Nonbypassable Transmission Riders Under R.C. 4928.05: Ohio Supreme Court Affirms PUCO’s Discretion and Demands Particularized Harm for Discovery Challenges

Introduction

In In re Application of Ohio Power Co. (2025-Ohio-3034), the Supreme Court of Ohio affirmed orders of the Public Utilities Commission of Ohio (PUCO) authorizing Ohio Power Company (AEP Ohio) to implement its fifth Electric Security Plan (ESP V). The appeal, brought by One Power Company, raised two principal issues:

whether PUCO erred by denying One Power’s motion to modify a protective agreement governing confidential discovery such that One Power’s in-house CEO-expert could review all discovery; and
whether PUCO erred by continuing AEP Ohio’s Basic Transmission Cost Rider (BTCR) as nonbypassable rather than bypassable.

Writing for a unanimous Court, Chief Justice Kennedy affirmed PUCO on both issues. The decision confirms PUCO’s statutory authority and broad rate-design discretion to recover “all transmission and transmission-related costs” through a nonbypassable, reconcilable rider under R.C. 4928.05(A)(2), even within an ESP proceeding and even when the utility did not expressly cite that statute in its application. The Court also reinforced core administrative-law doctrines: challenges to PUCO discovery rulings require a showing of particularized prejudice, and arguments not specifically raised on rehearing are jurisdictionally barred on appeal.

Summary of the Judgment

Protective Agreement: The Court upheld PUCO’s approval of AEP Ohio’s protective agreement limiting access by certain competitor employees, including One Power’s CEO-expert, to “restricted access confidential” materials. One Power failed to demonstrate specific, non-speculative prejudice resulting from the limitations. Generalized claims of litigation disadvantage were insufficient.
Nonbypassable BTCR: The Court held PUCO acted within its authority under R.C. 4928.05(A)(2) to continue AEP Ohio’s BTCR as nonbypassable. The statute authorizes recovery of all transmission and transmission-related costs through a reconcilable rider on distribution rates and does not require utilities to cite it as a predicate in their ESP applications. The Court also found no conflict with Adm.Code 4901:1-36-04(B) because AEP Ohio remains responsible for providing non-market transmission service to both shopping and non-shopping customers.
Policy and Precedent: PUCO’s decision accords with state electric policy in R.C. 4928.02, which provides guidelines, not mandates; and is consistent with PUCO’s past practice maintaining AEP Ohio’s BTCR as nonbypassable since 2015.
Issue Preservation: One Power’s argument that R.C. 4928.143 allows only bypassable transmission riders was not raised with specificity on rehearing and thus was jurisdictionally barred under R.C. 4903.10.

Analysis

Precedents and Authorities Cited and Their Role

R.C. 4903.13; Constellation NewEnergy, Inc. v. PUCO (2004-Ohio-6767): Establishes the standard of review—PUCO orders are reversed only if unlawful or unreasonable, with the Court retaining independent review of legal questions.
Canton Storage & Transfer Co. v. PUCO (1995-Ohio-282): Confirms the Court’s independent power to decide legal issues while deferring on facts.
In re Complaints of Lycourt-Donovan v. Columbia Gas (2017-Ohio-7566): The Court does not reweigh evidence or second-guess PUCO on factual findings.
In re Ohio Power Co. (2018-Ohio-4697); In re Complaint of Buckeye Energy Brokers, Inc. v. Palmer Energy Co. (2014-Ohio-1532); Elyria Foundry Co. v. PUCO (2007-Ohio-4164): A party challenging a PUCO order must show particularized prejudice; speculative harm from discovery rulings is insufficient.
In re Application of E. Ohio Gas Co. (2023-Ohio-3289): The Court will not insert words into a statute that the General Assembly did not write.
Ohio Consumers’ Counsel v. PUCO (2010-Ohio-134) and In re Application of Columbus S. Power Co. (2011-Ohio-1788): PUCO enjoys broad discretion in rate design and must weigh, but is not controlled by, the policy statements in R.C. 4928.02.
Cleveland Elec. Illum. Co. v. PUCO (1975), superseded in part on other grounds; Babbit v. PUCO (1979): PUCO should respect its own precedents to ensure predictability but may change course with adequate explanation. Here, PUCO remained consistent.
In re Complaint of Toliver v. Vectren Energy Delivery of Ohio, Inc. (2015-Ohio-5055): Conclusory allegations do not demonstrate error.
State ex rel. Shubert v. Breaux (2024-Ohio-2491): Briefs are not evidence; factual assertions need record support.
In re Application of Ohio Power Co. (2024-Ohio-2890): Strict enforcement of R.C. 4903.10; issue preservation via specific rehearing grounds is a jurisdictional prerequisite to appellate review.
PUCO’s Third and Fourth Electric Security Plan orders for AEP Ohio (2015 Ohio PUC LEXIS 161; 2018 Ohio PUC LEXIS 442): Established and maintained the BTCR as nonbypassable—background practice PUCO continued here.

Legal Reasoning

1) Protective Agreement and Due Process

One Power’s primary complaint was that PUCO’s acceptance of AEP Ohio’s protective agreement precluded its CEO and in-house expert, Jereme Kent, from viewing “restricted access confidential” materials, allegedly undermining One Power’s ability to litigate effectively. The Court applied its entrenched prejudice standard: reversal requires a showing of particularized harm, not speculation.

Failure to identify specific information: One Power did not identify what information it needed and how the restriction on Kent’s access impaired its case.
Alternative means: One Power did not show that using outside experts with access would be inadequate to protect its interests.
Speculation insufficient: Citing a federal district court quip that it is “difficult to identify the parameters of prejudice if one does not know what has not been produced” did not meet Ohio’s requirement to demonstrate actual, particularized prejudice from the ruling.

Conclusion: No reversible error; the protective agreement “imposed reasonable limits” on competitor employee-witnesses and included dispute-resolution mechanisms. Without concrete prejudice, the due process claim failed.

2) Authority and Discretion to Maintain a Nonbypassable BTCR

PUCO grounded its approval on R.C. 4928.05(A)(2), which authorizes recovery, through a reconcilable rider on distribution rates, of all transmission and transmission-related costs. The Court rejected three challenges.

No citation prerequisite: The statute does not require a utility to cite R.C. 4928.05 in its ESP application as a condition for PUCO to rely on it. Reading such a requirement into the statute would violate the rule against judicial insertion of terms (E. Ohio Gas).
Rate design discretion: R.C. 4928.05 does not specify bypassability; PUCO has “broad discretion” in rate design. PUCO reasonably declined to switch the BTCR to bypassable absent a developed record on the consequences (customer bill impacts, shopping complexity, and potential effects on a FERC-approved transmission agreement).
Issue preservation: One Power’s argument that R.C. 4928.143 supposedly allows only bypassable transmission riders was not specifically raised on rehearing and was therefore jurisdictionally barred (R.C. 4903.10; 2024-Ohio-2890).

3) Consistency with Adm.Code 4901:1-36-04(B)

The administrative rule provides that a transmission cost recovery rider “shall be avoidable by all customers who choose alternative generation suppliers and the electric utility no longer bears the responsibility of providing generation and transmission service to the customers.”

PUCO’s coherence with the rule: PUCO found AEP Ohio remains responsible for providing non-market transmission services to both shopping and non-shopping customers. If the utility still bears responsibility, the rider need not be avoidable for shopping customers.
Insufficient counter-proof: One Power cited only another party’s brief to claim some competitive suppliers procure transmission, but a brief is not evidence (Shubert). PUCO also observed One Power conceded that AEP Ohio provides transmission services.

Conclusion: No conflict with Adm.Code 4901:1-36-04(B).

4) Alignment with R.C. 4928.02 Policy and PUCO’s Past Practice

One Power invoked multiple policy objectives from R.C. 4928.02 (pricing, innovation, information access, customer protection, distributed generation). The Court reiterated that R.C. 4928.02 sets policy guidelines, not hard mandates. PUCO weighed those policies and opted to maintain the BTCR’s design pending fuller record development—an exercise of the discretion recognized in Columbus S. Power and Ohio Consumers’ Counsel.

On consistency, PUCO kept the BTCR nonbypassable, exactly as it has been since 2015 (Third ESP; Fourth ESP), thereby respecting its own practice. The “significant change” argument cut the other way: changing BTCR to bypassable would be the significant departure, and PUCO declined to do so without adequate studies or analysis on the record.

Impact and Significance

Key Takeaways for Ohio Energy Regulation

Statutory anchor for nonbypassable transmission recovery: PUCO may rely on R.C. 4928.05(A)(2) to recover “all transmission and transmission-related costs” through a reconcilable rider on distribution rates, and that rider may be nonbypassable where the utility remains responsible for transmission to shopping customers.
No “application-citation” trap: Utilities need not formally invoke R.C. 4928.05 in an ESP application for PUCO to rely on it. This clarifies procedural flexibility and focuses the inquiry on statutory authority and record evidence, not formality.
Record-building matters for rate design shifts: PUCO’s refusal to change BTCR from nonbypassable to bypassable without robust analysis signals that parties seeking major rate design changes must introduce substantial evidence: bill impact modeling, competitive effects, cost allocation analyses, and any implications for FERC-jurisdictional arrangements.
Rule 4901:1-36-04(B) clarified in context: The “avoidability” mandate applies only when the utility no longer bears responsibility for providing generation and transmission service. Where the utility retains transmission responsibility, nonbypassability is not barred.
Discovery challenges need concrete prejudice: Parties must demonstrate specific, case-linked harm from protective-order limits. Speculation that broader access might have helped will not overturn PUCO.
Strict rehearing preservation: Arguments not specifically identified on rehearing are forfeited for appeal, reinforcing disciplined issue preservation in PUCO practice.

Practical Implications for Stakeholders

Electric distribution utilities: Continued latitude to structure nonbypassable transmission riders under R.C. 4928.05, provided the utility still serves transmission obligations for shopping customers and the record supports the design.
Competitive retail electric service (CRES) providers and large customers: Efforts to make transmission riders bypassable must be supported by a thorough evidentiary showing of benefits, cost causation, customer bill effects, and compatibility with transmission tariffs.
Litigants before PUCO: When objecting to protective agreements, identify the specific information sought, why in-house access is indispensable, and why outside-expert access would be insufficient. Preserve every statutory and rule-based argument precisely in a rehearing application.

Complex Concepts Simplified

Standard Service Offer (SSO): The default package of electric services an electric distribution utility must make available to consumers in its territory, including a firm supply of generation service (R.C. 4928.141).
Electric Security Plan (ESP): One of the ways a utility can meet the SSO obligation. An ESP packages various rate riders and mechanisms for a set term and requires PUCO approval (R.C. 4928.143).
Transmission vs. Generation: Generation is the production of electricity; transmission is the high-voltage transport of electricity from generators to distribution systems. Transmission costs include non-market charges set by FERC-jurisdictional tariffs.
Rider: A separate line item on a bill allowing a utility to recover specific categories of costs. A “reconcilable” rider can be adjusted periodically to true-up actual costs versus amounts collected.
Bypassable vs. Nonbypassable: A bypassable charge is avoided by customers who “shop” for competitive generation. A nonbypassable charge applies to all customers, shopping or not.
Adm.Code 4901:1-36-04(B): A transmission cost recovery rider is “avoidable” (bypassable) only when the utility no longer bears responsibility to provide generation and transmission service to those customers. If the utility still provides the transmission service, shopping customers cannot avoid the charge.
Particularized Prejudice: To overturn a PUCO discovery ruling, a challenger must show specific, concrete harm resulting from the ruling—not general or speculative assertions that broader discovery might have helped.
Issue Preservation (R.C. 4903.10): To raise an argument on appeal from a PUCO order, the party must have specifically raised that ground in a timely rehearing application before PUCO. Failure to do so is jurisdictionally fatal.

Conclusion

The Supreme Court of Ohio’s decision in In re Application of Ohio Power Co. crystallizes two important principles in Ohio utility regulation. First, PUCO has clear statutory authority under R.C. 4928.05(A)(2) to recover all transmission and transmission-related costs via a reconcilable rider on distribution rates, and may maintain that rider as nonbypassable when the utility remains responsible for transmission service to shopping customers. The decision also confirms PUCO’s broad rate-design discretion and emphasizes the need for a fully developed record before ordering major structural changes such as converting a longstanding nonbypassable rider to bypassable.

Second, the Court reinforced procedural guardrails: discovery-related appeals require a showing of specific prejudice, and arguments not precisely raised on rehearing are barred. These doctrines preserve orderly administrative litigation and appellate review, encouraging parties to build detailed evidentiary records and to frame issues with specificity. Practically, the ruling promotes stability in the recovery of transmission costs in Ohio while mapping a clear pathway for challengers—develop the facts, preserve the issues, and demonstrate concrete harm or benefits tied to proposed changes.