PUCO Prudency Reviews: Must-Run Strategy Judged Without Hindsight; Subpoenas Discretionary; Auditor Independence Requires “Undue Influence,” Not Mere Appearance

I. Introduction

Case: In re Rev. of the Power-Purchase-Agreement Rider of Ohio Power Co. for 2018 and 2019, 2026-Ohio-1485 (Supreme Court of Ohio, Apr. 29, 2026).
Parties: The Office of the Ohio Consumers' Counsel (“OCC”) and the Ohio Manufacturers' Association Energy Group (“OMAEG”) (appellants) challenged orders of the Public Utilities Commission of Ohio (“PUCO” or “the commission”) (appellee). Ohio Power Company (“AEP Ohio”) intervened as appellee.

The dispute concerns AEP Ohio’s power-purchase-agreement rider (“PPA Rider”), which passes through to retail customers the net difference between costs associated with AEP Ohio’s entitlement to output from Ohio Valley Electric Corporation (“OVEC”) coal plants and revenues from wholesale market sales. The proceeding was a prudency review for 2018–2019 conducted with the assistance of an independent auditor, London Economics International, L.L.C. (“LEI”).

The appeal presented three core issues:

  • Evidence/merits: Whether PUCO’s prudency determination—especially OVEC’s must-run operating strategy—was against the manifest weight of the evidence.
  • Procedure/due process: Whether PUCO violated due process or Adm.Code 4901-1-28(E) by denying OCC’s motion to subpoena a PUCO staff member (Mahila Christopher) regarding edits suggested to draft audit language.
  • Audit-independence standard: Whether PUCO should have applied an appearance-of-impropriety standard (as urged via AICPA independence concepts) rather than an undue-influence framework when assessing whether LEI’s “independent audit” was compromised.

II. Summary of the Opinion

The Supreme Court of Ohio affirmed PUCO’s orders in full. The court held:

  • PUCO did not commit reversible error by crediting evidence that OVEC’s must-run strategy was prudent when chosen, even if hindsight suggested an economic strategy might have been preferable in some months.
  • PUCO did not violate procedural due process or Adm.Code 4901-1-28(E) by denying the requested subpoena because other witnesses (LEI’s economist and the staff member’s supervisor) covered the relevant subject and were cross-examined; appellants showed no prejudice.
  • PUCO did not err by declining to apply an appearance-of-impropriety standard; the court found no binding authority compelling that standard and accepted PUCO’s use of an undue-influence approach.

Because the court rejected appellants’ merits and procedural challenges, it did not reach their refund arguments.

III. Analysis

A. Precedents Cited

1. Statutory and institutional review constraints

  • Constellation NewEnergy, Inc. v. Pub. Util. Comm., 2004-Ohio-6767 (citing R.C. 4903.13).
    Used for the core appellate standard: PUCO orders are reversed only if “unlawful or unreasonable.” This frames the entire opinion as deferential on fact-finding and demanding on legal error.
  • Canton Storage & Transfer Co. v. Pub. Util. Comm., 1995-Ohio-282.
    Cited for the court’s “complete and independent power of review” on questions of law—important because appellants’ subpoena and “proper standard” arguments are legal/procedural in nature.
  • In re Complaints of Lycourt-Donovan v. Columbia Gas of Ohio, Inc., 2017-Ohio-7566.
    Reinforces that the court will not reweigh evidence or second-guess PUCO on fact questions, signaling the uphill nature of the manifest-weight challenge.

2. Manifest-weight review and deference to PUCO fact-finding

  • Monongahela Power Co. v. Pub. Util. Comm., 2004-Ohio-6896.
    Supplies the test: PUCO factual determinations stand where supported by sufficient probative evidence and not so unsupported as to show misapprehension, mistake, or willful disregard of duty.
  • Ohio Consumers' Counsel v. Pub. Util. Comm., 2007- Ohio-4276.
    Cited for the proposition that courts should not second-guess PUCO on fact issues absent a showing that findings are manifestly against the weight of the evidence.
  • In re Z.C., 2023-Ohio-4703.
    Imported as a general articulation of manifest-weight review (“clearly lost its way”), adapted to the administrative setting to underscore how extreme the error must be to justify reversal.

3. Prudency review as retrospective and anti-hindsight

  • Cincinnati v. Pub. Util. Comm., 1993-Ohio-79.
    Central to the merits: prudency is a retrospective inquiry into decision-making “without the use of hindsight judgment.” This is the doctrinal anchor for affirming PUCO even while acknowledging that “in retrospect” another strategy may have been better in some months.
  • In re Application of Suburban Natural Gas Co., 2021-Ohio-3224.
    Reinforces “backward-looking” prudence—whether the decision was prudent when made—supporting PUCO’s time-of-decision lens for OVEC’s operating strategy.

4. PPA Rider background and “evidence points both ways” principle

  • In re Application of Ohio Power Co., 2018-Ohio-4698.
    (i) Provides a prior explanation of how the PPA Rider operates. (ii) Supplies the key appellate principle that conflicting evidence alone does not justify reversal (“evidence before the commission points both ways”). The court used this to validate PUCO’s choice to credit testimony favoring must-run operations.
  • In re Application of Ohio Power Co., 2018-Ohio-4697.
    Used to situate the rider’s procedural history (placeholder approval at zero rate) and to show the long-running nature of disputes over this cost-recovery mechanism.
  • In re Application Seeking Approval of Ohio Power Co.'s Proposal to Enter into an Affiliate Power Purchase Agreement for Inclusion in the Power Purchase Agreement Rider, PUCO Nos. 14- 1693-EL-RDR and 14-1694-EL-AAM, 2016 WL 3482857.
    This PUCO decision is pivotal background: it authorized cost collection subject to annual audit and possible disallowance if bidding wasn’t consistent with competitive-market participation, placing the burden on AEP Ohio to prove prudence and customer best interest.

5. Due process and subpoena-related authorities

  • Arbino v. Johnson & Johnson, 2007-Ohio-6948.
    Cited for Ohio’s Due Course of Law Clause being treated as functionally equivalent to federal due process for purposes of analysis here.
  • State ex rel. Cincinnati Enquirer v. Bloom, 2024-Ohio-5029 and State v. Carter, 2024-Ohio- 1247.
    Used to justify analyzing only the federal Due Process Clause because appellants did not argue for a distinct state constitutional standard.
  • North Carolina Dept. of Revenue v. Kimberley Rice Kaestner 1992 Family Trust, 588 U.S. 262 (2019) and Lyle Constr., Inc. v. Dept. of Natural Resources, Div. of Reclamation, 34 Ohio St.3d 22 (1987).
    These provide general procedural-due-process framing: “fundamental fairness” and “meaningful opportunity to be heard.”
  • West Ohio Gas Co. v. Pub. Util. Comm., 294 U.S. 63 (1935).
    Appellants relied on it for the “suitable opportunity through evidence and argument to challenge the result” concept. The court effectively narrowed its use by emphasizing that denial of a subpoena is not per se a due-process violation and requires prejudice.
  • Federal cases on subpoenas and due process: Foxy Lady, Inc. v. Atlanta, 347 F.3d 1232 (11th Cir. 2003); Amundsen v. Chicago Park Dist., 218 F.3d 712 (7th Cir. 2000); Yancey v. Apfel, 145 F.3d 106 (2d Cir. 1998); United States v. Woods, 931 F.Supp. 433 (E.D.Va. 1996).
    These authorities support the court’s holding that inability to subpoena a witness in an administrative proceeding is not automatically unconstitutional.
  • Flynn v. State Med. Bd., 2016-Ohio-5903 (10th Dist.).
    Supplies the prejudice requirement: reversal based on failure to issue a subpoena requires a showing of prejudice.
  • State v. Stutler, 2022-Ohio-2792 and Renacci v. Testa, 2016-Ohio-3394.
    Invoked for the interpretive axiom that “may” is discretionary, supporting PUCO’s reading of Adm.Code 4901-1-28(E).
  • In re Application of Champaign Wind, L.L.C., 2016-Ohio-1513.
    Applied by analogy for an abuse-of-discretion standard when reviewing an agency’s decision to quash/deny subpoenas.

6. Preservation/forfeiture and agency precedent

  • In re Buckeye Wind, L.L.C., 2016-Ohio-5664.
    PUCO cited it to argue forfeiture, but the court distinguished it: here, the allegedly erroneous standard (undue influence) first appeared in PUCO’s opinion and order, so rehearing was appellants’ first chance to object.
  • In re Application of Ohio Power Co., 2025-Ohio-3034.
    Used to emphasize that PUCO should respect its own precedents for predictability—supporting PUCO’s reliance on prior use of an undue-influence test.
  • Kaminski v. Metal & Wire Prods. Co., 2010-Ohio- 1027, Arbino v. Johnson & Johnson, 2007-Ohio-6948, and Weidman v. Hildebrant, 2024-Ohio-2931 (Kennedy, C.J., dissenting).
    These frame the separation-of-powers point: if an appearance-based audit-independence rule is desirable policy, the General Assembly must require it.

7. Audit independence, “undue influence,” and disclosure of relied-upon facts

  • In re Rev. of the Reconciliation Rider of Duke Energy Ohio, Inc., PUCO No. 20-167-EL-RDR, 2023 WL 5880399.
    Demonstrates PUCO’s established phrasing and approach: “no evidence of undue influence” and no reason to think the auditor was prevented from an independent review. The court treated this as a legitimate, repeated commission standard.
  • United States v. Arthur Young & Co., 465 U.S. 805 (1984).
    Appellants invoked it to argue auditor independence demands something like appearance-based neutrality. The court rejected the inference: the case concerned IRS access to tax-accrual workpapers and did not impose an appearance-of-impropriety test for state-commission audits.
  • Tongren v. Pub. Util. Comm., 1999-Ohio-206.
    Appellants claimed PUCO relied on undisclosed staff “findings.” The court distinguished Tongren because PUCO here identified the actual record evidence (notably Dr. Fagan’s testimony) supporting its conclusion that LEI maintained independence.
  • In re Rev. of Duke Energy Ohio, Inc.'s Distrib. Capital Invest. Rider, PUCO No. 23-549-EL-RDR, 2025 WL 71755.
    Although discussed in a footnote, it bolsters the idea that sharing drafts and receiving input can be “routine and reasonable,” while also acknowledging there are lines utilities should not cross (that PUCO can police).

B. Legal Reasoning

1. The court’s controlling lens: deference on facts, no hindsight on prudency

The opinion combines two powerful doctrines that, together, largely determine outcomes in utility prudency appeals:

  • Deference to PUCO fact-finding under R.C. 4903.13 and manifest-weight principles (the court does not reweigh evidence).
  • No-hindsight prudency review (prudency asks whether the decision was reasonable when made, not whether later market outcomes made it look bad).

Against that backdrop, appellants’ central factual theme—that OVEC’s must-run operation produced large losses compared to market alternatives—could not carry the day unless it compelled the conclusion that PUCO “clearly lost its way.” The court held it did not, because PUCO credited testimony that (i) coal baseload units are typically run must-run, (ii) cycling can cause wear, risk, and costs, and (iii) AEP Ohio earned substantial net revenue from wholesale sales during the audit period (even if fixed costs ultimately made the rider a net charge).

2. “Must-run” vs “economic” strategies: prudency as process, not outcome

The court accepted PUCO’s framing that the “dominant” question was whether it was prudent, at the time, to operate the OVEC plants as must-run. Appellants argued that a reasonable competitive operator would run daily profitability analyses and cycle units accordingly. PUCO—and the court—treated the countervailing evidence as sufficient: must-run is “typical and common” for coal units designed for baseload service, and cycling can create long-run costs that complicate simple short-run margin comparisons.

Notably, the court did not declare must-run always prudent. It endorsed PUCO’s nuanced stance: in hindsight, an economic strategy might have been prudent in some months, and LEI recommended revisiting the must-run approach going forward. But that forward-looking recommendation did not establish backward-looking imprudence.

3. Draft audit language and “independence”: final report, not abandoned drafts

A key flashpoint was email evidence showing PUCO staff offered “editorial suggestions” on the “overall tone” of LEI’s draft report, and draft language implying keeping the plants running was not in customers’ best interest. PUCO refused to rely on draft language not contained in the final audit report; the court agreed, emphasizing that the record supported PUCO’s finding of no undue influence:

  • The RFP required LEI to submit draft reports to staff—so staff review was contemplated, not clandestine.
  • LEI’s chief economist (Dr. Fagan) testified that LEI only makes revisions it agrees with and that changes did not alter the audit’s material findings.
  • PUCO could rationally treat the final audit report and sworn testimony—not superseded drafts—as the operative evidentiary product.

4. Subpoena denial: due process requires prejudice, not maximal discovery

The court rejected the claim that subpoenaing the staff member (Christopher) was constitutionally required. The opinion is significant for translating general due-process language into a pragmatic administrative-hearing rule: denial of a subpoena is not per se a due-process violation; the complaining party must show prejudice.

The court found no prejudice because appellants had a meaningful opportunity to explore the issue through:

  • Cross-examination of Dr. Fagan (the person who made the changes and could explain LEI’s reasons); and
  • Cross-examination of Rodney Windle (Christopher’s supervisor), who testified it was his decision to approach LEI about the language.

In this framing, due process is satisfied when the record contains an adequate avenue to test the contested issue—especially where the sought testimony would be cumulative or speculative.

5. Adm.Code 4901-1-28(E): “may be subpoenaed” means discretion

Appellants argued Christopher “contributed” to the report and thus could be subpoenaed. The court assumed arguendo that her conduct could qualify as “contributing,” but held the regulation’s use of “may” preserves commission discretion. Combined with the absence of demonstrated necessity after days of hearing and extensive cross-examination of other witnesses, the denial was upheld as within PUCO’s procedural management authority.

6. Audit-independence standard: “undue influence” is acceptable absent binding law to the contrary

Appellants urged an “appearance-of-impropriety” standard drawn from AICPA independence concepts. The court held:

  • The argument was preserved (because PUCO first articulated the undue-influence approach in its opinion and order, unlike the forfeiture scenario in In re Buckeye Wind, L.L.C., 2016-Ohio-5664).
  • But it failed on the merits because appellants did not identify authority binding PUCO to an appearance-based standard, and PUCO has applied an undue-influence approach in prior audit contexts.
  • Adopting a stricter appearance rule was characterized as a policy choice for the General Assembly, not a judicially imposed requirement.

C. Impact

1. Prudency disputes: stronger insulation for PUCO when record evidence is mixed

The opinion reinforces a predictable pattern in Ohio utility regulation appeals: where PUCO builds a record with competent testimony supporting its chosen view, appellants face a steep climb under manifest-weight review. For future PPA Rider or analogous rider prudency reviews, challengers will need to show more than inferior economics in hindsight; they must show the decision-making process was unreasonable at the time and that PUCO’s findings are clearly unsupported.

2. Operational strategy litigation: must-run is not declared “right,” but is treated as plausibly prudent

The court’s acceptance of must-run as “typical and common” for coal baseload units—paired with recognition that markets and best practices evolve—may shape future cases in two ways:

  • Utilities defending legacy operational decisions may rely on engineering/design constraints and cycling-cost risk to justify must-run periods.
  • Regulators and intervenors may increasingly focus on whether the utility periodically reassessed strategy as conditions changed (a governance/process angle), rather than merely pointing to later unfavorable margins.

3. Administrative procedure: subpoena requests must demonstrate necessity and prejudice

The decision is a meaningful procedural precedent in PUCO practice: parties seeking to compel testimony—particularly from agency staff—should expect courts to ask whether the requested testimony is noncumulative and whether its absence caused prejudice, especially when the relevant subject is covered by other witnesses who can be cross-examined.

4. Audit independence: “undue influence” becomes the operative judicially approved benchmark

By refusing to constitutionalize or common-law impose an appearance-of-impropriety requirement for PUCO-commissioned audits, the court effectively validates PUCO’s existing “undue influence” framing. In future disputes over draft edits and stakeholder feedback, the critical evidentiary question will likely be whether the auditor retained substantive control and agreement over final conclusions—rather than whether communications created optics of partiality.

IV. Complex Concepts Simplified

  • PPA Rider: A customer billing adjustment that passes through gains or losses from selling OVEC power into the PJM market. If OVEC costs exceed market revenues, customers pay a surcharge; if revenues exceed costs, customers receive a credit.
  • Prudency review: A backward-looking check on whether a utility acted reasonably when it made operational or spending decisions. The focus is on what was known (or reasonably knowable) then—not what later happened.
  • Must-run strategy: Keeping generating units committed to run regardless of market prices, often justified for baseload coal units due to physical limitations and cycling costs.
  • Economic strategy: Running units only when the market price is expected to cover variable operating costs (and sometimes other costs), turning units down or off when prices are too low.
  • Manifest weight of the evidence (in this setting): A high bar. Even if evidence conflicts, the court affirms if PUCO’s view is supported by sufficient probative evidence and PUCO did not “clearly lose its way.”
  • Procedural due process: Fair procedure—chiefly, a meaningful chance to present evidence and challenge opposing evidence. It does not guarantee every requested subpoena if the party still had a fair opportunity and suffered no prejudice.
  • Undue influence vs appearance of impropriety: “Undue influence” asks whether someone actually pressured or compromised the auditor’s independent judgment. “Appearance” focuses on whether circumstances could look compromising even without proof of actual influence.

V. Conclusion

In re Rev. of the Power-Purchase-Agreement Rider of Ohio Power Co. for 2018 and 2019 crystallizes three practical rules for Ohio utility regulation appeals: (1) prudency is judged at the time of the decision, without hindsight; (2) denial of a subpoena in a PUCO hearing does not violate due process absent a showing of prejudice, particularly when other witnesses cover the subject and are cross-examined; and (3) PUCO is not required to apply an appearance-of-impropriety standard to audit independence and may rely on an undue-influence approach absent binding legal authority to the contrary. Together, these holdings strengthen PUCO’s procedural discretion and reinforce the evidentiary burden facing intervenors seeking disallowances in rider audits.