Court News Ohio
Court News Ohio
Court News Ohio

Tuesday, Feb. 3, 2015

In the Matter of the Application of Ohio Power Company for Approval of a Mechanism to Recover Deferred Fuel Costs Ordered Under R.C. 4928.144, Case no. 2012-2008
Public Utilities Commission of Ohio

State of Ohio v. Terrence Brown, Case no. 2014-0104
Sixth District Court of Appeals (Wood County)

State of Ohio v. Edward A. South, Case no. 2014-0563
Ninth District Court of Appeals (Summit County)

Disciplinary Counsel v. Edward R. Bunstine, Case no. 2014-1392
Ross County

May PUCO Adjust Carrying Charges Approved with Deferred Fuel Costs?

In the Matter of the Application of Ohio Power Company for Approval of a Mechanism to Recover Deferred Fuel Costs Ordered Under R.C. 4928.144, Case no. 2012-2008
Public Utilities Commission of Ohio


  • Is a Public Utilities Commission of Ohio (PUCO) order modifying carrying costs authorized as part of an electric company’s deferred phase in of fuel costs?
  • Did the PUCO’s order retroactively modify the terms of an expired electric security plan and unreasonably and unlawfully prevent the company from its statutory right to withdraw from the plan?

In a March 2009 order, the PUCO approved an electric security plan from Ohio Power Company, more commonly known as AEP. To minimize the impact of higher electric rates on consumers, the commission allowed for the deferral of fuel costs to be phased in at a later time. Because a utility has to wait to recover its costs, the utility can assess carrying charges on the deferred amounts.

The PUCO approved AEP’s proposal that the carrying costs be calculated as the weighted average cost of capital (WACC) before taxes, or “gross of tax” basis. (According to the PUCO, the WACC is a blended interest rate determined by the company’s cost of debt and equity financing weighted by the percentages of debt and equity in the company’s capital structure.) The deferred fuel expenses and the carrying costs were to be recovered through a nonbypassable, or unavoidable, charge on consumers’ bills from 2012 to 2018.

In September 2011, AEP filed an application with the commission to start billing for the deferred fuel expenses and carrying charges. The PUCO adjusted the carrying costs as part of approving the application. It allowed the carrying charges to be based on the WACC until AEP started recovering the deferred expenses in 2012. At that point, the PUCO stated the carrying charges had to be lowered from the WACC rate to the company’s rate on its long-term cost of debt.

The electric utility challenged the adjustment, but in a rehearing the commission affirmed its order. AEP then filed an appeal with the Ohio Supreme Court.

Two groups – Industrial Energy Users-Ohio (IEU) and the Ohio Consumers’ Counsel (OCC) – each filed cross appeals, which were accepted by the court.

Utility’s Arguments
In AEP’s brief to the court, the company’s lawyers describe the PUCO’s decision as a “bait and switch” that cost them $130 million and resulted in a “new chaos paradigm.” They contend that the commission’s 2009 order approving the electric plan was final, that the commission cannot alter a final ruling, and that the order cannot be appealed.

They argue the PUCO may alter orders because of policy issues, but it cannot change the factual determinations it makes in specific cases. While AEP’s lawyers note the PUCO stated it changed the carrying cost amounts because of continuing economic hard times and in line with its earlier decisions, they contend that these reasons are invalid given the specifics in the commission’s 2009 order. The PUCO approved the WACC rate in that order, then changed its mind by lowering the rate in the 2011 ruling, they assert. They add that AEP financially relied on the 2009 decision to later recover the fuel costs it had paid during the 2009-2011 period of the initial electric plan.

The lawyers claim this alteration amounts to retroactive modification of the 2009 order, which they argue was final.

They also explain that a utility submits a proposed electric plan to the PUCO, which then decides whether to approve it. Then, they note, state law allows a utility to withdraw from the plan if it chooses. However, in this case, the electric service plan had ended by the time the PUCO made its change to the carrying cost rate, so AEP could no longer withdraw its original proposal, they argue. They conclude that the commission has a duty to define the carrying costs up front.

PUCO’s Position
Lawyers for the PUCO counter that during the electric service plan period, deferrals are accumulating, the utility company is collecting nothing, and the risk of the company not collecting the money later is high. In these circumstances, the higher WACC rate is appropriate, they argue. When the electric plan ends and recovery of the deferred costs begins, they assert the utility’s recovery of those charges is a definite because all customers pay the fee regardless of whether they buy electricity from AEP or another supplier. Because the risks changed, the PUCO had authority to impose different rates for carrying charges for different time periods.

In addition, they point out that the state legislature passed a new law, effective in March 2012, which allows utilities to “securitize” deferrals, or sell bonds to be serviced by the deferred charges. That gives the company immediate cash, before it would receive deferred costs from customers.

“[T]he entire reason that carrying charges are required at all is to pay the utility for not receiving the cash it was otherwise, but for the phase-in, entitled to receive,” they write in the PUCO’s brief. “Securitization obviates the need to compensate the utility with a carrying charge because it provides the utility with the cash to which it was entitled and it provides that cash immediately.”

They argue the commission set two distinct carrying charges for AEP, based on the risk profile during the different relevant time periods. They assert that nothing in the 2009 order expressly defined the carrying charge that would be put in place during the time the utility began recovering the deferred expenses. They contend that the commission is required to decide the correct carrying charge at a given time, such as the beginning of the recovery of deferred costs, and nothing from the original plan period was relevant to that determination.

They also respond that the PUCO’s adjustment to the carrying charge rate was “forward looking,” rather than retroactive. The PUCO properly determined when AEP submitted its application in 2011 the carrying charge rate for the cost recovery period, they add. And the commission clearly explained its reasons for the adjustment, they stress.

Cross Appeal from Ohio Consumers’ Counsel
While OCC’s lawyers agree with the PUCO’s adjustment to the carrying charges, they take issue in the OCC’s cross appeal with the commission’s 2011 overall approval of AEP’s application to start charging for the deferred fuel expenses and carrying charges. They contend that the approved deferred costs included rates for provider-of-last-resort (POLR) charges that the Ohio Supreme Court had earlier found to be unjustified. On remand following that decision, the PUCO concluded that AEP had not shown the POLR charges were reasonable, but the commission refused to adjust the deferred fuel charges because it viewed such a reduction as retroactive ratemaking.

OCC’s attorneys respond that the PUCO issued its decision in 2011 before any deferred charges had begun to be collected, so there was no retroactive ratemaking. Also they argue the deferred “fuel” charges encompass much more than fuel costs, including charges for environmental capital investment and transmission (as well as POLR service). Consumers are being forced to pay for millions of dollars in POLR charges that the Supreme Court, and the commission, determined were unsupported by evidence, they conclude.

Cross Appeal from Industrial Energy Users-Ohio
In IEU’s cross appeal, the attorneys focus on “accumulated deferred income taxes” (ADIT). They explain that for tax filings, AEP deducts expenses, including deferred amounts. But for “book purposes,” AEP deducts only the expenses that are not deferred. They provide an example: If AEP’s expenses were $200 but the commission sets a rate cap equaling $100 and allowing the rest to be deferred, then AEP would list $100 for its book accounting. That creates a $100 difference between the “book” and the “tax” expenses. The result is an ADIT benefit – At a 35 percent tax rate, AEP would reduce its federal tax by $35 ($100 x .35), making it possible to finance $100 of the deferred amount with only $65.

They argue the PUCO should have required AEP to calculate carrying charges only after subtracting the ADIT benefits from the deferred amounts. Because of the timing difference between book and tax accounting, they note AEP receives an immediate savings on what it pays in federal income taxes, and increases its available capital. These benefits to AEP are described as “free capital.”

“The purpose of carrying charges is to compensate a utility for the cost of borrowing capital from creditors or raising capital from shareholders to fund expenditures,” they write in IEU’s brief. “Sound regulatory practices and principles prohibit the recovery of carrying charges on cost-free capital such as ADIT.”

Friend-of-the-Court Brief
An amicus curiae brief supporting the position of the Ohio Power Company/AEP has been submitted by the East Ohio Gas Company, doing business as Dominion East Ohio.

- Kathleen Maloney

Docket entries, memoranda, briefs (including amicus briefs), and other information about this case may be accessed through the case docket.

Representing the Ohio Power Company/AEP: Matthew Satterwhite, 614.716.1915

Representing the Public Utilities Commission of Ohio from the Ohio Attorney General’s Office: Thomas McNamee, 614.466.4396

Representing the Ohio Consumers’ Counsel: Terry Etter, 614.466.7964

Representing Industrial Energy Users-Ohio: Samuel Randazzo, 614.469.8000

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Can Traffic Stop Outside Officer’s Jurisdiction Result in Exclusion of Evidence?

State of Ohio v. Terrence Brown, Case no. 2014-0104
Sixth District Court of Appeals (Wood County)

Editor’s Note: While the appellate court’s decision and, subsequently, the Supreme Court’s docket, spell the appellee’s name as “Terrance,” both briefs filed in the case use “Terrence.”

ISSUE: Does the exclusionary rule apply when a traffic stop and subsequent arrest were made outside of the officer’s jurisdiction and in violation of a state statute?

On March 16, 2011, a Lake Township police officer observed Terrence Brown’s vehicle cross slightly over the white line on I-280. The officer continued to follow his vehicle and then pulled him over. Brown was driving with a suspended Michigan license. Officer Kelly Clark deployed her K-9 unit dog to do a sniff search of the vehicle. The investigation determined that Brown had 30 milligrams of oxycodone in his vehicle, and he was charged with one count of possession of drugs. As a township officer, Clark didn’t have the authority to make an interstate traffic stop or arrest.  Generally, only the Ohio State Highway Patrol has this authority. While this was a statutory violation, there’s no penalty for a violation of territorial jurisdiction.

Brown argued the drugs found in his car should be excluded from the trial, because they were obtained as a result of a stop in conflict with the Ohio statute governing traffic stops. Brown asked the trial court to suppress the evidence. The request was denied, and he pled no contest. He then appealed to the  Sixth District Court of Appeals, which agreed that the evidence shouldn’t have been presented at trial under the exclusionary rule, because the stop was unconstitutional under Article I, Section 14 of the Ohio Constitution, but not unconstitutional under the U.S. Constitution. These constitutional provisions both govern searches and seizures.

The State of Ohio appealed that decision to the Supreme Court, which agreed to hear the case.

Issues Raised by State
Attorneys for the state stress that there cannot be an Ohio constitutional violation if there is not a federal constitutional violation because both should be read to have the same standards, according to State v. Robinette III (1997) decided by the Ohio Supreme Court. The attorneys point out that Article I, Section 14 of the Ohio Constitution is almost identical to the Fourth Amendment, and under the Fourth Amendment the evidence would be allowed because the violation was technical not constitutional.

While the attorneys assert the violation is purely statutory and not constitutional, they contend that the exclusionary rule cannot be used to suppress evidence resulting from a statutory violation. The state maintains that allowing the use of the exclusionary rule to suppress evidence creates a penalty for a statutory violation, which isn’t in the court’s authority. They emphasize that State v. Wilmonth (1986), decided by the Ohio Supreme Court, supports their proposition and stated that “the exclusionary rule has been applied by this court to violations of a constitutional nature only.” Thus, it would be an improper use of the rule to exclude evidence for a statutory or technical violation, they contend.

The attorneys argue that if the exclusionary rule is used for a technical violation it would mean that Article I, Section 14 of the Ohio Constitution provides greater protection than the Fourth Amendment, and that creates a conflict, because Ohio case law, such as Robinette III, states that both should be harmonized.

Brown’s Assertions
While the exclusionary rule is applied to violations of a constitutional nature, attorneys for Brown state that the violation of the statute, stopping Brown without jurisdiction, is an Ohio constitutional violation. They assert that it’s proper for the court to exclude evidence of drugs found in his car. They rely on State v. Jones (2000), in which an arrest was made in violation of an Ohio statute. The court there ruled that the arrest was a violation of his constitutional rights.

The attorneys further emphasize that the state’s constitution can offer more protection than the U.S. Constitution. They point to City of Mesquite v. Aladdin’s Castle, Inc. (1982) decided by the U.S. Supreme Court. The court ruled that state courts are free to interpret their constitutions as providing broader liberties than those afforded in the U.S. Constitution. 

Friend-of-the-Court Filings
Amicus curiae briefs supporting the State of Ohio’s position have been submitted by the Buckeye State Sheriffs Association, the Lucas County Prosecutor’s Office, the Office of Montgomery County Prosecuting Attorney, Ohio Attorney General Michael Dewine, and the Ohio Prosecuting Attorneys Association.

The Office of the Ohio Public Defender has filed an amicus brief in support of Terrence Brown.

- Miriah Lee

Docket entries, memoranda, briefs (including amicus briefs), and other information about this case may be accessed through the case docket.

Representing Terrence Brown: Lawrence Gold, 419.843.5719

Representing State of Ohio from the Wood County Prosecutor’s Office: Paul A. Dobson, 419.354.9250

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Can Person Convicted of Prior OVIs Be Sentenced Longer than State Sentencing Statute Requires?

State of Ohio v. Edward A. South, Case no. 2014-0563
Ninth District Court of Appeals (Summit County)

Editor’s Note: The Supreme Court determined that a conflict exists on this issue between the Ninth District Court of Appeals in this case and the ruling of another appellate court.

ISSUE: If a defendant has multiple prior OVI convictions, does R.C. 2941.1413 allow for a longer prison term than the sentencing statute?

Brittany Washburn heard a loud crash outside of her house the night of December 26, 2012. A car had hit a pole across the street. Washburn called 911 to report the accident and then saw someone leave the car with the license plate. She then called 911 again to report that the person in the accident had left the scene.

A police canine unit tracked footprints left in the snow to a nearby home where Edward South was living. In the home, officers discovered a license plate in South’s room. South declined to speak with the officers and refused to take a field sobriety test. The officers arrested him. He later consented to a breath alcohol test, indicating he had a BAC of .087, which is above the state’s legal limit. The police also discovered that South had multiple OVI (operating a vehicle under the influence) convictions and a suspended driver’s license.

A jury found South guilty for operating a vehicle under the influence of alcohol, a third-degree felony, and other charges. The sentencing statute dictates that third-degree felony offenders may be sentenced from nine months to three years. Pursuant to another section of the Revised Code, though, South was sentenced to eight years in prison. South received five years for the OVI charge and three years pursuant to R.C. 2941.1413, which imposes a mandatory sentence for offenders guilty of five or more violations of operating a vehicle under the influence in the past 20 years.

On appeal, the Ninth District appellate court ruled in favor of South stating that the sentence imposed was contrary to the applicable law, because it exceeded three years. The court notified the Supreme Court of Ohio that its decision may be in conflict with another appellate court judgment.

The Supreme Court certified the conflict and agreed to address the issue.

State’s Arguments
Attorneys from the Summit County Prosecutor’s Office insist that the statutes should be read together, which allows for increasing the maximum sentences of third-degree felonies from three years to five years:

“R.C. 4511.19(A)(1)(a). No person shall operate any vehicle, streetcar, or trackless within this state, if, at the time of the operation, any of the following apply:
(a) The person is under the influence of alcohol, a drug of abuse or a combination of them.”

“R.C. 2941.1413. Imposition of a mandatory additional prison term of one, two, three, four, or five years upon an offender under division (G)(2) of section 2929.13 of the Revised Code is precluded unless the indictment, count in the indictment, or information charging a felony violation of division (A) of section 4511.19 of the Revised Code specifies that the offender, within twenty years of the offense, previously has been convicted of or pleaded guilty to five or more equivalent offenses.”

The state’s attorneys rely on State v. Sturgil (2013), decided by the Twelfth District appellate court. The court found when a person is convicted under R.C. 2941.1413 and Ohio’s OVI statute, a five-year maximum sentence for a third-degree felony is allowed. Thus, the five-year sentence for South was not contrary to law, they maintain.

Defendant’s Responses
Attorneys for South argue that the two statutes are irreconcilable. They point out that when the applicable OVI statute was enacted, the maximum penalty for a third-degree felony was five years, which is consistent with R.C. Chapter 2941. Since then, the legislature has revised the sentencing statutes and the two statutes are now in conflict, they contend, because three years is the maximum sentence now.

They also cite case law such as State v. May (2014), decided by the Second District appellate court. The May court found that a three-year mandatory sentence was appropriate, because the sentencing statute dictating three years was enacted last.

Additional Brief
An amicus curiae brief supporting Edward South has been submitted by the Office of the Ohio Public Defender.

- Miriah Lee

Docket entries, memoranda, briefs (including amicus briefs), and other information about this case may be accessed through the case docket.

Representing the State of Ohio from the Summit County Prosecutor’s Office: Heaven DiMartino, 330.643.7459

Representing Edward A. South: Lawrence Whitney, 330.253.7171

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Attorney Discipline

Disciplinary Counsel v. Edward R. Bunstine, Case no. 2014-1392
Ross County

The attorney discipline board in the state recommends that the Ohio Supreme Court indefinitely suspend attorney Edward R. Bunstine of Chillicothe for a pattern of dishonest conduct in a matter involving a criminal defendant and for failing to cooperate in the related disciplinary proceedings.

In December 2011, a former client of Bunstine’s was arrested on criminal charges. Bunstine had represented the client, Gary Freeland, years earlier in a divorce. Freeland’s daughter contacted Bunstine and asked him to meet with her father in jail, and the attorney did. A few days later at Freeland’s arraignment, the court appointed the county public defender’s office to represent him because Freeland claimed he was impoverished and unable to pay for legal representation.

Freeland’s daughter gave Bunstine a $10,000 check. She testified that the money was a retainer for Bunstine to hire a private investigator and possibly have a polygragh exam conducted and hire a psychologist for an evaluation. In additional testimony, she indicated that Bunstine said he would review the state’s evidence to decide whether he could help, but that she also thought the fee was for Bunstine to represent her father in court.

Meanwhile, Freeland refused to cooperate with the public defender, conveying that Bunstine was his lawyer. In early 2012, the trial court judge held a hearing after the public defender filed a request to withdraw as Freeland’s lawyer, and the judge requested that Bunstine attend. When asked by the judge whether he received $10,000 from Freeland, Bunstine answered no. When the judge inquired further whether anyone had paid him $10,000 on Freeland’s behalf, Bunstine stated that Freeland’s daughter had and that he represented her, not Freeland. After learning that the retainer had actually come from Freeland’s account, Bunstine refunded the money.

Board’s Conclusions
In the report from the Board of Commissioners on Grievances and Discipline (now known as the Board of Professional Conduct), the board explained that an attorney-client relationship may be created by implication. In this case, Freeland reasonably expected that once he paid Bunstine $10,000, that relationship was established. The board concluded that Bunstine took no action to protect Freeland’s interests, he falsely testified that he represented the daughter and not the father, and he was less than honest with the trial judge.

The board also determined that Bunstine was not cooperative in the disciplinary proceedings because he responded late to the first inquiry letter sent by the Disciplinary Counsel, who filed the complaint in this case, and he never responded to additional correspondence asking for more information.

The board noted the Ohio Supreme Court imposed a stayed suspension on Bunstine in 2012 and another suspension of one year, with six months stayed, in August 2013. The board recommended that Bunstine be suspended indefinitely from practicing law with credit for the time he has served during the 2013 suspension.

Attorney’s Objections
Bunstine has made six objections to the board’s report. First, he contends that no one knew until the early 2012 meeting with the judge that the $10,000 had come from Gary Freeland, rather than his daughter, so no attorney-client relationship could have been created with Freeland based on the payment. Also no evidence shows that he ever agreed to represent Freeland. Bunstine’s son, an attorney who attended Bunstine’s meetings with Freeland, supports this view, Bunstine claims.

Second, he argues he took no steps to protect Freeland’s interests because he never represented Freeland, he didn’t falsely testify that he represented the daughter rather than the defendant, and if the judge had asked he would have explained that the money wasn’t for attorney fees.

Bunstine also asserts that he never answered the Disciplinary Counsel’s second letter because the questions had nothing to do with the alleged rule violation spelled out in the first letter. He argues that the investigating body must identify all alleged rule violations so an attorney has an opportunity to respond. He contends that the Disciplinary Counsel didn’t comply with the rules for the government of the bar and acted unreasonably.

Based on these factors, Bunstine asks the court to overrule and vacate the board’s findings and recommendations.

Response from Disciplinary Counsel
The investigating entity responds that Freeland reasonably believed Bunstine was his attorney starting from their first meeting in the jail. When Freeland was arrested, he reached out to Bunstine for legal counsel. The Disciplinary Counsel asserts that Bunstine advised Freeland in the meeting about the allegations, about how to plead and what issues should be raised at the arraignment, and to ask for a public defender because he was going to be away. Bunstine continued to meet with Freeland in the jail’s attorney-client visitation room and drafted legal documents for the case, counsel points out. Counsel adds that Freeland believed the money would be used for expenses related to Bunstine’s defense in his case and was “shocked” when Bunstine denied being his lawyer at the hearing before the judge. Counsel concludes that Bunstine’s claims to the contrary are disingenuous and undermined by the evidence.

The Disciplinary Counsel also counters that Bunstine wasn’t responsible for deciding what information was or was not relevant in the investigation and that he had a duty to cooperate and respond to the correspondence sent to him in this matter. He received notice of the allegations against him and should be sanctioned as recommended by the board, Counsel argues.

- Kathleen Maloney

Docket entries, memoranda, briefs (including amicus briefs), and other information about this case may be accessed through the case docket.

Representing the Office of Disciplinary Counsel: Scott Drexel, 614.461.0256

Edward R. Bunstine, pro se: 770.703.5017

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These informal previews are prepared by the Supreme Court's Office of Public Information to provide the news media and other interested persons with a brief overview of the legal issues and arguments advanced by the parties in upcoming cases scheduled for oral argument. The previews are not part of the case record, and are not considered by the Court during its deliberations.

Parties interested in receiving additional information are encouraged to review the case file available in the Supreme Court Clerk's Office (614.387.9530), or to contact counsel of record.