PUCO Discretion to Raise Residential Fixed Charges and End Non‑Low‑Income DSM Under SFV (with Strict Rehearing Issue Preservation)

I. Introduction

Case: In re Application of Columbia Gas of Ohio, Inc., 2026-Ohio-2381 (Supreme Court of Ohio, June 25, 2026).
Parties: Environmental Law & Policy Center (“ELPC”) and Citizens’ Utility Board of Ohio (“CUB”) (appellants) v. Public Utilities Commission of Ohio (“PUCO”) (appellee), with Columbia Gas of Ohio, Inc. (“Columbia”) as intervening appellee.

The case arises from Columbia’s 2021 filings seeking (1) a distribution-rate increase under R.C. 4909.18, (2) accounting changes, (3) approval of an alternative-rate plan under R.C. 4929.05(A) (including rider adjustments and a new rider), and (4) continuation of demand-side-management (“DSM”) programs. A multi-party joint stipulation and recommendation was filed in October 2022 by Columbia, PUCO staff, and several intervenors (the “signatory parties”), proposing, among other terms, a stipulated revenue increase and a major DSM redesign: eliminating DSM for non-low-income customers while continuing the low-income “WarmChoice” program and ending “shared savings.”

ELPC and CUB opposed the stipulation. PUCO modified and approved it after hearing. On appeal, ELPC and CUB primarily challenged PUCO’s approval of (a) a substantial increase in the fixed monthly charge to residential customers under Columbia’s straight fixed variable (“SFV”) rate design and (b) the elimination of DSM programs for non-low-income customers.

II. Summary of the Opinion

The Supreme Court of Ohio affirmed PUCO’s orders. Applying R.C. 4903.13 (orders reversed only if “unlawful or unreasonable”), the court held that appellants failed to show reversible error in PUCO’s approval of the contested stipulation under PUCO’s established three-part “reasonableness test” for stipulations.

  • On the second prong (whether the stipulation, as a package, benefits ratepayers and the public interest), the court found record support for PUCO’s conclusion—particularly evidence of customer savings from DSM elimination, cessation of shared savings, and added low-income assistance measures.
  • On the third prong (whether the stipulation violates important regulatory principles or practices), the court rejected the claim that ending non-low-income DSM and raising fixed charges violated Ohio energy-efficiency policy or fairness principles, reaffirming prior holdings that relevant statutes provide guiding policies rather than mandates for specific DSM programs or funding levels.
  • The court also enforced strict issue-preservation requirements under R.C. 4903.10(B), dismissing several arguments for lack of jurisdiction because they were not specifically raised on rehearing.
  • Although PUCO made one finding with limited record support (that customers “will continue to have access” to energy-efficiency measures in the competitive marketplace), the court treated it as non-reversible in context because PUCO relied on multiple other evidentiary bases supporting the DSM change.

III. Analysis

A. Precedents Cited

1. The stipulation “reasonableness test” framework

PUCO evaluated the contested stipulation using the three-part test approved by the court: (1) serious bargaining among capable parties, (2) as a package, benefit to ratepayers and the public interest, and (3) no violation of important regulatory principles or practices. This test traces to Consumers' Counsel v. Pub. Util. Comm., 1992-Ohio-122, and was reaffirmed in In re Application of Ohio Power Co., 2018-Ohio-4698.

The opinion reiterates that PUCO may use this test, but its approval must still be supported by record evidence to survive R.C. 4903.13 review, citing Indus. Energy Consumers of Ohio Power Co. v. Pub. Util. Comm., 1994-Ohio-435, and Consumers' Counsel v. Pub. Util. Comm., 1992-Ohio-122.

For the “public interest” prong, the court references In re Application of E. Ohio Gas Co., 2023-Ohio-3289, and Elyria Foundry Co. v. Pub. Util. Comm., 2007-Ohio-4164, as guiding authority that the stipulation is assessed “as a package,” not term-by-term in isolation.

2. Standard of review and deference to PUCO fact-finding

The court anchored review in R.C. 4903.13 and explained the unlawful/unreasonable standards, citing: Constellation NewEnergy, Inc. v. Pub. Util. Comm., 2004-Ohio-6767 (R.C. 4903.13 framework) and AT&T Communications of Ohio, Inc. v. Pub. Util. Comm., 51 Ohio St.3d 150 (1990) (appellant bears the burden).

For what makes an order “unlawful” or “unreasonable,” and how the court separates legal review from factual deference, the opinion relies on In re Application of Firelands Wind, L.L.C., 2023-Ohio-2555, and Ohio Edison Co. v. Pub. Util. Comm., 1997-Ohio-196 (de novo review of law). For evidentiary deference and “manifest weight” concepts, the court cites In re Complaints of Lycourt-Donovan v. Columbia Gas of Ohio, Inc., 2017-Ohio-7566, and Monongahela Power Co. v. Pub. Util. Comm., 2004-Ohio-6896. The admonition that the court will not reweigh competing testimony is reinforced with Util. Serv. Partners, Inc. v. Pub. Util. Comm., 2009-Ohio-6764.

3. Jurisdictional issue preservation on rehearing (R.C. 4903.10(B))

A significant portion of appellants’ briefing was rejected on jurisdictional grounds because the arguments were not “specifically set forth” in rehearing applications under R.C. 4903.10(B). The court applied In re Application of Ohio Power Co., 2014-Ohio-4271 (issues not raised on rehearing are barred on appeal), and emphasized strict construction by citing Consumers' Counsel v. Pub. Util. Comm., 1994-Ohio-469, and Discount Cellular, Inc. v. Pub. Util. Comm., 2007-Ohio-53. The court also invoked In re Complaint of Cameron Creek Apts. v. Columbia Gas of Ohio, Inc., 2013-Ohio-3705, as an application of the preservation bar.

Procedurally, the rehearing posture was shaped by In re Application of Moraine Wind, L.L.C., 2024-Ohio-3224, which held PUCO cannot grant rehearing merely “for the limited purpose of further considering” issues; in this case, PUCO later treated rehearing as denied by operation of law in light of Moraine Wind.

4. SFV rate design: Ohio Supreme Court and PUCO lineage

The opinion situates Columbia’s fixed-charge increase within Ohio’s SFV rate design, previously upheld by the court in Ohio Consumers' Counsel v. Pub. Util. Comm., 2010-Ohio-134, and Ohio Consumers' Counsel v. Pub. Util. Comm., 2010-Ohio-6239. Those cases described SFV as “decoupling” recovery of largely fixed distribution costs from monthly usage, reducing the utility’s incentive to increase sales and improving price signaling and bill stability.

Appellants also invoked PUCO’s original 2008 SFV-adoption orders: In re Application of Duke Energy Ohio, Inc., PUCO Nos. 07-589-GA-AIR, 07-590-GA-ALT, and 07-591-GA-AAM, 2008 WL 2390285 (May 28, 2008); In re Application of the East Ohio Gas Co., PUCO Nos. 06-1453-GA-UNC, 07-829-GA-AIR, 07-830-GA-ALT, 07-831-GA-AAM, and 08-169-GA-ALT, 2008 WL 4628439 (Oct. 15, 2008); and In re Application of Columbia Gas of Ohio, Inc., PUCO Nos. 08-72-GA-AIR, 08-73-GA-ALT, 08-74-GA-AAM, and 08-75-GA-AAM, 2008 WL 5158185 (Dec. 3, 2008). The court, however, rejected the claim that PUCO “departed” from this precedent by permitting SFV fixed-charge increases while narrowing DSM; the court treated SFV’s incentive effects as structural and not contingent on the utility providing DSM to all customer classes.

5. State energy-efficiency policy as “guidance,” not a mandate

The court relied on Ohio Partners for Affordable Energy v. Pub. Util. Comm., 2007-Ohio-4790, and again on Ohio Consumers' Counsel v. Pub. Util. Comm., 2010-Ohio-134, to reaffirm that R.C. 4905.70 and R.C. 4929.02(A) set policy goals but do not compel PUCO to approve any particular DSM portfolio or funding level.

6. Agency adherence to precedent and reasoned explanation for departures

On the doctrine that agencies should respect precedent (and explain departures), the court cited Cleveland Elec. Illum. Co. v. Pub. Util. Comm., 42 Ohio St.2d 403 (1975), and noted its partial supersession “on other grounds” as stated in Babbit v. Pub. Util. Comm., 59 Ohio St.2d 81 (1979). For the rule that a departure requires explanation and must be substantively reasonable, the court cited In re Application of Columbus S. Power Co., 2011-Ohio-1788. Here, the court held PUCO did not depart from precedent, so no special justification was required.

7. Record-consideration and harmlessness in context

When appellants alleged PUCO failed to consider certain evidence, the court pointed to examples where PUCO addressed those arguments, relying on In re Application of Columbus S. Power Co., 2011-Ohio-4129, and In re Application of Columbus S. Power Co., 2011-Ohio-2383, as support that PUCO’s order must show it considered key contentions, not necessarily accept them.

The court also held that one PUCO finding (about competitive-market availability of efficiency measures) lacked full evidentiary support, but it did not warrant reversal because PUCO had other substantial record-supported reasons. This aligns with the court’s broader review approach articulated in Indus. Energy Consumers of Ohio Power Co. v. Pub. Util. Comm., 1994-Ohio-435, and Monongahela Power Co. v. Pub. Util. Comm., 2004-Ohio-6896: the dispositive question is whether the order is unreasonable “as a whole” given the record.

8. Additional cited authority contextualizing DSM “shared savings”

The opinion’s footnote on shared savings references In re Application of Ohio Edison Co., 2019-Ohio-4196, which the court used as a definitional anchor for shared-savings incentive mechanisms.

9. Burden on appellants in rate challenges

In rejecting the fairness/cost-apportionment challenge, the court noted the appellant’s burden under R.C. 4903.13, citing In re Application of Columbus S. Power Co., 2011-Ohio-1788, and reiterated that merely offering an “alternative take” on the evidence is insufficient. It also cited In re Application of Duke Energy Ohio, Inc., 2012-Ohio-1509, for the proposition that reversal requires showing PUCO’s evidence/reasoning is faulty or that the record compels the opposite conclusion.

B. Legal Reasoning

1. PUCO’s contested-stipulation analysis: package benefits and public interest

The court accepted PUCO’s use of the three-prong stipulation test and focused on whether PUCO’s conclusions were supported by probative evidence. On the “package benefit/public interest” prong, the court credited PUCO’s reliance on:

  • evidence (from OCC testimony) that eliminating non-low-income DSM would save ratepayers approximately $120 million;
  • evidence (from PUCO staff) that Columbia would no longer collect $10 million in shared savings;
  • stipulated low-income support enhancements, including a utility-funded bill-payment assistance contribution (modified by PUCO upward) and continued WarmChoice investment.

The court also emphasized its own limited role in resolving evidentiary conflicts: where parties presented competing testimony, the court would not reweigh it.

2. SFV, fixed charges, and the “price signal” dispute: narrowed appellate review

Several detailed critiques of PUCO’s “price signal” findings and alleged impacts on low-income/low-usage customers were dismissed for lack of jurisdiction under R.C. 4903.10(B) because the specific arguments were not properly preserved on rehearing. This portion of the opinion functions as a practical warning: even in high-stakes ratemaking appeals, failure to identify a specific alleged error (and its evidentiary/legal basis) at rehearing can be dispositive.

3. DSM elimination for non-low-income customers: evidentiary sufficiency and “competitive marketplace” finding

The court rejected the claim that PUCO acted “devoid of evidentiary support.” It noted PUCO cited specific testimony/exhibits supporting cost savings and low-income offsets. Importantly, the court acknowledged a flaw: PUCO’s finding that customers “will continue to have access” to energy-efficiency measures in the competitive marketplace was not adequately supported by the cited testimony (which only established the stipulation did not preclude such offerings).

But the court treated this as non-reversible because PUCO offered multiple independent grounds, adequately supported, for concluding the overall stipulation remained reasonable under the second prong. In effect, the opinion adopts a contextual materiality approach: not every unsupported subsidiary finding will invalidate a complex, multi-issue PUCO order when the decisive determinations remain supported by the record.

4. “Departure from precedent” rejected: SFV’s rationale is structural, not programmatic

Appellants attempted to link SFV’s legitimacy to universal DSM availability, arguing PUCO undermined the original SFV justification by allowing fixed-charge increases while eliminating DSM for many customers. The court rejected that linkage: SFV’s core function is decoupling distribution cost recovery from volumetric sales, thereby removing the utility’s disincentive to support conservation/efficiency. That structural feature persists regardless of whether DSM is offered to every class.

The court further noted the record showed DSM was not eliminated wholesale: WarmChoice and related low-income measures continued and were expanded in certain respects.

5. “Regulatory principles” and statutory energy-efficiency policy

On the third prong, appellants framed energy efficiency and cost-apportionment fairness as “bedrock principles” allegedly violated by the stipulation. The court’s response was doctrinal:

  • R.C. 4905.70 and R.C. 4929.02(A) are policy guides, not mandates requiring any specific DSM program or funding level, per Ohio Partners for Affordable Energy v. Pub. Util. Comm. and Ohio Consumers' Counsel v. Pub. Util. Comm., 2010-Ohio-134.
  • Challenges to SFV’s efficiency and price-signal logic had already been substantially addressed in Ohio Consumers' Counsel v. Pub. Util. Comm., 2010-Ohio-134; PUCO’s continued reliance on SFV and fixed-cost recovery through fixed charges was treated as consistent with that body of law, absent a record-compelled contrary conclusion.
  • On “fairness,” the court accepted PUCO’s embedded-cost logic: because distribution service costs are largely fixed, allocating those costs as an equal fixed charge across residential customers can be viewed as equitable and non-discriminatory within the class. Appellants’ evidence to the contrary did not carry the burden required for reversal under R.C. 4903.13.

C. Impact

  • Ratemaking flexibility under SFV: The decision strengthens PUCO’s discretion to approve stipulations that increase residential fixed charges while also narrowing DSM offerings, so long as the order is supported by record evidence and the stipulation “as a package” is found to serve the public interest.
  • DSM is not judicially compelled for all customer classes: By reaffirming that statutory energy-efficiency provisions are guiding policies rather than mandates, the opinion signals that challengers must show unreasonableness in the evidentiary and statutory sense—not merely inconsistency with policy preferences.
  • Rehearing applications are the gatekeeper for appellate issues: The opinion’s strict enforcement of R.C. 4903.10(B), together with the procedural effects of In re Application of Moraine Wind, L.L.C., places a premium on careful rehearing practice. Parties must articulate each alleged legal/evidentiary error with specificity, or risk losing appellate review entirely.
  • Tolerance for non-material evidentiary missteps: The court’s treatment of PUCO’s unsupported “competitive marketplace” availability finding suggests future appellants must show that an evidentiary flaw is material to PUCO’s ultimate determinations under R.C. 4903.13, not merely that a sentence in the order is imperfectly supported.

IV. Complex Concepts Simplified

  • DSM (Demand-Side Management): Utility-sponsored programs that reduce or reshape customer energy use (e.g., efficiency upgrades), lowering overall demand.
  • SFV (Straight Fixed Variable) rate design: A pricing structure where most fixed delivery costs are recovered through a flat monthly charge, while the per-unit price largely reflects commodity cost. The goal is to avoid tying recovery of fixed delivery costs to sales volume.
  • “Price signal”: The idea that prices communicate information to customers. In energy, higher per-unit costs can encourage conservation; the SFV debate often concerns whether shifting charges from per-unit rates to fixed charges weakens that incentive.
  • Shared savings: Incentive payments to a utility tied to measured savings from efficiency programs; eliminating shared savings means customers do not pay that incentive.
  • Alternative-rate plan (R.C. 4929.05(A)): A regulatory mechanism allowing rates outside the ordinary cost-of-service ratemaking structure, often implemented via riders and multi-year terms.
  • R.C. 4903.10(B) rehearing preservation: Before appealing PUCO orders, parties must file for rehearing and must state alleged errors specifically; otherwise, the Supreme Court of Ohio lacks jurisdiction to consider those arguments.
  • “Unlawful” vs. “unreasonable” (R.C. 4903.13): “Unlawful” focuses on legal error/procedure; “unreasonable” focuses on evidentiary support, internal consistency, and whether PUCO stayed within permissible discretion.

V. Conclusion

In re Application of Columbia Gas of Ohio, Inc., 2026-Ohio-2381, is a consequential affirmation of PUCO’s discretion in contested, multi-party settlements: PUCO may approve substantial fixed-charge increases under SFV and eliminate non-low-income DSM programs when the overall package is supported by record evidence and does not contravene established regulatory principles as Ohio law defines them. The opinion’s most immediate practical lesson is procedural—R.C. 4903.10(B) issue preservation is strictly enforced—and its most substantive lesson is doctrinal: Ohio’s energy-efficiency statutes guide PUCO’s judgment but do not mandate any particular DSM program design or funding outcome.