Ohio court lets utility cut secret side deals with industrial customers to support a rate hike in return for a price cut

I wish this were an April Fool’s story.

Energy Daily (subs. req’d) reported Tuesday:

In a ruling that drew a sharp dissent from one justice, the Ohio Supreme Court last month backed a decision by the state’s utility commission to keep secret key information about “side agreements” made by Duke Energy Ohio Inc. that gave electricity price cuts to certain industrial customers in exchange for their public support for a past rate hike request by the utility to the commission.

The state court rejected a challenge by the Ohio Consumers’ Counsel, the state ratepayer advocate, which contended that it was wrong and contrary to state law for the Public Utilities Commission of Ohio (PUCO) to withhold key details about the side agreements from the public given their impact on the utility’s old rate case.


PUCO countered that the information constituted legitimate “trade secrets” that could damage the industrial customers or Duke by revealing their corporate business strategies to competitors.

The Ohio Supreme Court takes the “public” out of public utility.

This story is such a classic example of how so many PUCs are in the pocket of the big utilities — in case you were wondering why they just keep approving new power plant after new power plant and rate hike after rate hike even though “Power plants costs have doubled since 2000” and “efficiency is the only cheap power left.”

Here is the rest of this sad story:

The state court’s February 19 ruling upholding the sealing of information about the side agreements was notable because the same court several years ago forced the PUCO to reconsider its approval of the rate hike for Duke Energy Ohio — previously known as Cinergy — due to questions about the side agreements. The side agreements were negotiated by Cinergy, which was later bought by Charlotte, N.C.-based Duke Energy.

The commission was forced to reconsider its initial September 2004 decision approving the Cinergy rate hike settlement by a November 2006 ruling by the Ohio Supreme Court, which said the side agreements were not reached through a fair bargaining process.

In an October 24, 2007, ruling, the PUCO agreed with the court, saying the previously secret side agreements — in which Cinergy effectively agreed to reimburse certain industrial customers for costs stemming from its requested rate increase — were not reached as part of a “serious bargaining” process in which Cinergy dealt fairly, openly and equitably with all parties affected by the rate hikes.

In particular, the commission said “the existence of the side agreements, in which several of the signatory parties agreed to support [Duke’s rate hike], raised serious doubts about the integrity and openness of the negotiation process that led to the [industrial customers’ supporting Duke’s rate hike].”

In the same decision, PUCO approved a modified rate hike for Duke, but said the side agreements — as private deals — were outside its jurisdiction and, thus, it could not invalidate them.

However, Ohio Consumers’ Counsel (OCC) Janine Migden-Ostrander pressed her effort in the courts to force the commission to release information on the side agreements, including the names of the industrial customers and the electricity price cuts they received from Duke in exchange for supporting its rate hike request.

Duke opposed the OCC’s suit to force release of the terms of the side agreement, arguing that it would damage Ohio’s effort to create a competitive electricity market if the commission were unable to keep trade-secret information confidential.

The OCC rejected those arguments, saying the Ohio Supreme Court’s previous finding that the side agreements were reached through a suspect process showed they were “not normal competitive agreements, but settlement agreements necessary for public inspection.”

However, the state court said that while the PUCO had legal obligations to inform the public about its actions, it also had statutory duties to promote electricity competition in the state.

“All of the parties agree that the [Ohio electricity] market is weak, and anything could affect the future growth of competitive [electricity] providers,” it said. “Exposing a competitor’s business strategies and pricing points would likely have a negative impact on that provider’s viability.”

As a result, the court said it was “not unreasonable” for the commission to release redacted versions of the side agreements that did not contain the key pricing information.

That ruling drew a strong dissent from Justice Paul Pfeifer, who said that while utility deals with industrial customers are not wrong, the PUCO’s secrecy was, especially since the Duke side agreements had previously been flagged by the court for further review.

“Public utilities should not be able to hide their pricing,” he said. “They are, after all, public utilities.

“Providing a lower price to a high-volume user is a legitimate business decision; hiding that lower price is not. I dissent.”

Put another way, providing a lower price to a high-volume user is a legitimate business decision, secretly bribing powerful industries to support your rate hikes, not so much.