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Retail Supplier Files Complaint Against PUC At State Supreme Court, Alleges PUC Exceeding Authority And Lacks Jurisdiction To Regulate Retail Supplier Rates

Consumer Counsel Seeks Sanctions Against Retail Supplier

May 8, 2020

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Copyright 2010-20
Reporting by Paul Ring •

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Palmco Energy and Palmco Power have filed a complaint with the Supreme Court of Ohio seeking a writ of prohibition against the Public Utilities Commission of Ohio, as Palmco alleges that PUCO exceeded its authority in opening a second investigation of Palmco and that PUCO lacks jurisdiction to regulate retail suppliers' rates

A writ of prohibition is a mechanism to prevent any future unauthorized exercise of jurisdiction and to correct the results of prior jurisdictionally unauthorized actions.

As previously reported, PUCO opened an investigation into alleged marketing and other violations by Palmco in April 2019, which resulted in a settlement entered into in August 2019 between PUCO Staff and Palmco.

However, while the settlement was pending, Staff alleged violations by Palmco related to rates charged after August 2019. Staff alleged in a December 2019 notice of probable non-compliance that, "Staff believes that PALMco is charging variable rates that are unconscionably higher than the utilities' standard offer and other variable rates available to customers." (story here)

On March 11 2020, PUCO adopted the settlement that was filed in August 2019, but also opened a second investigation of Palmco (Case 19-2153-GE-COI) to address behavior alleged to have occurred since the allegations addressed in a prior May 2019 Staff report (story here)

Under the August 2019 settlement, Palmco agreed to not renew its electric and gas supplier licenses

The most recent gas supplier license had an expiration date of February 14, 2020. The most recent electric supplier license had an expiration date of March 8, 2020

Palmco noted that PUCO's opening of a second investigation on March 11, 2020 occurred after the stated expiration date of both supplier licenses

In the second investigation proceeding, on April 6, 2020 PUCO also granted a motion to intervene filed by the Ohio Consumers' Counsel (OCC) and OCC's motion to compel discovery (discussed further below).

In its complaint at the Ohio Supreme Court, Palmco alleged, "The March 11, 2020 and April 6, 2020 Entries in Case No. 19-2153-GE-COI represent an exercise of 'judicial' power."

Palmco said that the second investigation commenced under Case No. 19-2153-GE-COI is based solely on the allegedly "unconscionably high" rates charged by Palmco for competitive retail electric service and competitive retail natural gas service

As alleged by Palmco in its complaint, "[PUCO] Staff's conclusion that Palmco's rates were 'unconscionably high' is based solely on Staff's subjective determination that these rates were 'higher than the utilities' standard offer and other variable rates available to customers.'"

As alleged by Palmco in its complaint, "[PUCO] Staff contends that by charging 'unconscionably high' rates, Palmco violated Commission rules prohibiting 'unfair, deceptive, and unconscionable acts and practices.'"

Palmco alleged that, "Neither the certification standards ... in R.C. 4928.08 and 4929.20, nor the rulemaking authority conferred by R.C. 4928.10 and R.C. 4929.22, authorize the PUCO to regulate, directly or indirectly, the rates charged by an electric services company or competitive retail natural gas supplier."

Palmco said in the complaint, "At all times relevant to the Complaint, Palmco charged variable rates in accordance with the terms of contracts entered with customers. These terms include provisions allowing customers to terminate their contract with Palmco at any time, without penalty. (Exhibit B, at 4, 'No early termination fee' paragraph.)"

Palmco alleged in the complaint that, "Moreover, PUCO Staff reviewed Palmco's variable rate contract language and Palmco implemented Staff's recommended changes prior to the investigation commenced in Case No. 19-957-GE-COI. (See Exhibit A, at 2.) These contracts expressly disclaim any representation that customers will receive a lower rate than the utility default service rate: '[Palmco] does not guarantee savings or promise rates lower than your utility (ies) [sic].' (Exhibit B, at 3, 'Acknowledgement' paragraph at (E).) The contracts specifically advised customers: 'There is no limit on how much the Variable Price of your natural gas and/or electric supply service may change from one billing cycle to the next and your Variable Price may be higher or lower than your utility's standard offer service rate in any given month. Indra does not guarantee savings in any month or for the entire length of this Agreement.' (Id., 'Natural Gas and/or Electric Supply Price Disclosure' paragraph.)"

Palmco said, "As a matter of law, a competitive retail energy supplier does not commit an unfair, deceptive, or unconscionable practice by charging a variable rate in excess of the utility default rate where, as here, the customer has agreed to contract terms providing for variable rates and disclaiming any representation of savings."

Palmco alleged, "The Commission does not have subject matter jurisdiction to establish, review, modify, suspend, or otherwise regulate the price charged for electric generation service furnished by an electric services company. The Commission does not have subject matter jurisdiction to establish, review, modify, suspend, or otherwise regulate the price charged for commodity sales service by a competitive retail natural gas supplier."

"In commencing the second investigation in Case No. 19-2153-GE-COI, the Commission is exceeding the statutory jurisdiction and authority granted to it under R.C. Chapters 4928 and R.C. 4929," Palmco alleged

Palmco alleged, "The PUCO's lack of jurisdiction in Case No. 19-2153-GE-COI is patent and unambiguous," noting that, "Palmco was not an 'electric services company' or 'retail natural gas supplier' when the PUCO commenced the second investigation."

"The PUCO lacks jurisdiction or authority to regulate the rates charged by Palmco during the time Palmco lawfully operated as an electric services company and retail natural gas supplier," Palmco alleged

Palmco said, "The Stipulation in Case No. 19-957-GE-COI provided remedies for consumers allegedly 'overcharged' between August 1, 2019 and December 10, 2019. 'The doctrines of res judicata and collateral estoppel preclude relitigation of a point of law or fact that was at issue in a former action between the same parties and was passed upon by a court of competent jurisdiction.' Vectren Energy Delivery of Ohio, Inc. v. Pub. Util. Comm., 2006-Ohio-1386, ¶ 30, 113 Ohio St. 3d 180, 186, 863 N.E.2d 599, 606. Thus, the Stipulation bars the investigation commenced in Case No. 19-2153-GE-COI."

"Although the PUCO has subject matter jurisdiction to enforce certification standards and minimum service requirements, the PUCO does not have jurisdiction to directly or indirectly regulate supplier pricing. 'A writ of prohibition is proper even when the respondent judge has general jurisdiction when the judge has taken an action that exceeds the bounds of the court's statutory authority,'" Palmco alleged

While Palmco may appeal any final order issued by PUCO in Case No. 19-2153-GE-COI. R.C. 4903.12, Palmco said that the availability of an appellate remedy does not preclude issuance of a writ of prohibition where the relief offered by appeal is not 'complete, beneficial, and speedy.'

Palmco said that appellate relief would not be complete, beneficial, or speedy in this case because, among other reasons, "Palmco has already incurred, and continues to incur, substantial legal fees to defend an investigation the PUCO has no jurisdiction to conduct. It would be unjust and inequitable to require Palmco to continue to incur legal defense costs in a matter where the PUCO's lack of jurisdiction is patent and unambiguous."

Palmco also noted that, "Palmco asserted its jurisdictional defense in response to the December 16, 2019 PNC. (See Exhibit H.) The Commission impliedly rejected this defense by ordering the second investigation. Thus, litigating this defense at the Commission would be futile."

A media representative stated that the Public Utilities Commission of Ohio does not comment on pending court cases. PUCO is represented by the Ohio Attorney General and will speak through its court filings, and the Commission's written opinion and orders

A statement from Palmco is below

In the PUCO case, the OCC has sought sanction against Palmco for what the OCC alleged was Palmco's failure to respond to discovery.

"PALMco was ordered to respond to discovery issued by the Office of the Ohio Consumers' Counsel ('OCC'), but it still refuses to do so. PALMco should be sanctioned for defying a direct order by the Public Utilities Commission of Ohio ('PUCO') to respond to OCC's discovery," the OCC said

OCC alleged, "On April 15, 2020, PALMco's counsel finally responded to OCC stating simply that: 'PALMco will not be responding to the first or second set of discovery.'"

"Since then, PALMco has not communicated or collaborated with OCC, nor has it provided any responses (neither objections nor substantive responses) to any of OCC's discovery requests. Instead, PALMco filed a Complaint in Prohibition with the Supreme Court of Ohio on April 28, 2020, challenging the PUCO's jurisdiction over PALMco in this case," OCC alleged

In addition to its authority over suppliers, OCC alleged, "the PUCO has jurisdiction (in complaint proceedings) over any person who has violated or failed to comply with any provisions regarding competitive retail natural gas or electric service for which it is subject to certification or any rule or order adopted or issued by the commission for purposes of those sections."

"The General Assembly armed the PUCO with the power to impose substantial forfeitures of up to $10,000 a day. The maximum forfieture [sic] is warranted in this case. OCC respectfully requests that the PUCO take action under R.C. 4905.54 to enforce the April 6 Entry, and impose sanctions on PALMco in the amount of $10,000 per day for each day it refuses to respond to OCC's discovery in this case," OCC said

Palmco leadership issued the following statement to concerning the matters:

"When the PUCO initiated its first investigation into Palmco in April 2019 (Case No. 19-957-GE-COI), Palmco immediately ceased enrolling new customers while continuing to fulfill its contractual obligations to serve its existing ones. Palmco cooperated fully with Staff and negotiated in good faith to reach a settlement agreement by the end of July 2019. We began spending hundreds of thousands of dollars to re-rate customers per the terms of the settlement, even before its final approval by the PUCO. After long months, we believed an equitable agreement had been reached which was in the best interests of our customers.

"To our shock and dismay, mere weeks before the PUCO's approval of the settlement agreement (which ultimately came on January 29, 2020), Staff separately filed a request for another investigation, on December 16, 2019. We held, and continue to hold, this effort by Staff was without legal merit and contained no new allegations of wrongdoing, merely a subjective assertion that Palmco's rates were 'too high.'

"Nevertheless, Palmco abided by the terms of the settlement agreement for the first investigation and wound down our business in Ohio throughout January and February 2020. We transferred our remaining customers to utility default service in an orderly fashion and declined to renew our expiring electricity and natural gas supplier licenses, per the terms of the agreement.

"We took care of our former customers and then exited the marketplace, as we had agreed.

"Then, on March 11, 2020, after Palmco's licenses had expired and we were no longer serving customers or operating in Ohio, the PUCO took the puzzling and unfounded step of approving Staff's request for a second investigation into Palmco.

"This was a bridge too far.

"We had prudently chosen to hold our fire over the previous months, deciding it was in the best interests of our customers and our business not to assert our legal rights despite the clear overreach of Staff in objecting to our legally-contracted and properly-disclosed rates. As the General Assembly has made crystal clear in state law, the PUCO has no authority over the rates charged by licensed competitive electricity and natural gas suppliers.

"PUCO's decision on March 11 is a dangerous precedent for the entire retail energy industry and amounts to nothing less than an attempt to regulate supplier rates in direct contradiction to state law. Palmco had no choice but to mount a vigorous defense and thus we filed a complaint with the Ohio Supreme Court for a writ of prohibition.

"We are confident that our case is legally sound and factually accurate and that we will be vindicated by the Court."

--- Statement from Palmco leadership

The supreme court case is Supreme Court Docket 2020-0564: State ex rel. Palmco Energy OH, LLC and Palmco Power OH, LLC v. Public Utilities Commission of Ohio

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