IN THE SUPREME COURT OF OHIO. Appellant,. Appeal from the Public Utilities Commission of Ohio

Transcription

1 IN THE SUPREME COURT OF OHIO Ohio Partners for Affordable Energy,. Case No Appellant,. Appeal from the Public Utilities Commission of Ohio V. The Public Utilities Commission of Ohio, Public Utilities of Ohio Case No GA-EXM Appellee MERIT BRIEF OF INTERVENOR-APPELLEE COLUMBIA GAS OF OHIO, INC Colleen Mooney ( ) (COUNSEL OF RECORD) OHIO PARTNERS FOR AFFORDABLE ENERGY 231 West Lima Street Findlay, OH Telephone: (614) Facsimile: (614) cmooney@ohiopartners.org COUNSEL FOR APPELLANT, OHIO PARTNERS FOR AFFORDABLE ENERGY Michael DeWine ( ) William L. Wright ( ) Stephen A. Reilly ( ) (COUNSEL OF RECORD) Steven L. Beeler ( ) Public Utilities Section 180 East Broad Street, 6t" Floor Columbus, OH Telephone: (614) Facsimile: (614) stephen.reilly@puc.state.oh.us steven.beeler@puc.state.oh.us COUNSEL FOR APPELLEE PUBLIC UTILITIES COMMISSION OF OHIO..^.i:.. t% ^ l.^i S..) Cf 'J _ Et^%,^<^^i: { fj Li ^2 tik R:`,..4^^^L, " R; 0 r';0

2 M. Howard Petricoff ( ) (COUNSEL OF RECORD) Stephen M. Howard ( ) Michael J. Settineri ( ) VORYS, SATER, SEYMOUIZ AND PEASE LLP 52 East Gay Street Columbus, Ohio Tel, (614) Fax (614) mj settinerica?vorys. com COUNSEL FOR INTERVENOR- APPELLEES THE OHIO GAS MARKETERS GROUP AND THE RETAIL ENERGY SUPPLY ASSOCIATION Daniel R. Conway ( ) (COUNSEL OF RECORD) Mark S. Stemm ( ) Eric B. Gallon ( ) PORTER WRIGHT MORRIS & ARTHUR LLP 41 South High Street Columbus, OH Telephone: (614) Facsimile: (614) Charles McCreery ( ) 1700 N.IacCorkle Ave. SE, P.O. Box 1273 Charleston, West Virginia Telephone: (304) Facsimile: (304) Stephen B. Seiple ( ) Brooke E. Leslie ( ) Columbia Gas of Ohio, Inc. 200 Civic Center. Drive P.O. Box 117 Columbus, OH Telephone: (614) Facsimile: (614) COUNSEL FOR INTERVENOR- APPELLEE COLUMBIA GAS OF OHIO, INC.

3 TABLE OF CONTENTS TABLE OF AUTHORITIES... ii INTR.ODUCTION STATEMENT OF FACTS ,... 4 LAW AND ARGUMENT...10 A. Response to Proposition of Law No. 1...: The Commission's Orders were authorized by the terms of the 2009 Stipulation, general Commission authority, and R.C B. Response to Proposition of Law No The Commission's Orders were authorized by the terms of the 2009 Stipulation, general Commission authority, and Ohio Adm.Code 4901: C. Response to Proposition of Law No. 3 : , The Commission's Orders set forth and explained the Commission's findings in sufficient detail to satisfy the requirements of R.C D. Response to Proposition of Law No. 4: The Commission's Orders reasonably concluded that modifying its prior Exemption Orders was in the public interest, consistent with R.C (A) E. Response to Proposition of Law No , The Commission's Orders reasonably concluded that the Amended Joint Stipulation met this Court's criteria for approval of stipulations CONCLUSION APPENDIX Ohio Adm.Code 4901: COH APPX, 1 i

4 CASES TABLE OF AUTHORITIES Pa es Constellation NewEnergy, Inc. v. Pub. Util. Comm., 1.04 Ohio St.3d 530, Ohio-6767, 820 N.E.2d Elyria Foundry Co. v. Pub. Util. Comm., 114 Ohio St.3d 305, 2007-Ohio-4164, 871 N. E.2d Frisch's Restaurants, Inc. v. Ryan, 121 Ohio St.3d 18, 2009-Ohio-2, 901 N.E.2d In re Application of Columbus Southern Power Co. et al., 128 Ohio St.3d 512, Ohi.o In re Application of Uuke Energy Ohio, Inc., 131 Ohio St.3d 487, 2012-Ohio- 1509, 967 N.E.2d Ohio Consiamers' Counsel v. Pub. Util. Comm., 110 Ohio St.3d 394, Ohio ,... 29, Ohio Consumers' Counsel v. Pub. Util, Comm., 114 Ohio St.3d 340, Ohio-4276, 872 N.E.2d , 18, 29, 33 Payphone Assn. v. Pub. Util. Comm., 109 Ohio St.3d 453, 2006-Ohio-2988, 849 N.E.2d 4... a Time Warner AxS v. Pub. Util. Comm., 75 Ohio St.3d 229, 661 N.E.2d 1097 (1996) Weiss v. Pub. Util. Comm., 90 Ohio St.3d 15, 734 N.E.2d 775 (2000) STATUTES R.C , 22 R.C , 34 R.C , 14-15, 16 ii

5 ADMINISTRATIVE RULES Ohio Adm.Code 4901: Ohio Adm.Code 4901: ,...,...10 Ohio Adm.Code 4901: iii

6 INTRODUCTION This appeal relates to an Opinion and Order and Entry on Rehearing in which the Public Utilities Commission of Ohio ("Commission") modified two prior orders that exempted the commodity sales service and ancillary services of Columbia Gas of Ohio, Inc, ("Columbia") from certain provisions of. Chapters 4905, 4909, and 4935 of the Ohio Revised Code. (See OPAE Appx. 8, 56.) Appellant Ohio Partners for Affordable Energy ("OPAE") challenges the Commission's orders below, generally asserting that the joint motion filed by Columbia, Commission Staff, the Ohio Gas Marketers Group ("OGMG"), the Retail Energy Supply Association ("RESA"), and Dominion Retail, Inc. ("Dominion") to modify those prior exemption orders failed to follow the requirements of R.C (id. at 171) and R.C (id. at 173). OPAE further asserts that the stipulation submitted in support of that motion by the joint movants and the Office of the Ohio Consumers' Counsel ("OCC") - entities representing a broad cross-section of interests - failed to meet this Court's standards for approval of a stipulation. At its core, though, OPAE's Merit Brief is based on a disagreement over the Commission's decision to allow Columbia to potentially "exit the merchant function" for non-residential customers. OPAE's fear is that eliminating the auction-based system by which Columbia currently obtains natural gas for its non-residential customers who do not "shop" (i.e., purchase gas directly from Competitive Retail Natural Gas Service suppliers ("marketers")) will leave those customers to purchase gas from marketers at

7 higher prices. Yet, the Commission's orders below do not necessarily end Columbia's auction-based mechanism for providing "default" service to non-shopping customers, called the Standard Choice Offer ("SCO"). Instead, they direct Columbia to continue the SCO for non-residential customers for up to five years unless the vast majority of those customers - 70% - leave the SCO to obtain natural gas from marketers under Columbia's CHOICE program. And, OPAE had no admissible evidence demonstrating that ending the SCO would cause non-residential gas customers' natural gas costs to rise. Thus, OPAE has brought this appeal to prevent an occurrence that may never happen and, even if it does, will not necessarily cause the higher prices OPAE fears. In its effort to dramatize this appeal, moreover, and thereby lift it over the high bar that this Court imposes for overturning the Commission's factual findings, OPAE has misrepresented the facts. OPAE argues repeatedly that Columbia conspired with Staff and the other joint movants to evade the public notice and hearing requirements for obtaining a new exemption order, by pretending to seek a quick "modification" of existing exemption orders that, OPAE claims, were set to expire before the "modifications" went into effect. (See Appellant's Brief at 4-6.) Similarly, OPAE argues that Columbia conspired in private with Staff, OGMG, RESA, Dominion, and the OCC to craft and submit an Amended Stipulation that, according to OPAE, somehow makes "non-residential customers * * * its victims" by ending the SCO once the 70% trigger is reached. (Id. at 24.) These arguments are simply false. 2

8 The prior exemption orders had no expiration date. The orders that the joint movants sought to modify approved a stipulation that explicitly said its provisions would "continue" after March 31, 2013, with some exceptions, "until modified by the Commission * * *." (OPAE Appx. 96.) Indeed, that stipulation - which OPAE signed -- explicitly authorized the stipulation's parties to seek modifications to the agreement. As required by R.C and the Commission's rules, the parties' joint motion to modify the prior exemption orders demonstrated that the assumptions underlying those orders were no longer valid and that modifying the orders was in the public interest. As required, Columbia filed public notices regarding the joint motion and the Commission held a multi-day hearing on that motion. OPAE actually participated in the lengthy stakeholder meetings that ultimately led to the drafting and filing of the stipulation that the Commission approved below. And Columbia's exit from the merchant function once shopping by non-residential customers reaches 70% was supported in comments by a small business group, the Council of Smaller Enterprises. Thus, OPAE's arguments and suggestions that Columbia, the Commission, the OCC, and the marketers worked together to break the rules and prejudice nonresidential customers are simply false. OPAE may disagree with the Commission's decision to allow Columbia's SCO to terminate for non-residential customers after 70% of those customers leaves the SCO, but that disagreement does not justify overturning the Commission's decision below. The Commission's orders should be affirmed. 3

9 STATEMENT OF FACTS On December 2, 2009, the Commission issued an Opinion and Order ("First Opinion and Order") in Case No GA-EXM, granting Columbia's natural gas commodity sales services or ancillary services a general exemption from certain provisions contained in Chapters 4905, 4909, and 4935 of the Revised Code. (OPAE Appx ) In that First Opinion and Order, the Commission adopted a Joint Stipulation and Recommendation ("2009 Stipulation") that eliminated the mechanism by which Columbia previously recovered its costs of providing natural gas to its customers. The 2009 Stipulation replaced that system with auctions - two annual Standard Service Offer ("SSO") auctions, followed by annual SCO auctions (see id, at 92-93).' The 2009 Stipulation also:» set Colum.bia's peak-day capacity demand at 2,037,600 decathe.rm.s and established the portfolio of capacity (i.e., pipeline) contracts that Columbia would use to meet that demand (OPAE Appx. 94; see also Columbia Supp. 12); ' The primary difference between SSO and SCO auctions is the manner in which the winners provide natural gas to Columbia's customers. Under the SSO, Columbia held auctions to "obtain commodity gas supplies from [marketers]" and the winners of those auctions were "assigned an undivided percentage of the standard service customers' demand." (OPAE Appx. 93.) Columbia would then "pass the price of the gas on to its sales customers at a monthly SSO rate." (Id.) Under the SCO auction, the winners of the auctions are "assigned to [the] individual customers" who obtain service through the SCO. (Id.) 4

10 imposed a "Balancing Fee" of $0.32/Mcf on CHOICE/SSO/SCO suppliers to cover Columbia's costs to provide balancing/peaking service to those suppliers, with the difference between Columbia's actual costs and its revenues from the Balancing Fee "true[d]-up" (i.e., reconciled) each year (see id.); established a mechanism through which Columbia would share revenues from off-system sales and capacity release with Columbia's customers (see OPAE Appx. 95; see also Columbia Supp. 16); and, established a CHOICE/SSO/SCO Reconciliation Rider ("CSRR") through tivhich Columbia would, among other things, recover Columbia's incremental SSO/SCO program costs; recover undercharges for gas costs or pass back overcharges to affected customers; pass through refunds to customers; and pass on customers' shares of off-system sales revenues to customers (see OPAE Appx ). After a hearing, the Commission issued a Second Opinion and Order on September 7, 2011, which reaffirmed Columbia's transition to the SCO auctions. (Id ) Most of the provisions of the 2009 Stipulation - to which OPAE was a party, and which OPAE's trial counsel in this appeal personally signed (see Columbia Supp. 24) - were set to continue after the stipulation's initial term expired on March 31, (See id. at 10.) Several provisions expired on March 31, 2013, however, including Columbia's specified levels of peak day demand and peak day capacity portfolio (see id. at 12), some of Columbia's interstate pipeline contracts, and the off-system sales/capacity release

11 ("OSS/CR") revenue sharing mechanism (see id. at 10). The " Term" provision of the 2009 Stipulation stated: The Parties agree that the Stipulation shall commence upon approval of the Commission and shall have an initial term extending until March 31, After the expiration of the initial term, the provisions of this Agreement including the then-approved method of supplying commodity for standard service offer and PIPP service shall continue until modified by the Commission. The OSS/CR Program's revenue sharing mechanism is limited to a three-year term (April 1, 2010 through March 31, 2013). That mechanism does not continue unless agreed to by the OCC and the Staff. Absent an agreement on an extension of the OSS/CR Program's revenue sharing mechanism, the default mechanism is 80% of the revenues to customers and 20% to Columbia. Columbia, Staff, or the OCC may petition the Commission for a change to the default mechanism, whereas the other Parties retain the right to oppose any such changes. All Parties reserve the right to propose changes to the Agreement to become effective after the end of the initial term. (Emphasis added.) (Columbia Supp. 10.) Columbia's stakeholder group met for several months in to discuss these issues. Those discussions resulted in Columbia, Commission Staff, OGMG, RESA, and Dominion ("the Joint Movants") filing a Joint Motion to Modify Orders Granting Exemption ("JointMotion") in the proceeding below on October 4, (See Commission Supp. 22.) The Joint Movants attached a Joint Stipulation and Recommendation ("Joint Stipulation"), which laid out their agreement to continue the 2009 Stipulation, with modifications, for five years. (See OPAE Appx. 10, 18.) 6

12 On October 18, 2012, the Commission issued an entry setting a procedural schedule and requiring Columbia to "publish notice of the hearing in this case one time in a newspaper of general circulation in each county of Columbia's service area." (Columbia Supp. 29.) Among other information, the notice was required to notify customers that Columbia was "proposing to discontinue providing commodity service to choice-eligible nonresidential customers * * * once Columbia's Choice Program reaches specific thresholds * * *. " (.Id.) Columbia published the required notices between October 24 and October 27, (See id ) One month later, after several weeks of additional negotiations and discussions with the OCC, the Joint Movants filed an Amended Joint Motion to Modify Orders Granting Exemption ("Amended Joint Motion") (See OPAE Supp. 1; Commission Supp. 30). Attached to that Amended Joint Motion was an Amended Stipulation and Recommendation ("Amended Stipulation") (see OPAE Supp. 14), which modified the Joint Stipulation to address several of OCC s concerns with the original filing (see Commission Supp. 30). The Amended Stipulation proposed several modifications to the Commission's First Opinion and Order and Second Opinion and Order ("the Exemption Orders") for the period from April 1, 2013, through March 31, 2018, including: establishing a new $0.06/Mcf security deposit that winning SCO suppliers would be required to pay, to cover any expenses incurred by Columbia as the result of a supplier default (OPAE Supp. 17); 7

13 reducing the Balancing Fee to $0.27/Mcf and charging it directly to customers, while prohibiting CHOICE suppliers from including the prior $0.32/Mcf Balancing Fee in their rates after April 1, 2013 (id.); adjusting Columbia's firm city gate interstate and intrastate pipeline transportation and storage capacity and terminating certain capacity contracts (OPAE Supp. 18); reducing the amount of revenue from off-system sales and capacity release that Columbia can recover each year from $20 million to $14 million and imposing a total recovery limit of $55 million for the next five-year term (OPAE Supp. 19); authorizing Columbia to exit from the merchant function (i.e., stop obtaining and providing natural gas) for CHOICE-eligible non-residential customers if at least 70% of those customers choose to participate in Columbia's CHOICE program for at least three consecutive months (OPAE Supp. 22); allowing Columbia to file an application to exit from the merchant function for CHOICE-eligible residential customers, if at least 70% of those customers choose to participate in Columbia's CHOICE program for at least three consecutive months and Columbia has already exited the merchant function for nonresidential customers at least twenty-two months earlier (OPAE Supp. 23); and establishing a Monthly Variable Rate ("MVR") program to be administered after an exit from the merchant function, under which marketers will be assigned

14 CHOICE-eligible customers who have not selected a CHOICE supplier and are not served through a government aggregation program (OPAE Supp ). The Commission held a brief hearing on December 3, 2012, to allow public comment on the Amended Joint Motion and Amended Stipulation. (There was none.) The Commission then held an evidentiary hearing in this proceeding on December 5 and 6, At that hearing, OPAE and Hess Corporation presented witness testimony challenging only the exit-the-merchant-function, MVR, and SCO supplier security provisions of the Amended Stipulation. On January 9, 2013, the Commission issued an Opinion and Order granting the joint motion to modify and approving the amended stipulation entered into between Columbia, OGMG, RESA, Dominion, OCC, and Staff. The Commission's January 2013 Opinion and Order also established the ir.litial customer allocation process for the MVR program. (OPAE Appx ) Columbia, OPAE, and other parties filed applications for rehearing of the January 2013 Opinion and Order. In its March 20, 2013 Entry on Rehearing, the Commission denied OPAE's application for rehearing, but granted, in part, the applications for rehearing filed by Columbia, OGMG, RESA, Dominion, and Hess, amending the MVR allocation process. (OPAE Appx ) Now, OPAE asserts that the Commission's Order and Entry on Rehearing are unlawful, unjust, and unreasonable and that they violate R.C and (A). 9

15 LAW AND ARGUMENT A. Response to Proposition of Law No. 1: The Commission's Orders were authorized by the terms of the 2009 Stipulation, general Commission authority, and R.C OPAE's first Proposition of Law makes hvo related arguments. OPAE's first argument is that the Joint Movants should not have filed a motion to modify the Commission's prior exemption orders because modifying the prior orders was not the Joint Movants' true intention. "The purpose of the Amended joint Motion was not to modify the existing exemption orders, which were set to expire," OPAE falsely asserts, "but to request a new exemption order and a new term." (Appellant's Brief at 4.) Hence, OPAE argues, the joint Movants should have filed an application for a new exemption order, pursuant to R.C (A).z (See id. at 4-5.) OPAE's second, and alternative, argument is that the Amended joint Motion does not meet the requirements for modifying an exemption order set forth in R.C (A). (See id. at 4.) OPAE asserts that the statute required Joint Movants to identify "invalid findings in the existing exemption orders" and allege harm from those orders, and that joint Movants failed to do so. (Id. at 7.) 2OPAE incorrectly refers to an application under R.C as an "application for a new alternative regulation plan." (Appellant's Brief at 4.) An application under R.C is called an "exemption application." See Ohio Adm.Code 4901: (OPAE Appx. 151). 10

16 OPAE's first argument is premised on an indisputable, and inexcusable, falsehood. The First Opinion and Order (which OPAE calls the "2009 exemption order") was not "[set] to expire on March 31, 2013" - Commission orders do not have expiration dates - and the joint Movan.ts were not requesting "a new exemption order and a new term." (Appellant's Brief at 4.) The First Opinion and Order adopted a stipulation (see OPAE Appx. 101), which the First Opinion and Order described as continuing after the stipulation's "initial term" expired on March. 31, 2013, and until the stipulation was modified: The Stipulation will commence upon approval of the Commission and will have an initial term until March 31, 2013; after which the provisions of the Stipulation, including the metliod of supplying commodity for SSO and PIPP service[,] shall continate until modified by the Commission (Jt. Ex. 1 at 8). (Emphasis added.) First Opinion and Order at 11 (OPAE Appx. 96,)3 Hence, the Joint Movants properly described the relief they sought as a modification of "the Exemption Orders, and thus the terms of the exemption, for a five-year period to begin after the initial term of the stipulation ('2009 Stipulation') approved in Case No GA-EXM." (Emphasis added.) (OPAE Supp. 1-2.) The 2009 Stipulation did not expire on March 31, 2013, and as a party to the 2009 Stipulation (see Columbia Supp. 24), OPAE has no excuse for repeatedly misrepresenting its terms. 3 The actual text of the 2009 Stipulation can be found in the Statement of Facts, stipra. 11

17 In the 2009 Stipulation, OPAE also explicitly authorized Columbia and the other Joint Movants to seek modifications to the Exemption Orders to apply after March 31, The 2009 Stipulation stated, in relevant part: "After the expiration of the initial term, the provisions of this Agreement * * * shall continue until modifled by the Commission. * * * All Parties reserve the right to propose changes to the Agreernent to become effective after the end of the initial term." (Emphasis added.) (Colun-tbia Supp. 10.) The 2009 Stipulation also set forth a new, default mechanism for sharing off-system sales/capacity release revenue with customers after March 31, 2013, but authorized "Columbia, Staff, or the OCC [to] petition the Commission for a change to the default mechanismt.]" (Id.) And, the 2009 Stipulation indicated that its parties could review Columbia's capacity portfolio after the initial term of the Stipulation and specifically directed the parties to begin "[p]lanning for when the large upstream contracts expire * * * in a timely fashion.' (Id. at 12.) Hence, the Joint Movants were not required to file a new exemption application pursuant to R.C Nor did the joint Movants need to rely on the authority of R.C (f1.) to move for a modification to the prior Exemption Orders. T'he 2009 Stipulation explicitly authorized its parties to request modifications for the period after March 31, 2013, and explicitly authorized the Commission to grant such modifications. OPAE's argument that the Joint Movants needed to file a new exemption application is again contradicted by the 2009 Stipulation that OPAE signed and supported. 12

18 Additionally, this Court has affirmed the Commission's inherent authority to "change or modify earlier orders as long as it justifies any changes." Ohio Consumers' Counsel v. Pub. l:ltil. Comm. ( OCC"), 114 Ohio St3d 340,2007-C7hio-4276, 872 N.E.2d 269, y[14, citing Consumers' Counsel v. Puh. Lttil. Comm, 10 Ohio St.3d 49, 50-51, 461 N.E.2d 303 (1984). In that case, the OCC challenged a December 2005 order that had modified the terms of a September 2003 order in a prior proceeding. In the September 2003 order, the Commission had "approved a stipulation providing for the extension of DP&L's [Dayton Power & Light's] market-development period" from December 31, 2003, to December 31, 2005, and "approved a three-year'rate-stabilization period," to begin immediately following the end of the market-development period and ending on December 31, 2008." The September 2003 order also generally authorized DP&L to collect a rate-stabilization surcharge from its customers, although it required DP&L to file a separate applicatioii to set the amount of that surcharge. Id. at DP&L subsequently filed such an application in a new docket. In a December 2005 order in that new docket, the Commission approved a rate-stabilization surcharge of 11% and also "'extended DP&L's rate-stabilization period from the end of 2008 through December 31, 2010." Id. at Jj8. OCC challenged the Commission's ability to modify the terms of the September 2003 order, particularly "without the permission of the signatories to the first stipulation." Id. at 110. This Court rejected that challenge, finding that the Commission had justified its decision to modify its prior order. See id. at y

19 Pursuant to OCC, the Joint Movants were not required to rely on the provisions of R.C (A) to obtain modifications to the Commission's prior Exemption Orders. The Commission had the inherent authority to revisit and reconsider the Exemption Orders, so long as it justified any modifications. The 2009 Stipulation explicitly recognized the Commission's authority to modify the parties' agreement after the expiration of the agreement's initial term. And, the Commission explained the basis for its decision to grant the Amended joint Motion, as required by OCC. (See OPAE Appx ) Regardless, the Amended Joint Motion also meets the requirements of R,C (A). R.C (A) provides, in relevant part: As to any [natural gas company that has been granted an exemption or alternative rate regulation under section or of the Revised Code], the commission, upon its own motion or upon the motion of any person adversely affected by such exemption or alternative rate regulation authority, and after notice and hearing and subject to this division, may abrogate or modify any order granting such an exemption or authority only [if] * * * [t]he commission determines that the findings upon which the order was based are no longer valid and that the abrogation or modification is in the public interest * * *. (Emphasis added.) R.C (A) (OPAE Appx. 173). Contrary to OPAE's arguments (see Appellant's Brief at 7), the Amended Joint Motion both explained why the findings underlying the prior Exemption orders were no Ionger valid and explained why the Joint Movants were adversely affected by those orders. As the Commission found, the Joint Movants pointed to several developments 14

20 since the issuance of the Exemption Orders that undermined "the assumptions used to support the exemption orders * * *." (OPAE Appx. 17.) In particular, the Commission held, Columbia had noted that since the 2009 Stipulation was approved in December 2009, the introduction of shale gas into the marketplace had created greater uncertainty about Columbia's best use of interstate pipeline capacity. (Id. at 15, 17.) The factual assumptions underlying Columbia's capacity contracts had changed since the Commission issued the Exemption Orders, and the 2009 Stipulation approved by the Exemption Orders provided for a peak day capacity portfolio that was not geared to meet Columbia's needs during the period after the 2009 Stipulation"s~ initial. term. (Id.; see also id. at 62 (discussing these points on rehearing).) Columbia had also begun to plan for a possible exiting of the merchant function, which Columbia had not contemplated when the 2009 Stipulation was approved and which the Exem.ption. Orders did not authorize. (Id.) The Commission also noted testimony from OGMG/RESA witness Vin.cent Parisi, who opined that modifying the Exemption Orders would allow for a move away from "regulated commodity service" and towards "competitive markets" as contemplated in the state policies expressed in R.C (Id.) The Joint Movants thus met the requirements of R.C (A), contrary to the arguments OPAE made before the Commission and raised again here, on appeal. OPAE interprets R.C (A) as authorizing the Commission to modify a prior exemption order only if the Commission can point to specific, explicit findings in 15

21 the prior order that are no longer valid. (See Appellant's Brief at 3, 7.) Yet, the statute does not say that. The statute says that a prior exemption order may be modified if "[t]he commission determines that the findings upon which the order was based are no longer valid * * *." R.C (A) (OPAE Appx. 1.73). The Commission interpreted the statute to mean that "the record [must reflect] that the assumptions used to support the exemption orders are no longer valid * * *." (OPAE Appx. 17.) OPAE has pointed to nothing in the language of the statute or in this Court's precedent that would contradict the Commission's interpretation. Consequently, the Commission's interpretation is entitled to deference. See Weiss v. Pub. tltil. Comm., 90 Ohio St.3d 15, 17-18, 734 N.E.2d 775 (2000) (holding that "Due deference should be given to statutory interpretations by an agency that has accumulated substantial expertise and to which the General Assembly has delegated e.nforcement responsibility."). The Commission's orders below explained why the assumptions underlying the prior orders were no longer valid. The Commission's orders granting the joint Movants' motion to modify the Commission's prior exemption orders were therefore within the scope of authority granted by R.C (A), as well as the Commission's inherent authority and the explicit terms of the 2009 Stipulation, and should be affirmed. th

22 B. Response to I'roposition of Law No. 2: The Commission.'s Orders were authorized by the terms of the 2009 Stipulation, general Commission authority, and Ohio Adm.Code 4901: OPA.E's second Proposition of Law, which is similar to the first, argues that the Amended. Joint Motion failed to comply with the Commission's rule for applications for modification of an exemption order, Ohio Adm.Code 4901: In particular, OPAE argues that the Joint Movants filed a motion, not a "complaint"; failed to explain "which findings of the existing exemption orders are now invalid" or "how the existing exemption orders adversely affect the complainant"; and provided no details about Columbia's "code of conduct" or "corporate separation plan," as purportedly required by the rule. (Appellant's Brief at 9.) OPAE further suggests the Commission cannot "ignore" or "violate" the requirements of its own regulations. (Id.) It is unclear, at best, whether Ohio Adm.Code 4901: properly applies to the Amended Joint Motion. On its face, Ohio Adm.Code 4901: applies to complaints against companies that have received exenlption orders. The rule lists the minimlzm information that a "complainant" must provide with an "application to modify or abrogate an order granting an exemption," including, inter alia, "[a] detailed description of the exact nature of the violation" and "[s]upporting documentation for the complainant's allegation." Ohio Adm.Code 4901: (OPAE Appx. 157). With regard to the "nature of the violation," the rule directs the complainant to explain how 17

23 the utility company had failed to comply with its corporate "separation plan" and "code of conduct"; "[h]ow the complainant has been adversely affected by [the] exemption; "[w]hich findings of the order granting the exemption are no longer valid and why"; and "[h]ow the modification or abrogation of the order * * * is in the public interest." 1d. Because the Joint Movants did not file a"complaint" against Columbia, the Rule wo-u.ld not seem to apply. Instead, the Amended Joint Motion would seem to be subject to the general requirement that the Commission justify any modifications to prior orders. See OCC, 114 Ohio St.3d 340, 2007-Ohio-4276, at '114. As explained above in the response to OPAE's first Proposition of Law, the Commission's Opinion and Order and Entry on Rehearing below fulfilled that requirement. I Iowever, this Court has "recognized that no set of statutes and administrative rules will answer each and every administrative concern. When agencies promulgate and interpret rules to fill these gaps, as they must often do in order to function, "courts * * * must give due deference to an administrative interpretation formulated by an agency that has accumulated substantial expertise, and to which the General Assembly has delegated the responsibility of implementing the legislative command."` Frisch's Restaurants, Inc. v. Ryan, 121 Ohio St.3d 18, 2009-Ohio-2, 901 N.E.2d 777, 116, quoting Northwestern Ohio Bldg. & Constr. 7rades Council v. Conrad, 92 Ohio St.3d 282, 298, Ohio-190, 750 N.E.2d 130, quoting Swallow v. Indus. Comm., 36 Ohio St.3d 55, 521 N.E.2d 778 (1988). The agency's interpretation of its rules must simply be reasonable. Id. 18

24 In the absence of a rule that was directly on-point, the Commission below concluded that Ohio Adm.Code 4901: applied to the Amended Joint Motion and that the Joint Movants had fulfilled the rule's requirements. 'The Commission interpreted the rule as requiring an applicant for abrogation or modification of an exemption order to, "at a minimum, provide a detailed description of the nature of the violation, supporting documentation for the applicant's allegations, and the form of remedy requested." (OPAE Appx. 13.) The Commission concluded that the Joint Movants had "shown that certain findings from the exemption orders are no longer valid and, absent modification to those orders, Columbia, the suppliers, and ultimately, the customers could be adversely affected." (Id. at 18.) The Commission further held, on rehearing, that the rule's references to "Columbia's corporate separations plan and the code of conduct" were irrelevant to the Amended Joint Motion and, thus, did not need to be included. (Id. at ) OPAE objects to the Commission's findings, arguing the Commission was not at liberty to disregard any of the requirements of Ohio Adm.Code 4901: (Appellant's Brief at 10.) Yet, the Commission's reasonable interpretation and application of Ohio Adm.Code 4901: is entitled to deference. Moreover, the Commission's own rules authorize the Commission to "waive any provision in these rules * "' * zip n its own motion." (Emphasis added.) Ohio Adm.Code 4901: (A) (Columbia Appx. 1). The Commission effectively waived the requirements that the 19

25 Amended Joint Motion address Columbia's corporate separation plan and code of conduct, on the grounds that "neither of these items were affected by the joint motion and there was no allegation that Columbia failed to comply with either of these items[.]" (OPAE Appx. 61.) Thus, the Commission's entries below were consistent with Ohio Adm.Code 4901: and 4901: and should be affirmed. C. Response to Proposition of Law No. 3: The Commission's Orders set forth and explained the Commission's findings in sufficient detail to satisfy the requirements of R.C OPAE's third Proposition of Law largely restates the false and faulty arguments raised in its first and second :Propositions of Law. OPAE argues that the Commission's orders below fail to comply with R.C because they fail to set forth the "factual basis for the [Commission's determination] that the prior exemption orders were invalid." (Appellant's Brief at 11.) In doing so, OPAE falsely argues, again, that the 2009 Stipulation adopted in the First Opinion and Order "was supposed to expire on March 31, 2013." (Id. at 12.) OPAE incorrectly assumes, again, that the Commission's authority to modify a prior exeynption order derives solely from R.C (A). (See id. at ) And, OPAE asserts again that R.C (A) authorizes the Commission to modify a prior exemption order only if "a finding in the prior orders is now invalid * * *." (Id. at 14.) Each of the components of OPAE's argument is addressed and rebutted above, in response to OPAE's first and second Propositions of Law. 20

26 OPAE's overarching argument - that the Commission's orders failed to provide the information required by R.C misstates the Commission's burden. R.C requires the Commission to file, in all contested cases, "findings of fact and written opinions setting forth the reasons prompting the decisions arrived at, based upon. said findings of fact." R.C (OPAE Appx. 158.) To demonstrate that the Commission failed to meet the standard set forth in this statute, OPAE would have to demonstrate that "the commission * * * failed to explain a material matter * * *.".In re Application of Columbus Southern Power Co. et al., 128 Ohio St.3d 512, 2011-Ohio-1788, I 71. This Court has held that "strict compliance with the terms of [Section ] is not required." Payphone Assn. v. Pub. Util. Comm., 109 Ohio St.3d 453, 2006-Ohio-2988, 849 N.E.2d 4, yj32, citing Tongren v. Pub, Lltil. Conrm., 85 Ohio St.3d 87, 89, 706 N.E.2d 1255 (1999). Instead, "[t]he detail need be sufficient only for [the Supreme Court] to determine the basis of the PUCO's reasoning." Id., citing Allnet Communications Serv., Inc. v. Piib. Util. Comm., 70 Ohio St.3d 202, 209, 638 N.E.2d 516 (1994). "The PUCO is required only to set forth'some factual basis and reasoning based thereon in reaching its conclusion."' Id., quoting Allnet Communfcations at 209. The Commission's orders meet the standard imposed by R.C The Cnlnmission's Opinion and Order first summarized the "findings upon which the exemption orders were based" that the Joint Movants argued "are no longer valid" (OPAE Appx. 14). The Commission noted the Joint Movants' arguments that in 2009, 21

27 the SSO/SCO auction process was considered "new [and] novel," Columbia had different capacity needs, and "Columbia did not [yet] contemplate exiting the merchant function." (OPAE Appx. 15.) The Commission noted the Joint Movants' argument that "since 2009, * * * the introduction of shale gas into the market place has created greater uncertainty about Columbia's best use of interstate pipeline capacity." (Id,) The Commission further noted the testimony of OGMG/RESA witness Parisi, who discussed "the state policy in [R.C.] ' * * * that, once effective competition [i_s] developed in the state, regulated commodity service [is] to be eliminated in favor of competitive markets." (Id.) The Commission then concluded that the Joint Movants' arguments on those points provided "ample support" for their Amended joint Motion. The Commission agreed that "the advent of shale gas production in Oh:io, the factual assumptions underlying Columbia's capacity contracts, Columbia's consideration of exiting the merchant function, and adherence to the [competition] policies enunciated in Section , Revised Code," fulfilled the requirement in R.C to demonstrate that "the assumptions used to support the exemption orders are no longer valid * * "." (Id. at 17.) Thus, the Commission did not simply make "perfunctory findings." (Appellant's Brief at 11.) The Commission's entries below complied with the requirement in R.C to "set[ ] forth the reasons prompting the decisions arrived at" (R.C (OPAE Appx. 158)) and should be affirmed. 22

28 D. Response to Proposition of Law No. 4: The Commission's Orders reasonably concluded that modifying its prior Exemption Orders was in the public interest, consistent with R.C (A). OPAE's fourth Proposition of Law argues that the Commission improperly concluded that amending the Commission's prior exemption orders was "in the public interest," as required by R.C (A). (Appellant's Brief at 15.) OPAE focuses on the portion of the orders below that direct Columbia to end the SCO for non-residential customers if 70% of such customers abandon the SCO for at least three consecutive months. OPAE argues that this is contrary to the public interest because the SCO price is lower than the rates charged by most Ohio marketers. (See id, at ) As with OPAE's other Propositions of Law, OPAE's fourth Proposition of Law is based on several false and unsupported premises. 'The primary misrepresentation is that the Commission's Opinion and Order and Entry on Rehearing "eliminate[s] the competitive SCO option * * * that customers now have and now choose" and "force [s] consumers into higher-priced bilateral contracts." (Id. at ) Under the Commission's entries below, Columbia will continue the SCO program for non-residential customers for another five years unless and until a substantial majority of those customers - 70% - choose for at least three consecutive months to enter into bilateral contracts with marketers instead. (OPAE Appx. 31.) Rather than eliminating a popular service option for Columbia's customers, the Commission's orders direct Columbia to discontinue that 23

29 service option only if it becomes unpopular. This is unlikely to happen soon. According to testimony filed by OPAE's expert witness, marketers "currently serve 26% of the industrial market [and] 52% of the commercial market[.]" (OPAE Supp. 97.) An exit would require a large increase in CHOICE participation among non-residential customers. If OPAE is correct that "[p]rice matters to * x' * struggling small businesses" and industrial customers and "[b]ilateral contract prices are * * "' higher than the SCO" (Appellant's Brief at 17-18), then OPAE has nothing to worry about. The second false premise is that, by allowing Columbia to discontinue the SCO after it becomes unpopular, the Commission's entries below "deprive[ ] customers * * * of the choice not to choose an individual supplier." (Appellant's Brief at 22.) Eliminating the SCO option. would not force consumers to choose marketers any more than the current SCO program does; it would simply change the manner in which Columbia selects the marketers that provide service to default customers. Under the current SCO, those customers are assigned to a marketer through an auction process. (See OPAE Appx. 93.) Under the MVR I'rogram that would be in place after Columbia exited the merchant function, those customers would instead be assigned to a marketer through an allocation methodology chosen by the Commission. (See OPAE Appx. 43.) Either way, Columbia chooses a supplier for its default customers. Default customers will still retain "the choice not to choose an individual supplier." (Appellant's Brief at 22.) 24

30 The third major premise of OPAE's argument is that customers will pay more for natural gas service if the SCO is eliminated. Here, OPAE's arguments regarding cost savings under the SCO program are misleading. OPAE points to "shadow billing" figures compiled by Columbia that indicate that SSO/SCO customers paid $316,477,450 more than customers receiving service through bilateral contracts with marketers. (See id. at ].6.) As Columbia witness Tom Brown noted in testimony, however, those "shadow billing" figures tell one nothing about the cost difference for an average customer in any particular month. (See Commission Supp. 20.) The figures include savings by residential customers, not just the non-residential customers that are the subject of this appeal, and compare dissimilar kinds of rates with dissimilar tax treatments. (Id.) Importantly, the ' shadow billing" figures also say nothing about future costs. (Id.) OPAE never established that the current state of successful competition would suffer or that prices would rise from discontinuing the SCO. Indeed, OPAE's own expert testimony suggested that prices under the post-exit MVR program would continue to be low. OPAE's expert witness listed four reasons why she believed SCO prices tend to be lower than marketers' rates. The first was that "marketers must directly compete with other marketers to provide SCO service." (OPAE Supp. 95.) Competition will continue under the MVR. Any customer assigned to an MVR Supplier could switch to a marketer or join a government aggregation program - with no cancellation fee - if it were dissatisfied with the terms, conditions, or service 25

31 the MVR Supplier provided. (See OPAE Appx. 39.) And, the MVR program retains one of the aspects of the SCO program that OPAE's expert witness credited most for keeping SCO rates low - the fact that SCO marketers do not have to incur customer acquisition (i.e., marketing) costs. (OPAE Supp. 95) This will also be true under the MVR program. Columbia will allocate customers to MVR Suppliers based on the suppliers' existing CHOICE enrollment and historical SSO/SCO tranche ownership. (See OPAE Appx. at 66.) As a result,lvivr prices may continue to be lower than the prices currently offered through bilateral contracts with marketers. At the very least, OPAE's assertion that "elimination of the SCO service will force * * * SCO customers into higher-priced bilateral contracts" (Appellant's Brief at 21) is unsupported by the record. Yet, the premise that the "public in.terest" is defined as obtaining the lowest possible price for natural gas (see Appellant's Brief at 15) is also false, OPAE's only support for this premise is a sentence on microeconomic theory taken from a consultant's testimony in the earlier exemption proceeding and a comment, in the Commission's Second Opinion and Order, that other companies' SCO auctions have saved customers money (see id., citing OPAE Supp. 179 and OPAE Appx. 115). Neither of these comments is an expression of Commission policy. Instead, as OPAE acknowledges, "the policy of the state of Ohio with respect to natural gas service" is set forth in R.C (Id. at 20.) That statute states, in relevant part, that it is the state's policy to "[p]romote the availability to consumers of adequate, reliable, and reasonably 26

32 priced natural gas services and goods * " *." (Emphasis added.) R.C (A)(1) (OPAE Appx. 169). Thus, it is not state policy that prices should be as low as possible; the policy is that prices should be "reasonabl[e]." Id. OPAE has not argued, much less demonstrated, that marketers' prices charged in bilateral contracts are not "reasonable." OPAE`s only other relevant argument in support of its Fourth Proposition of Law is that eliminating the SCO would. violate state policies favoring choice, diversity of natural gas supplies and suppliers, and effective competition. OPAE points to R.C (A), which says it is Ohio state policy to: (3) Promote diversity of natural gas supplies and suppliers, by giving consumers effective choices over the selection of those supplies and suppliers; (4) Encourage innovation and market access for cost-effective supplyand demand-side natural gas services and goods; * * * [and] (7) Promote an expeditious transition to the provision of natural gas services and goods in a manner that achieves effective competition and transactions between willing buyers and willing sellers to reduce or eliminate the need for regulation of natural. gas services and goods under Chapters and of the Revised Code ^-^-^ R.C (A) (App. 169). In particular, with regard to subparts (3) and (4), OPAE argues that eliminating the SCO would "take[ ] away the availability of a competitive option" and "reduce[ ] natural gas supply options * * *." (Appellant's Brief at 21.) But, taken to its logical conclusion, OPAE's argtzment would mean that an SSO or SCO program, once established, may never be dissolved - an extreme proposition that OPAE 27

33 does not support with any citation. to case law. And, OPAE's argument with regard to subpart (7) - that bilateral contracts with marketers somehow "minimize competition" (id.) - is simply OPAE's unsupported, and unexplained, opinion. As noted in the Commission's Entry on Rehearing below, the Amended Joint Motion and Amended Stipulation provided numerous benefits. Among other benefits, they extended Columbia's SCO program for up to five years; ensured that customers would not be double-billed for Columbia's balancing fee; provided greater revenue from off-system sales/capacity release to ratepayers; directed net revenues from certain new billing services provided by Columbia to the CSRR, thereby lowering that rider rate for customers; created a new security deposit for SCO Suppliers that, if not needed for default, would even further lower the CSRR; allowed marketers to bring new products to market; and provided greater transparency in customer billing. (OPAE Appx , 64.) The Commission further found that, by ending the SCO once it becomes unpopular, the Amended Joint Motion would allow for a"progression * * * toward market-based commodity supply," in furtherance of R.C (Id. at 50.) This finding was supported by testimony from a witziess for OGMG and RESA (see id, at 15) and also by public comments from the Council of Smaller Enterprises ("COSE"), which opined that "the MVR program would be a beneficial step towards bringing market pricing for natural gas to mediu.in and small commercial customers in the Columbia * * * service territory." (Commission Supp. 55.) 28

34 Even if the Amended Joint Motion and Amended Stipulation would increase non-residential customers' rates, that alone would not justify a finding that amending the prior Exemption Orders does not ben.efit ratepayers and the public interest. See OCC, 114 Ohio St.3d 340, at y[27. Only a demonstration that "the commission's findings * * "' are manifestly against the weight of the evidence" would justify "second-guess[ing] the commission" on that question. Id. at 'ff 29. Because OPAE has not demonstrated that "the weight of the evidence unquestionably compelled a decision in its favor," In re Application of Duke Energy Ohio, Inc., 131 Ohio St.3d 487, 2012-Ohio-1509, 967 N.E.2d 201, 'ff 32, the Court should reject OPAE's fourth Proposition of Law. E. Response to Proposition of Law No. 5: The Commission's Orders reasonably concluded that the Amended Joint Stipulation met this Court's criteria for approval of stipulations. When evaluating the reasonableness of a stipulation approved by the Commission, this Court considers "[1] whether the settlement is a product of serious bargaining among capable, knowledgeable parties; [2] whether the settlement, as a package, benefits ratepayers and the public interest; and [3] whether the settlement package violates any important regulatory principles or practices." (Citation omitted.) Ohio Consctmers' Counsel v. Pub. Util. Comrn., 110 Ohio St.3d 394, 2006-Ohio-4706, 116. OPAE's fifth and final Proposition of Law asserts that the Amended Stipulation failed all three parts of this Court's test. (Appellant's Brief at 23.) 29