ccccccccsccscvcsce 1, 13, 19, 26 Cleveland Electric Illuminating Company v. The Public Ut: United States Supreme Court Case No. 82-704 (January 10, 1983); 51 U.S.L.W. 3507 CIOSD) ccccvvccssccesceees 1, 15, 19, 26 ic. Util. Comm., 4 Ohio St.3d 107, 447 N.E.2d 746 (1983)....5. 8, 21, 31, 34, 110, 49, 50 Comm., 67 Ohio St.2d 153, 423 N.E.2@ 820 (1981)...1, 4, 5. 8. 9, 10, 12, 21, 22, 25, 26, 28, 33, 35, 36, 37, 39, 47, 49 iii Vv. b. .. 4 Ohio St.3d 91, 447 N. E.2d 733 (1983)...32, 33, 45, Ope Natural Gas Co., 329 U.S. 591 C19G6) cccccccccccce cde 42, 43, 44, ura » 315 U.S. 575, 62 S.Ct. 736, 86 L.Ed. 1052 (1942)... eee eevee eveveeeeee dl, d .. 386 U.S. 237 (1967)... ccc ccccvececevessvvves . 368 U.S. 157 46 47 42 30 (1961). cece eee erence eer eeneeeeeeesees dO : .. 281 U.S. 470 (1930)... cece eee e rece rnnene rtd, 24 . 327 U.S. 726 (1946)... ec eeevesvees cece eeeee e+e e+ 20 » 379 U.S. 443 ERPOR Po cccséccecvece eer eevee 27, 28, 37 . 324 U.S. 117 CAPES) ccccccscevceccceos eevee eevee eee 29 « 442 U.S. 332 OS.) Pr eo) Honeyman v. Hanan, 300 U.S. 14, 57 S.Ct. 350 (1937)..... ee euee coccce ee dO iv » 413 U.S. 173 $5 7 3) re ee saan cael anreabiia 17, 18 Mercado v. Rockefeller, 502 F.2d 666 (2d Cir. 1974), cert. denied, 420 U.S. 925 ee Sea cea icistabet lawclll NEPCO Municipal Rate Committee v. FERC, 668 F.2d 1327 (D.C. Cir. SS eee ee 40, 48, 49 Cc tric Co. v. - 265 U.S. 403 (1924). ce cc ccccccves eocccces coccece --40 llu atin Company, Case No. 81-146-EL-AIR, Opinion and Order (March 17, BOGE Pd ccecces SANT SEE CS Oecd o:5 a a Fe —— e 414 U.S. oo: 2)... ) eee Sp hata aeiniek x eae & 20 * * k o 168 F.2d 11 (D.C. Cir. 1950), cert. denied 340 U.S. 952 CBUEER sc ccscee LOPS i re ae » 433 U.S. 562 CUPP ee ee eho eeesessesesbcbescoooscent Statutes U.S. Sup. Ct. Rule 15.1, 28 U.S.C.A..... 16 U.S. Sup. Ct. Rule 16.1, 28 U.S.C.A..... ll Vv 26 U.S.C. §1257(2).. eee neve vvves ---ll, 12 Ohio Rev. Code §4909.15........++..24, 29, 35, 37, 39 Amendments Fifth Amendment to the Constitution of the United States..... cocccceeh, 36, 40 Fourteenth Amendment to the Constitution of the United States.........4, 38, 40 STATEMENT OF THE CASE The issue Appellant seeks to have re- viewed has twice previously been presented to this Court. (See, Clevelan tric Illuminating Company v. Office of the Con- sumers' Counsel, et al., United States Su- preme Court Case No. 81-1002 (February 25, 1982); 71 L.Ed.2d 455 (1982); Cleveland Electric Illuminating Company v. The Pub- lic Utilities Commission of Ohio, United States Supreme Court Case No. 82-704 (Jan- uary 10, 1983), 51 U.S.L.W. 3507 (1983).) The factual situation giving rise to this Appeal has not changed at all from the prior two cases. Appellant once again seeks the opportunity to relitigate issues previously decided in Consumers' Counsel v. Pub. Util. Comm., 67 Ohio St.2d 153, 423 N.E.2d 820 (1981). The instant appeal arose out of Case No. 81-146-EL-AIR, a proceeding before the 2 Public Utilities Commission of Ohio. In No. 81-146-EL-AIR, the Commission stated with regard to the four terminated units that: Applicant has requested an allowance for ratemaking purposes for the amor- tization of the costs incurred with respect to four cancelled nuclear u- nits. This subject was fully discuss- ed in Cleveland Electric Illuminating Company, Case No. 79-537-EL-AIR, Opin- ion and Order, July 10, 1980, in which the Commission approved such an amor- tization. The Commission approved the same amortization in Applicant's sub- sequent rate case, eveland ctric Illuminating Company, Case No. 80-376- EL-AIR , supra, and approved a simi- lar amortization in Ohio Edison, Case No. 80-141-EL-AIR, Opinion and Order, April 9, 1981. The Commission would approve the amortization again if it were not constrained by the decision of the Supreme Court of Ohio in Office of th umers' Vv. blic t 67 Ohio S&t.2d 153 (1981). This case clearly holds that this expense is, as a matter of law in Ohio, not includable as an op- erating expense for ratemaking pur- poses. The Commission must, there- fore, deny applicant's request. e Clevela ct t Company, Case No. 81-146-EL-AIR, Opin- ion and Order at 28 (March 17, 1982). 3 The Commission went on, however, to state: The Commission believes that the re- turn allowed in this proceeding pro- vides cevenues sufficient to provide for amortization of that balance over a reasonable period of time. Accord- ingly, although we cannot allow an amortization allowance for ratemaking purposes, for book purposes, the ap- plicant is authorized to amortize the balances assignable to the terminated nuclear units over an appropriate pe- riod of time, not to exceed 15 years. Id. at 28. The Commission in addressing the rate of return stated specifically: We are of the opinion that the in- crease in investors' perceived risk should be reflected in the return on equity granted in this case. Indeed, the Supreme Court in Consumers’ Coun- sel_v. Public Utilities Commission, . specifically acknowledged that ts decision in that case could seri- ously disadvantage Ohio utilities in the capital markets (Id. at p. 176). As a result, instead of selecting the low point of the Staff's recommended range, we are of the opinion that the first quartile should be utilized. Id. at 40. 4 Following the Commission's decision, the Appellant undertook its second appeal of the same issue to the Ohio Court, once again alleging that the Commission's deci- sion in Case No. 81-146-EL-AIR, supra, and the Ohio Supreme Court's decision in Con- u ‘Counsel v. b Utilities Con- mission, 67 Ohio St.2d 153, 423 N.E.2d 820 (1981) was incorrect and violative of the Fifth and Fourteenth Amendments of the U.S. Constitution. The Ohio Supreme Court, in addressing the issues raised by Appellant, stated: The question whether the expenditures associated with the four terminated generating stations may be included in test year expenses as allowable oper- ating expenses was addressed by this Court in , - Supra. In that case we held in the syllabus that: "The Public Utilities Commission's treatment of a utility's investment in terminated nuclear generating stations as amortizable costs to be recovered from the utility's ratepayers is in- consistent with the ratemaking formula 5 contained in R.C. 4909.15 and is un- reasonable and unlawful." In the present case, we are confronted with exactly the same issue arising out of exactly the same facts. We are no more persuaded by appellant's argu- ments today than we were when they were originally advanced in Consumers' Counsel. We adhere to our position taken in that case for the reasons ex- pressed therein. Cleveland Electric Illuminating Com- pany _v. Public Util. Comm., 4 Ohio St.3rd 107, 108-109 (1983). The Ohio Court's discussion of consti- tutional matters was not necessary to its result. The Court's decision in the case below was supported by its reasoning in Consumers' Counsel without the necessity of addressing the constitutional issues raised by Appellant. Cleveland Electric Illuminating Co. v. Pub. Util. Comm., su- pra at 108-109. Nevertheless, the Court did address the constitutional claim made by Appellant as follows: Appellant suggests, however, that such an interpretation of a... 6 4909.15(A)(4) cometitutes a confisca- tion of private property in violation of the Fifth and Fourteenth Amendments to the United States Constitution. We recently addressed this precise con- stitutional question in Dayton Power & Light Co. v. Pub. Util. Comm. (1983), S Gase St. 3a 92. After a thorough review of the applicable constitution- al standards, we determined that R.C. 4909.15(A)(4) does not violate the Fifth and Fourteenth Amendments, stat- ing, at pages 103-106: "***Pursuant to the statutory ratemaking formula investors are as- sured a fair and reasonable return on property that is determined to be used and useful, R.C. 4909.15(A)(2), plus the return of costs incurred in ren- dering the public service, R.C. 4909.15(A)(4), while consumers may not be charged for utility investments and expenditures that are neither included in the rate base nor properly catego- rized as costs. [Footnote omitted.) We see no constitutional infirmity in the balance thus struck by the General Assembly. *« ” « "“***Per ge confiscation in a u- tility rate case may exist as an ab- stract premise, but the constitutional cases make it clear that a successful challenge must demonstrate that the rate order when reviewed in its en- tirety falls outside the ‘broad zone of reasonableness' [Permian Basin Area Rate Cases (1968), 390 U.S. 747, 770) 7 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.) * * « "***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 Con- stitution 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 confis- catory. The commission submits that CEI's failure to do s0 "precludes a finding of confiscation in this case." The commission specifically adjusted the cost of common equity up- ward to reflect the perceived in- creased risk to investors as a result of this court's decision in Consumers' 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 Sane This adjustment buttresses the conclusion that the instant order falls within the broad zone of reason- ableness. Thus, even if appellant were correct in its assertion that the exclusion based on R.C. 4909.15(A)(4) is improper, there is nothing in the record to suggest that the commis- sion's order, viewed in its entirety, would not still be constitutional be- cause “any rate selected*** from the broad zone of reasonableness*** cannot be attacked as confiscatory." Permian Basin Area Rate Cases, supra, at page 770. Id. at 109-110. It is from the Ohio Court's rejection of Appellant's constitutional claims that Appellant seeks to perfect the instant ap- peal. There are several other brief points Appellee feels compelled to address. First, Appellant implies that it first presented the constitutional questions to the Ohio Supreme Court in its Brief as In- tervening Appellee in Consumers’ Counsel ub. Ut . 67 Ohio St. 153, 423 N.E.2d 820 (1981). (Appellant's Jurisdic- tional Statement at 8-9). However, con- trary to Appellant's assertion, Appellant did not, in Consumers’ Counsel, supra, raise any constitutional issue in its 9 Brief as Intervening Appellee. Review of this opinion of the Ohio Supreme Court re- veals that nowhere was any federal ques- tion mentioned, nor was any federal ques- tion mentioned in the dissenting opinions in Consumers' Counsel, supra. There was no presentation of a federal question in Consumers' Counsel by Appellant, and the suggestion that a federal question was raised on brief is simply incorrect. Secondly, Appellee is compelled to take exception with Appellant's descrip- tion of the consequences of non-recovery. Appellant suggests that there will be a severe financial impact resulting from a write-off of the costs associated with the cancelled plants. Yet, Appellant in its 1979 Annual hapert to Shareholders pre- sented a rather different picture than the gloom and doom scenario presented in its jurisdictional statement. 10 ..-CEI informed its investors in its "1979 Annual Report": "***The Company [CEI] will seek the approval of the Federal Energy Regulatory Commission and the Public Utilities Commission of Ohio for authority to amortize [the costs previously expended toward, the four nuclear units whose construction CAPCO terminated] over a suitable nun- ber of years. The extent to which these costs may be recovered through rates will be determined by the PUCO. If any costs of termination are not permitted to be recovered, the Company would be required to reduce Net Income by the disallowed amount. In any e- vent, the resolution of these matters should not have a material adverse in- pact on the financial position of the Company. Consumers' Counsel _v. Pub. Util. Comm., 67 Ohio St.2d 153, 171, 423 N.E.2d 820 (1981) (Justice Locher, concurring.). Finally, it should be noted that Ap- pellant was granted an additional incre- ment to the rate of return to reflect the perceived increase in risk flowing from the Ohio Supreme Court's decision in Con- sumers' Counsel. As such, the _ conse- quences of non-recovery, by Appellant's own admission, will “not have a material ll adverse impact" upon Appellant's financial position. MOTION TO DISMISS AND IN THE ALTERNATIVE, MOTION TO AFFIRM Pursuant to Supreme Court Rule 16.1(b), and 16.1(d), Appellee, Office of the Consumers' Counsel, hereby moves that this Court dismiss the appeal of the Cleveland Electric Illuminating Company as improperly taken from the Supreme Court of Ohio under 28 U.S.C. §1257(2). In the al- ternative, the Office of the Consumers’ Counsel moves that this Court affirm the decision of the Supreme Court of Ohio ren- dered in the case below. ARGUMENT IN SUPPORT OF MOTION TO DISMISS This is the third time in a two year period that Appellant has attempted to in- voke the jurisdiction of this Court with 12 respect to the same issue under 28 U.S.C. §1257(2), which states in pertinent part: Final judgments or decrees rendered by the highest court of a state in which a decision could be had, may be re- viewed by the Supreme Court as follows: *« * * (2) By appeal, where is drawn in ques- tion the validity of a statute of any state on the ground of its being re- pugnant to the Constitution treaties or laws of the United States, and the decision is in favor of its validity. * * * The express language of 28 U.S.C. §1257(2) requires that the highest court of a state render a decision favoring the validity of a state statute before review of the state court decision may be sought in the Supreme Court of the United States. In 1981, Appellant, appealing from the decision of the Ohio Supreme Court in Con- sumers' Counsel v. Pub. Util. Comm., 67 Ohio St. 2d 153, 423 N.E. 2d 820 (1981), 13 presented the following questions to this Court: QUESTIONS PRESENTED a May the State of Ohio, by stat- ute, constitutionally require a public utility to invest its capital to pro- vide adequate service for the conven- ience of the public in the future and simultaneously prohibit, by statute, the utility from recovering through rates such capital when prudently in- vested? ae May the State of Ohio, by stat- ute, constitutionally prohibit a pub- lic utility from recovering through rates its capital, prudently invested for the convenience of the _ public where the undisputed facts show that the utility, and its investors, have never been compensated through the au- thorized or achieved rate of return for the risk of exclusion of such cost from rates? This Court dismissed that appeal "for want of a properly presented federal gques- tion." The Cleveland Electric Illumina- ting Company v. Office of Consumers' Coun- sel, et al. United States Supreme Court Case No. 81-1002 (February 25, 1982), 71 L. Ed. 2d 455 (1982). 14 In 1982, following the Ohio Court's summary dismissal of an appeal to it on the same issue with the same facts, Appel- lant again appealed to this Court, pre- senting the same questions a second time: QUESTIONS PRESENTED hs May the State of Ohio, by stat- ute, constitutionally require a public utility to invest its capital for the convenience of the public to provide adequate service in the future and si- multaneously prohibit, by statute, that utility from recovering through rates such capital when prudently in- vested? 2. May the State of Ohio, by stat- ute, constitutionally prohibit a pub- lic utility from recovering through rates its capital, prudently invested for the convenience of the public, where the undisputed facts show that the utility, and its investors, have never been compensated through the au- thorized rate of return for the risk of exclusion of such cost from rates? The second appeal, like the first, was dismissed by this Court "for want of a properly presented federal question.” The leve tric u t a 15 The Pu on of QO. United States Supreme Court Case No. 82- 704 (January 10, 1983), 51 U.S.L.W. 3507 (1983). In this appeal, again on the same is- sue with the same facts, Appellant pre- sents the following question to the Court: QUESTION PRESENTED May the State of Ohio, by statute, constitutionally require a public u- tility to invest its capital for the convenience of the public to ensure reliable service in the future and si- multaneously prohibit, by statute, that utility from recovering through rates such capital when prudently in- vested? (Appellant's Jurisdictional Statement, p. i). It is believed that the second ques- tion was omitted in this appeal because the adjustment made in the case below by the Public Utilities Commission to the au- thorized rate of return to account for any 16 increase in investor-perceived risk asso- ciated with the cancelled plants has ef- fectively silenced that complaint. It is interesting to note that, having twice Claimed to this Court a constitutional right to explicit rate of return recogni- tion for the cancelled plants, and having finally received it from the Ohio Commis- sion in the case below, Appellant itself offered expert testimony in its subsequent rate case that such explicit recognition Was unnecessary because of the rate of re- turn methodology traditionally employed by the Ohio Commission. (Appellant's Appen- dix, p. 134). Regardless, this is the third time this Court has been asked to review the same question related to the same issue based on the same facts. Rule 15.1(a) of the Rules of the Su- preme Court of the United States (28 U.S.C.A., U.S. Sup. Ct. Rule 15) requires 17 that a jurisdictional statement contain the questions to be presented by the ap- peal. Many decisions have labeled a Ju- risdictional Statement as the indicator of what issues the Supreme Court has decided in a summary disposition. Mercado v. Rockefeller, 502 F.2d 666 (2d Cir. 1974), cert. denied, 420 U.S. 925 (1975). Appel- lee submits that this Court has already disposed of the question submitted in this appeal by its dismissal in Case Nos. 8l- 1002 and 82-704. Furthermore, this Court has ruled on numerous occasions that summary affira- ances and dismissals without doubt reject the specific challenges presented in the Statement of Jurisdiction. Mandel v. Bradley, 413 U.S. 173° (1977). This Court, in its Per Curiam opinion on the constitu- tionality of Maryland's Election Code, en- phasized that summary actions should not 18 be understood as breaking new ground, but as applying principles established by pri- or decisions to the particular facts in- volved. This Court further indicated that summary affirmances and dismissals prevent lower courts from coming to opposite con- clusions on the precise issues presented and necessarily decided in the cases sun- marily dismissed. Mandel v. Bradley, su- pra. Since the question presented here is id atical to those presented in the two previous CEI appeals, it follows, pursuant to Mandel, supra, that the prior decisions are dispositive of the issue presented in this appeal. Moreover, it is equally clear that a summary disposition either by affirmance or by dismissal is a disposition on the merits and need not be reconsidered by the Court. Hicks v. Miranda, 422 U.S. 332 19 (1975). Appellant has had its day in court, and has been unsuccessful. Appel- lant, having failed to obtain this Court's review of a claimed federal question in its two previous appeals, cannot revive its already unsuccessful arguments in a subsequent appeal on the same issue with the same facts. The summary dismissal of the issues presented in Case Nos. 81-1002 and 82-704 are, therefore, dispositive of the issue presented herein. It is also clear that relitigation of the identical facts on grounds either pre- viously presented or grounds Appellant failed to present in a proper and timely fashion is barred by the doctrine of res udicat The doctrine of fes judicata operates to bar repetitious suits involving the same cause of action. The doctrine is based upon considerations of economy of 20 judicial time and public policy favoring the establishment of certainty in legal relations. = Vv et, 414 U.S. 573, 578-579 (1974). This Court has also previously noted that res judica- ta is founded upon "the generally recog- nized public policy that there must be some end to litigation and that when one appears in Court to present his case, is fully heard, and the constituted issue is decided against him, he may not later re- new the litigation in another Court." Heiser v. Woodruff, 327 U.S. 726, 733 (1946). While the instant appeal may have grown from an Ohio Supreme Court decision separate and distinct from the one from which Appellant took its first appeal to this Court, Appellant raises issues herein which have already been considered and disposed of in the previous two appeals. 21 The Ohio Court agrees: In the present case, we are confronted with exactly the same issue arising out of exactly the same set of facts cts. We are no more persuaded by appel- lant's arguments today than we were when they were originally advanced in Consumers' Counsel. We adhere to our ositio aken that 5 t n. Cc and c. Illum. Co. v. Pub. Util. Comm., 4 Ohio St. 3d 107 at 108-109, 447 N.E.2d 746 (1983). (Enm- phasis added). It is that language of the Ohio Court which indicates clearly that the basis for its decision is no different from that in Consumers' Counsel from which Appellant originally appealed. The fact that the Ohio Court gratuitously included a discus- sion of constitutional matters cannot change the meaning of its express language that the basis for its decision is limited to its interpretation of Ohio ratemaking law as found in its discussion in Consun- ers' Counsel. 22 It is apparent that Appellant had the opportunity to present its constitutional arguments, as an Intervening Appellee, both to the Public Utilities Commission of Ohio and the Ohio Court, in Consumers' Counsel, supra. Appellant is now, through this third appeal, seeking to present an argument which was not made in a timely manner in Consumers' Counsel. This Court was faced with a similar situation in Grubb v. Pub. Util. Comna., 281 U.S. 470 (1930). In Grubb this Court stated: validity of the order upon one ground not brought to the attention of the gtate court - a ground arising out of the granting to another interstate mo- tor line of a certificate to operate busses over a route including the loop at Portsmouth; and he insists that this ground of objection is not con- 23 cluded by the judgment of the state court, and therefore is open to exami- at dju tion upo t er- it e di ct court. But the judgment has a broader operation as res judicata than is thus suggested. The certificate referred to was grant- ed several months before the appellant applied for a certificate and he had personal knowledge of it from the time it was granted. It was shown upon the records of the commission and was eas- ily accessible when the hearing was had upon his application. Thus it is a matter which, if having the bearing now suggested, could have been brought to the attention of the commission ei- ther at that hearing or in hie request for a rehearing (543, General Stat- utes); and, if it was not then given proper effect, he could have brought it to the attention of the state court and have made the same claim in re- spect of it that is now made in his bill. he had knowledge. He was not at lib- erty .to prosecute that right by piece- meal, as by presenting a part only of the available grounds and reserving others for another suit, if failing in that. 24 t bed wa ~ vailab t the ap- pellant must abide the rule that a judgment upon the merits in one suit is rc d in othe h the ar d ct- t a the same, not only as respects matters ac- tually presented to sustain or defeat the right asserted, but also as re- spects any other available matter which might have been presented to that end. Grubb, supra, at 478-479. (Emphasis added). The question here is, when the state court opinion appealed from is based sole- ly on a state ground articulated in an earlier decision, can Appellant now claim a federal question so as to invoke this Court's jurisdiction? Certainly not. The Ohio Court made it clear that its earlier decision and its decision in the matter sub judice was strictly limited to a construction of Ohio Rev. Code §4909.15(A)(4), which defines allowable Operating expenses as a component of the ratemaking formula set out in Ohio law. 25 The question decided by the Ohio Court was precisely articulated by it: Notwithstanding the provisions that impose a duty on utility companies to plan for the future, the question un- der R.C. 4909.15(A)(4) remains whether the cancelled plant expenditures rep- resent "(tjhe cost to the utility of rendering the public utility service for the test period." Consumers' Counsel Vv. Pub. Util. Comm., 67 Ohio St. 2d 153, 163-164, 423 N.E.2d 820 (1981). The Court's answer to that question was likewise narrowly limited: 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 serv- ice to the public for the test period. The extraordinary loss sustained by CEI in connection with the terminated nuclear plants cannot be transformed into an ordinary operating expense pursuant to R.C. 4909.15(A) (4) by Commission fiat. * * * The Commission's characterization of the investment in the four terminated 26 plants as "costs" under R.C. 4909.15(A)(4) in light of what we per- ceive to be the legisiative intention underlying the section is unreason- able. Therefore, to the extent that the commission's order in regard to the cancelled plants is predicated on R.C. 4909.15(A)(4), the order cannot stand. Consumers' Counsel, supra at 164. The reasoning of the Ohio Court in Consumers' Counsel on which it based its decision in the case below does not ad- dress a federal question, but rather re- lies solely on state grounds. Appellant seeks to address the same issue on a ground available to it, but not put for- ward for the Court's consideration, in Co ers' ounsel. The issue is the same; the parties are the same; and the facts are the same. Having failed to per- suade the Ohio Supreme Court through its arguments in Consumers' Counsel. and this Court in Case No. 81-1002, as well as Case No. 82-704, the Appellant now wishes the 27 same parties to relitigate the same issue based upon the same facts. The appropriate question is how many times must we reargue the question. This Appellee most strenuously objects to a piecemeal approach to litigation. Appel- lant had a prior opportunity to present its arguments on the identical facts pre- sented in the proceeding sub judice and apparently chose not to do s0. The doc- trine of res judicata compels dismissal. Even if res judicata were not applica- ble here to bar a federal claim by Appel- lant, the fact that the Ohio Court's de- cision is supported by adequate state grounds precludes review by this Court. It is well settled that the decision of a state court supported by adequate and in- dependent state grounds will not be re- solved by the United States Supreme Court. Henry v. Mississippi, 379 U.S. 443 28 (1965). The reliance of the Ohio Court in the matter sub judice on the state grounds enunciated in Consumers' Consent precludes review by this Court: Before we may undertake to review a decision of the court of a State it must appear affirmatively from the re- cord, not only that the federal ques- tion was presented for a decision to the highest court of the State having jurisdiction but that its decision of the federal question was necessary to the determination of the cause. Lynch v. New York, 293 U.S. 52, 54, 55 S. Ct. 16, 17, 79 L. Ed. 191, and cases there cited. Honeyman v. Hanan, 300 U.S. 14,18; 57 S. €C. 356, sea C20eres (Emphasis added). Furthermore, even where both state and federal questions are decided by the state court: It is, of course, a familiar principle that this Court will decline to review state court judgments which rest on independent and adequate state grounds, even when those judgments al- so decide federal questions. Henry v. Mississippi, supra at 446. 29 The justification for the adequate state ground rule has been explicitly stated by this Court: The reason is so obvious that it has rarely been thought to warrant state- ment. It is found in the partitioning of power between the state and federal judicial systems and the limitations of our own jurisdiction. Our only power over state judgments is to cor- rect them to the extent that they in- correctly adjudge federal rights. And our power is to correct wrong judg- ments, not revise opinions. » 324 U.S. 117, 125- 126 (1945). Not only was the case below not decid- ed on the basis of federal questions, the claimed conflict between state law and the Federal Constitution simply does not ex- ist. The Ohio Court did not scrutinize the entire Ohio statutory ratemaking for- mula in this case. The Ohio Court only reviewed the construction of Ohio Rev. Code §4909.15(A)(4) which defines proper 30 operating expenses for ratemaking pur- poses. The mere exclusion of a cost from allowable operating expenses does not per se render the rates confiscatory. This Court has stated: Under the statutory standard of "just and reasonable" it is the result reached not the method employed which is controlling. edera Ow mm. v. Hope Natural Gas Co., 320 U.S. 591, 602 (1944). This Court, in discussing the duties of the Federal Power Commission in setting rates, has defined just and reasonable rates as those: which will be sufficient to permit the company to recover its cost of service and a reasonable return on its invest- ment. FPC v. United Gas Pipe Line Co., 386 U.S. 237, 243 (1967). (Emphasis ad- All that has been determined by the Ohio Court is that the costs of cancelled 31 plants are not a cost of service. The re- turn authorized was adjusted upward spe- cifically to recognize the effects of the Court's decision on the risk perceived by investors. Cleve. Elec. Illum. Co., supra at 109. The exclusion of one cost from allowable operating expense does not auto- matically render rates resulting from the application of the Ohio ratemaking scheme in conflict with the constitutional stand- ards enunciated by this Court. It is clear, therefore, that this Court is faced with nothing more than what it faced in Appellant's two previous ap- peals. The issue is the same; the facts are the same; the parties are the same; and the basis for the decision of the Ohio Court is the sane. This Court has already disposed of the issue twice; further ap- peal is barred by res judicata; adequate state grounds support this, as well as the 32 previous, decision; and no conflict exists between state law and federal Constitu- tion. It is respectfully requested that this Honorable Court dismiss this appeal. ARGUMENT IN SUPPORT OF MOTION TO AFFIRM Appellant has sought to blend several concepts into one argument. However, in s0 doing, Appellant has failed to grasp one essential problem with its position. The hurdle Appellant must overcome was set out quite distinctly and clearly by the Ohio Supreme Court in Dayton Power & Light Co. v. Pub. Util. Comm., 4 Ohio St.3rd 91, 447 N.E.2d 733 (1983). That problem is to determine whether the expenses associated with the cancelled nuclear plants are al- lowable operating expenses. The question raised, i.e. whether the costs are recov- erable is one which rests upon state law, 33 as the Ohio Supreme Court correctly point- ed out: "it is not the Uniform System of Ac- counts which governs public utility ratemaking, but rather the Ohio Re- vised Code." Dayton Power & Light Co., supra at 104. The question of whether the costs are includable for ratemaking purposes is one which is governed by Ohio law and, in par- ticular, Ohio Rev. Code §4909.15(A)(4). In Consumers' Counsel, the Ohio Su- preme Court specifically limited its de- cision to “whether the cancelled plant ex- penditures represent ‘[t]Jhe cost to the utility of rendering the public utility service for the test period.'" Consumers' Counsel, supra at 153. The Ohio Court strictly limited its determination to what costs appropriately fall within the mean ing of Ohio Rev. Code §4909.15(A)(4). In Cleveland Electric Illuminating Company v._ 34 Pub. Util. Comm., 4 Ohio St. 3rd 4107 (1983), the Ohio Court, once again pre- sented with the question of the includa- bility of cancelled plant costs as allow- able operating expenses, stated: Th tion whether expenditures associated with the four terminated nuclear ;aenerating stations may be in- cluded in test year expenses as allow- able operating expenses was addressed by this court in Consumers' Counsel supra. In that case we held in the syllabus that: "The Public Utilities Commis- sion's treatment of a utility's in- vestment in terminated nuclear gener- ating stations as amortizable costs to be recovered from the utility's rate- payers is inconsistent with the rate- making formula contained os 2&€.&, §4909.15 and is unreasonable and un- lawful." In the present case, we are con- fronted with exactly the same issue arising out of exactly the same set of facts. We are no more persuaded by appellant's arguments today than we were when they were originally ad- vanced on Consumers’ Counsel. We ad- here to our position taken on that case for the reasons expressed therein. 35 Cl land Electr Illuminatin om- pany v. Pub. Util. Comm., supra at 108-109. (Emphasis added). The question presented to the Court in Consumers' Counsel involved the interpre- tation of Ohio Rev. Code §4909.15(A)(4). Rev. ...the question under R.C. §4909.15(A) (4) remains whether the cancelled plant expenditures represent "Ct)he cost to the utility of render- ing the public utility service for the test period." Consumers' Counsel, supra at 163-164. The court went on to interpret Ohio Code §4909.15(A)(4) as follows: It is our opinion that R.C. §4909.15 (A)(4) is designed to take into ac- count the normal recurring expenses incurred by utilities in the course of rendering service to the public for the test period. Consumers’ Counsel, supra at 164. Hence, it is clearly apparent that the decision below was derivative of the plain meaning of the statute's language. CEI 36 investors have no statutory right to re- cover their investment through amortiza- tion as service-related costs, when that “investment*** never provided any service whatsoever." Id. In reaching this hold- ing, the Ohio Supreme Court was fairly in- terpreting the law of the State of Ohio. This Court should affirm the Ohio Court's decision as the United States Supreme Court has stated that state "courts have the final authority to interpret and where they see fit to reinterpret (their) state's legislation. Garner v. Louisiana, 368 U.S. 157, 169 (1961). Where both federal and state questions have been decided by the state court, "Cit) is, of course, a familiar principle that this Court will decline to review state court judgments which rest on inde- pendent and adequate state grounds, even when those judgments also decide federal 37 questions." Henry v. Mississippi, 379 U.S. 443, 446 (1965). The rationale for the adequate state ground rule was recent- ly reiterated by this Court in Zacchini v. Scr s-Howard Broadcasting Co.:"(OJur on- ly power over state judgments is to cor- rect them to the extent that they incor- rectly adjudge federal rights." 433 U.S. 562, 566 (1977). The Ohio Court simply re-affirmed its prior decision handed down in Consumers' Counsel. The Court's decision to address the constitutional claims presented by Ap- pellant in no way serves as a basis for the Ohio Court's decision. Rather, the Ohio Court's decision in Consumers' Coun- sel re-affirms the adequate state grounds for the Court's decision. Simply put, the decision below hinged upon the definition of the word "cost" as found in Ohio Rev. Code §4909.15(A)(4). The interpretation 38 neither presents a federal question nor gives rise to one. The disposition of the issue involves nothing but state law. Appellant further argues that its property, meaning the investment in the terminated nuclear plants, has been con- fiscated in violation of the Fifth and Fourteenth Amendments to the United States Constitution. In support of this conten- tion, the Appellant directs this Court's attention to Bluefield Water Works Co. v. b Service omm on, 262 U.S. 679 (1923). Bluefield mandates that “a public utility is entitled to such rates as will permit it to earn a return on the value of the property which it employs for the con- venience of the public." 262 U.S. at 692- 93. (Emphasis added.) As this Court noted in Bluefield: Rates which are not’ sufficient to yield a reasonable return on the value of the property used, at the time it 39 8 to render the rvice, are unjust, unreasonable, and confis- catory, and their enforcement deprives the public utility company of its property in violation of the 14th Amendment. Id. at 290 (Emphasis added). The investment in the cancelled plants was never used to render service to the public. Ohio Rev. Code §4909.15(A)(4), as interpreted by the Ohio Supreme Court, establishes this same rule for the fixa- tion of a public utility's operating ex- penses. Ohio law, in accord with Blue- field, provides for the implementation of rates based upon property used to render service to the public. In this case, the Ohio Court found that this investment was not even related to property which provid- ed service to Appellant's customers. Con- sumers' Counsel, 67 Ohio S:.2a at 164, 423 N.E.2d at 827. Thus, the Appellant's property has not been confiscated within 40 the meaning of Bluefield and the Fifth and Fourteenth Amendments. The vital, yet unstated, premise in the Company's argument that its property has been unconstitutionally confiscated is that the "property" is the Company's in- vestment in the cancelled projects. This view has its roots in Mr. Justice Brandeis' dissenting opinion in Pacific Gas & Electric Co. v. San Francisco, 265 U.S. 403 (1924). The federal courts have “recognized, however, that Justice Brandeis' formula for ascertaining rate base--the amount of capital prudently in- vested--was not to become the prevailing rule." ee, Vv. FERC, 668 F.2d 1327 (D.C. Cir. 1981). Ap- pellant's investment was related to prop- erty that never provided utility service to the public, and, whether or not this 41 investment can be characterized as "prop- erty", which is doubtful, it is a cost that cannot lawfully be recovered from the Company's customers. What Appellant seeks is for this Court to hold, as a matter of law, with no re- gard for the overall rate relief granted, that the denial of recovery of the costs associated with the four terminated units results in the confiscation of Appellant's property. Such a decision would run con- trary to the admonition set out in Federal Power Commission v. Natural Gas Pipeline Company, 315 U.S. 575 (1942): The Constitution does not bind rate-making bodies to the service of any single formula or combination of formulas. Agencies to whom this leg- islative power has been delegated are free, within the ambit of their statu- tory authority, to make the pragmatic adjustments which may be called for by particular circumstances. Once a fair hearing has been given, proper find- ings made and other statutory require- ments satisfied, the courts cannot in- tervene in the absence of a clear 42 showing that the limits of due process have been overstepped. If the Commis- sion's order as applied to the facts before it and viewed in its entirety, produces no arbitrary result, our in- quiry is at an end. Id. at 586. (Emphasis added). The Ohio Court specifically reviewed the order of the Commission and found that: there is nothing in the record to sug- gest that the commission's order, viewed in its entirety, would not still be constitutional because "any rate selected*** from the broad zone of reasonableness*** cannot be at- tacked as confiscatory. Cleveland Electric I[Illuminatin Con- pany v. Pub. Util. Comm., supra at 110. The Ohio Court did nothing less than follow the guidelines set out by this Court in atura a eli which was subsequently affirmed in Federal Power Commission v. Hope Natural Gas Coa- pany. 320 U.S. 591 (1944) wherein the Court stated: when the Commission's order is chal- lenged in the courts, the question is 43 whether that order "viewed in its en- tirety" meets the requirements of the act...under the statutory standard of “just and reasonable" it is the result reached not the method employed which is controlling. ...It is not theory but the impact of the rate order which counts. If the total effect of the rate order cannot be said to be unjust and unreasonable judicial inguiry un- der the Act is at an end.... And he who would upset the rate order under the Act carries the heavy burden of making a convincing showing that it is invalid because it is unjust and un- reasonable in its consequences. Id. at 602. (Emphasis Added). The inclusion or exclusion of an item does not, in and of itself, render the de- cision of the Ohio Court confiscatory. The whole order must be viewed in its en- tirety. In such a context, the decision appealled from does not result in an un- constitutional confiscation of property. The exclusion of cancelled plant costs from includable expenses for ratemaking purposes does not, by itself, give rise to a claim of confiscation. 44 Finally, the Court's discussion of the ratemaking process in Hope Natural Gas Co., need be recalled. The ratemaking process under the Act, i.e., the fixing of "just and reasonable" rates, involves a balanc- ing of the investor and the consumer interests. Thus we stated in the Natural Gas Pipeline Co. case that “regulation does not insure that the business shall produce net revenues." 315 U.S. p. 590, 86 L.Ed. 1052, 62 S$ Ct 736. But such considerations aside, the in- vestor interest has a legitimate con- cern with the financial integrity of the company whose rates are being reg- ulated. From the investor or company point of view it is important that there be enough revenue not only for operation expenses but also for the capital costs of the business... That return, moreover, should be sufficient to assure confidence in the financial integrity of the enterprise, so as to maintain its credit and to attract capital. Hope Natural Gas Co., supra at 603. Two points need be made. First, the Ohio ratemaking formula provides just such a balancing of the interests of the in- vestor and the consumer. As the Ohio 45 Court stated in Dayton Power & Light Co. v. Pub. Util. Comm., supra; Under the ratemaking formula now in effect consumers are not chargeable for utility investments and expendi- tures 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: '***Tt is only proper that their [the investors'] venture be found operational before they commence to recoup their capital outlays from the consumers.' Consumers' Counsel v. Pub. Util. Comm. (1979), 58 Ohio St. 2d 449, 456-457 [12 0.0.3d 378]. In Consumers' Counsel vv. Pub. Util. Comm., (1979), 58 Ohio St. 2d 449 [12 0.0.3d 378] (hereinafter "To- ledo Edison"), this court held that the Davis-Besse Unit 1 generating sta- tion, which was not "used and useful in rendering the public utility serv- ice" pursuant to R.C. §4909.15(A)(1),. could not be included in the utility's rate base. * *« * While we again note that Toledo Edison involved rate base considera- tion 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 46 a consistent position in balancing in- vestor and consumer interests in util- ity ratemaking. Pursuant to the stat- utory ratemaking formula investors are assured a fair and reasonable return on property 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 invest- ments and expenditures that are nei- ther included in the rate base nor properly categorized as costs." We see no constitutional infirmity in the balance thus struck by the General Assembly. Id. at 102-103. Second, the financial integrity of the Appellant is not in any way effected by the Ohio Court's decision and possible write-off, as Appellant so readily ac- knowledged in its 1979 Report to Share- holders: If any costs of termination are not permitted to be recovered, the Company would be required to reduce net income by the disallowed amount. I ° e matters should not have a material ad- verse impact on the financial position of the Company. 47 Consumers' Counsel Vv. Pub. Util. Comm., supra at 171. (Emphasis added). The strictures set out in Hope Natural Gas _Co., have been adhered to. There is no confiscation. Finally, Appellee is compelled to ad- dress one final line of argument set out by Appellant. Appellant suggests’ that Washington Gas Light Co. v. Baker, 188 F.2d 11 (D.C. Cir. 1950), Cert. denied 340 U.S. 952 (1951) is "closely analogous" to the situation presented in the case sub judice. Such is most certainly not the case. Washington Gas Light dealt with a situa- tion wherein a plant used in the manufac- ture of gas was abandoned prior to full recovery through depreciation due to a switch to natural gas. Prior to abandon- ment, the plant in question was used in providing service. This is perhaps the 48 most important distinction noted by the Court in discussing this particular aspect; If a _unit of property resulting from prudent investment becomes obso- lete before it has been recovered in full by the investor (either through annual depreciation charges or through returns sufficient to compensate for such inadequacy), it is not necessar- ily erroneous as a matter of law for the Commission to include it in the rate base until such recovery has oc- curred.... But inclusion in the rate base must meet the test of justness and reasonableness to the consumers as well as to the investor. Id. at 19. This distinction was recognized by the District of Columbia Court of Appeals in NEPCO Municipal Rate Committee v. FERC, supra, wherein the Court, in addressing the argument that property prudently in- vested should be included in rate base, stated: Similarly, nothing in Washington Gas Light Co. v. Baker, supra, or Demo- Cratic Natural Committee v. Washington Metropolitan Area Transit Commission, 49 supra, conflicts with FERC's decision on this case. Those cases involved property used and retired from service before investors had been fully con- pensated. Neither case involved the issue presented here--how expenditures should be allocated when a project is cancelled before any use of the facil- ity begins. Id. at 1334. In the instant case, the expenditures never provided any service. Appellant seeks to totally insulate investors from any risk. The Ohio Court has done nothing more than properly allocate the risk as- sociated with cancellation in accordance with Ohio law. The decision by the Ohio Supreme Court in Cleveland Electr i ompa v. Pub. Util. Comm. did nothing more than adhere to the Court's previous decision in Consumers' Counsel. The decision in the first instance rests solely upon adequate 50 state grounds. Secondly, the decision ta- ken as a whole was not s0 unjust and un- reasonable as to result in the confisca- tion of Appellant's property. Therefore, this Court should affirm the decision of the Ohio Supreme Court in Cleveland Elec- tric Illuminating Company v. Pub. Util. Comn. CONCLUSION The instant appeal is nothing more than a third attempt to present the iden- tical question which has twice previously been brought before this Court, arising out of the same facts. This Court's prior dispositions, as well as the doctrine of res judicata compel dismissal. Further, the decision by the Ohio Supreme Court is based upon adequate state grounds. This Court should, therefore, sustain Appel- lee's Motion to Dismiss this appeal. In 51 the alternative, Appellee submits that the decision of the Ohio Supreme Court should be affirmed for the reasons set out in Ap- pellee's Motion to Affirm. Respectfully submitted, WILLIAM A. SPRATLEY CONSUMERS' COUNSEL MARTIN J. MARZ Associate Consumers' Counsel Counsel of Record GRETCHEN J. HUMMEL STEVEN M. SHERMAN Associate Consumers' Counsel Office of the Consumers' Counsel 137 East State Street Columbus, Ohio 43215 (614) 466-1312 Attorneys for Appellee --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385011_0046%3A3. Public record. Not legal advice.