Ohio Edison Co. v. City of Hubbard

69 F.R.D. 58, 1975 U.S. Dist. LEXIS 15576
CourtDistrict Court, N.D. Ohio
DecidedOctober 28, 1975
DocketNo. C75-37Y
StatusPublished
Cited by1 cases

This text of 69 F.R.D. 58 (Ohio Edison Co. v. City of Hubbard) is published on Counsel Stack Legal Research, covering District Court, N.D. Ohio primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Ohio Edison Co. v. City of Hubbard, 69 F.R.D. 58, 1975 U.S. Dist. LEXIS 15576 (N.D. Ohio 1975).

Opinion

MEMORANDUM OPINION AND ORDER

LAMBROS, District Judge.

On April 4, 1975, the Ohio Edison Company instituted these proceedings against the City of Hubbard, Ohio, seeking to recover the sum of $60,699.32 alleged to be owed to it for electricity supplied to defendant. Plaintiff also seeks a permanent injunction requiring the defendant municipality to make full payments in the future.

The amount due plaintiff represents part of billings made to defendant under rate schedules previously approved by the Federal Power Commission (F.P.C.). The city had paid so much of plaintiff’s bills as represented the base rate but refused to pay the amount designated as being for fuel adjustment. Defendant asserts that the plaintiff has conducted itself in such a manner that much of the cost passed through the plaintiff via the fuel adjustment clause is unreasonable.

Plaintiff has moved for summary judgment arguing that defendant may not raise as a defense in these proceedings the reasonableness of plaintiff’s actions in regard to the passing through of fuel costs. Rather, plaintiff contends, this is an issue dealing with the reasonableness of a duly approved rate which can only be raised in proceedings before the F.P.C. Defendant concedes that if the defense is found insufficient, summary judgment for plaintiff would be appropriate but argues that the defense does not draw in issue the reasonableness of rates but rather the reasonableness of the application and implementation of the fuel costs passed through by plaintiff.

The Court has heard oral argument on the motion, and evaluated the briefs and evidentiary matters submitted by the parties. For reasons to be set forth, plaintiff’s Motion for Summary Judgment is denied.

I. FACTUAL SETTING

On February 29, 1973, the plaintiff and 20 Ohio municipal corporations, including the defendant, filed with the F.P.C. a settlement agreement which reflected a negotiated settlement of plaintiff’s wholesale electric rates. On August 29, 1973, the F.P.C. issued an Order approving the settlement making the rates effective from September 1, 1972. The rate, as approved, was composed of a capacity charge and an energy charge neither which is in issue herein, and a fuel adjustment provision, which is the issue herein. This latter clause provided that for each kilowatt-hour used, so much of the total cost of the fossil fuels burned by plaintiff during the month immediately preceding the billing month above or below an average cost would, after certain other computations, be passed through to the customer as either an increase in the billing, or a credit, depending on whether the cost was above or below the average cost per hour. (The only fossil fuel relevant here is coal) There is no question that defendant did approve this rate and that the F.P.C. found it to be reasonable and proper.

What happened next is, even absent the figures provided by the parties, almost a matter for judicial notice. Between the embargo imposed by the oil producing nations and the effects of double-digit inflation, the cost of fossil fuels skyrocketed. Indeed, from May [60]*601973 to May 1974, plaintiff’s average cost per ton of coal doubled. And this charge was passed directly through to the municipalities, including the defendant.

The rapidity of the rise can be demonstrated by an analysis of the cost figures provided by plaintiff. At the time the settlement agreement was filed with the F.P.C., plaintiff was paying one coal producer (Albert Schiappa) $5.90 per ton of delivered coal. At the same time, another producer (Valley Camp Coal) was being paid $9.85 per ton of coal (f. o. b.) from its No. 1 Mine. By April 1975, plaintiff was paying Schiappa $9.75 per ton, and Valley Camp was receiving $22,031 per ton of coal. Other coal producers were charging prices which were, at times relevant herein, approaching $50.00 per ton. Even allowing for differences in the quality of coal, location of the purchase plant and method of delivery, these charges were enormous in view of the cost changes in the preceding six to seven years.

It appears that defendant sought information as to the purchasing agreements plaintiff had with its coal producers and as to plaintiff’s connection with suppliers, if any. When plaintiff refused to provide this information, defendant refused to pay the fuel adjustment cost. Confronted with the practical impossibility of terminating service to a city, plaintiff commenced this action.

II. APPLICATION OF THE LAW

Plaintiff does not contest the fact that the charges it makes must be reasonable. Under 16 U.S.C.A. § 824d (a), a public utility may only collect such rates and charges as are just and reasonable. This is a general principle appearing not only in the United States Code but which is established in the common law (See Montana-Dakota Utilities Co. v. Northwestern Public Service Co., 341 U.S. 246, 252, 71 S.Ct. 692, 95 L.Ed. 912 (1951)) and which has also been carried through in that portion of the Uniform Commercial Code dealing with sales of goods, see specifically U. S.C. §§ 2-305 and 2-306.

At oral agrument, plaintiff conceded this point, arguing that the decision as to reasonableness has already been made by the F.P.C. Until that body determines otherwise, plaintiff argues, Ohio Edison can collect the rate as established, including the pass through of those costs attributable to fossil fuels burned to produce the electricity it sells.

Plaintiff argues that the reasonableness of the rates is a matter for the F.P.C., subject to review in the Court of Appeals, and in no way properly before this Court. Support for this position lies in the decision by the Supreme Court in the Montana-Dakota Utilities case, supra, wherein one electric company sued another in an attempt to recover for payments made on rates which were allegedly unreasonable although approved by the F.P.C. Plaintiff asserted that by virtue of interlocking directorates, the defendant had controlled the rate setting proceedings before the F.P.C. so as to subvert plaintiff’s interest to that of the defendant. The Court denied relief, holding that the reasonableness of the rate was for the Commission not the Court and “that the right to a reasonable rate is the right to the rate which the Commission files or fixes . ” Montana-Dakota Utilities, supra, at 251-2, 71 S.Ct. at 695.

This decision was reinforced by the Supreme Court in United States v. Western Pacific Railroad Co., 352 U.S. 59, 77 S.Ct. 161, 1 L.Ed.2d 126 (1956), which involved an action by carriers to obtain a determination as to which tariffs should be applied to particular shipments. The Court held that primary jurisdiction lay with the Interstate Commerce Commission. In its decision, however, the Court indicated that such treatment was not always required:

By no means do we imply that matters of tariff construction are never cognizable in the courts. We adhere to the distinctions laid down in Great [61]*61Northern R. Co. v. Merchants Elevator Co., (US) supra [259 U.S. 285, 42 S.Ct. 477, 66 L.Ed. 943]; which call for decision based on the particular facts of each case.

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Bluebook (online)
69 F.R.D. 58, 1975 U.S. Dist. LEXIS 15576, Counsel Stack Legal Research, https://law.counselstack.com/opinion/ohio-edison-co-v-city-of-hubbard-ohnd-1975.