Sunoco, Inc. (R & M) v. Toledo Edison Co.

2011 Ohio 2720, 129 Ohio St. 3d 397
CourtOhio Supreme Court
DecidedJune 9, 2011
Docket2009-0880
StatusPublished
Cited by146 cases

This text of 2011 Ohio 2720 (Sunoco, Inc. (R & M) v. Toledo Edison Co.) is published on Counsel Stack Legal Research, covering Ohio Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Sunoco, Inc. (R & M) v. Toledo Edison Co., 2011 Ohio 2720, 129 Ohio St. 3d 397 (Ohio 2011).

Opinions

McGee Brown, J.

Introduction

{¶ 1} Sunoco, Inc. (R & M) owns and operates petroleum-refining facilities in several states, including Oregon, Ohio. Sunoco purchases electric service for its Oregon facility from the Toledo Edison Company, intervening appellee.

{¶ 2} This case involves a contract between Sunoco and Toledo Edison for the sale of electricity. The contract is a “special contract,” approved by appellee Public Utilities Commission of Ohio (“PUCO” or “commission”) pursuant to R.C. 4905.31, which permits “reasonable arrangement^]” between public utilities and their customers. Generally, such contracts include arrangements that differ from the standard rate schedules and are often tailored to a specific customer’s service.

{¶ 3} The case also concerns a contract between BP Oil Company and Toledo Edison for the sale of electricity. BP owns and operates a competing refinery located adjacent to Sunoco’s refinery. Both the Sunoco and BP contracts contain clauses generally called “most favored nation” clauses. These clauses — titled “Comparable Facility Price Protection” — allow Sunoco and BP to utilize any “arrangement, rates or charges” for their facilities that Toledo Edison has given to the other.

{¶ 4} The sole issue in this case is whether Sunoco could invoke the most-favored-nation clause to extend the duration of its contract with Toledo Edison to match the duration of BP’s contract with Toledo Edison. If the clause can be used to extend the contract, then Sunoco would pay the same rate that BP paid for electric service from February 2008 until December 31, 2008. If the contract [398]*398is not extended, Sunoco would be obligated to pay Toledo Edison over $13 million in higher electric bills.

{¶ 5} The commission found that the plain language of the most-favored-nation clause did not allow Sunoco to extend the duration of its contract to match the duration of BP’s contract. We find that the commission committed several errors in construing the language of the most-favored-nation clause. As a result, we reverse the decision of the commission and render judgment in favor of Sunoco.

Facts

{¶ 6} Sunoco, Inc. (R & M) filed a complaint in 2007 against Toledo Edison in the Public Utilities Commission of Ohio. In proceedings before the commission, the parties filed joint stipulations of facts, which include the following information.

{¶ 7} In 1996, Toledo Edison entered into an electric-service contract with Sunoco. Also in 1996, Toledo Edison entered into a similar contract with BP, hereinafter referred to as “the BP Agreement” or “the 1996 Agreement.” The BP Agreement provided that it would remain in effect until June 2006.

{¶ 8} On May 17, 1999, Sunoco and Toledo Edison entered into an electric-service agreement (the “Sunoco Agreement” or “the 1999 Agreement”), which replaced the 1996 Sunoco-Toledo Edison contract. The Sunoco Agreement is a special contract authorized by the PUCO pursuant to R.C. 4905.31. Under the terms of the special contract, Sunoco was entitled to pricing for electric service that was below standard tariff rates. The Sunoco Agreement provided that it would remain in effect through June 2006 — the same date as the BP Agreement.

{¶ 9} The Sunoco Agreement and the BP Agreement contained identical most-favored-nation clauses. Generally, Sunoco and BP could utilize the clause to obtain a benefit — in the form of an “arrangement, rates or charges” — that Toledo Edison had given the other. In each of these agreements, the clause was titled “Comparable Facility Price Protection.” No one disputes that Sunoco and BP are comparable facilities as that term is defined in the most-favored-nation clause.

{¶ 10} In late 1999, the General Assembly enacted legislation that restructured Ohio’s electric-utility industry to allow retail customers to buy electricity from someone other than their local electric company. See Am.Sub.S.B. No. 3, 148 Ohio Laws, Part IV, 7962. Codified as R.C. Chapter 4928, the legislation was commonly known as “S.B. 3.” What followed was a series of cases at the PUCO involving Toledo Edison and other electric utilities in which the PUCO attempted to ease the transition from a regulated rate structure to a market-rate structure. See the electric-transition-plan (“ETP”) case, In re Application of Ohio Edison Co. (July 19, 2000), PUCO No. 09-1212-EL-ETP; and the rate-stabilization-plan (“RSP”) case, In re Application of Ohio Edison Co. (Oct. 28, 2003), PUCO No. [399]*39903-2144-EL-ATA, in which the PUCO allowed Toledo Edison and its large customers to extend the terms of their pre-S.B. 3 service contracts.

{¶ 11} The first extension was proposed through a joint stipulation filed by Toledo Edison and other parties to Toledo Edison’s ETP case. The electric-transition-plan stipulation provided that each electric-service customer that had entered into a special contract with Toledo Edison would be given a one-time opportunity to continue, cancel, or extend the terms of its special contracts, provided that those customers gave Toledo Edison timely notice. As was required by the electric-transition-plan stipulation and the commission’s order approving that stipulation, Toledo Edison gave notice to each special-contract customer of the option to extend the duration of its contract. Sunoco elected to extend the terms of its 1999 Agreement with Toledo Edison. Likewise, BP elected to extend the terms of its 1996 Agreement with Toledo Edison.1

{¶ 12} The next opportunity to extend occurred in Toledo Edison’s RSP case. In that case, the commission again approved a joint stipulation filed by Toledo Edison and other parties allowing Toledo Edison’s customers to extend the term of any special contract “upon the request of the customer, or its agent, received within 30 days of the Commission’s order in this case.” However, unlike in the ETP case, the stipulation and the PUCO’s order in the RSP case did not require Toledo Edison to notify its contract customers of the opportunity to extend, and Toledo Edison did not directly communicate with Sunoco, BP, or any other contract customer regarding this option. Nevertheless, within that 30-day window, BP requested that Toledo Edison extend the 1996 BP Agreement, which Toledo Edison agreed to do. Sunoco did not submit a request to Toledo Edison to extend the Sunoco Agreement.

{¶ 13} A final stipulated contract extension was approved in Toledo Edison’s rate-eertainty-plan (“RCP”) case, In re Application of Ohio Edison Co., PUCO No. 05-1125-EL-ETA, a case that is still open. The stipulation in the RCP case provided that the special contracts that were extended under the RSP case — such as the BP Agreement — would continue in effect until December 31, 2008. The stipulation further provided that special contracts extended under the ETP case, but not extended under the RSP case — such as the Sunoco Agreement — would continue in effect only until February 2008. Thus, Sunoco’s agreement was scheduled to expire ten months before BP’s agreement.

{¶ 14} On or about May 16, 2007, Toledo Edison informed Sunoco that the Sunoco Agreement would terminate in February 2008.

[400]

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Bluebook (online)
2011 Ohio 2720, 129 Ohio St. 3d 397, Counsel Stack Legal Research, https://law.counselstack.com/opinion/sunoco-inc-r-m-v-toledo-edison-co-ohio-2011.