In a 4-3 decision, justices sided with environmental and consumer groups that had challenged the Public Utilities Commission of Ohio's finding that the so-called distribution modernization rider to FirstEnergy's rate plan represented a corporate incentive.
"The PUCO staff's wishful thinking cannot take the place of real requirements, restrictions, or conditions imposed by the commission for the use of (the) funds," Justice Michael P. Donnelly wrote for the majority.
The rider, a temporary additional charge, has been raising between $204 million and $168 million a year for the company since it was imposed in January 2017, costing homeowners using an average of 750 kilowatt-hours of electricity a month about $30 more a year.
FirstEnergy spokesman Mark Durbin said the company is evaluating its options.
"We continue to believe that (the rider) provides benefits to our customers by enhancing our ability to modernize our system and invest in advanced technologies," he said in an email. "A third party appointed by the PUCO just this week determined that we have appropriately used (rider) funds in support of grid modernization."
The company has asked the PUCO to extend the charge for two more years when it expires this December.
Opponents hailed the court's decision as a victory for customers. The court instructed the PUCO to ensure FirstEnergy immediately stops collecting the rider, but noted money already collected from the charge isn't subject to refund.
"The decision further highlights the fact that FirstEnergy's frequent and systemic bad decision-making has led them to a point where they can only operate if Ohio electric customers are routinely bailing them out," Neil Waggoner, Ohio campaign representative for the Sierra Club Beyond Coal Campaign, said in an emailed statement.
Miranda Leppla, vice president of energy policy at the Ohio Environment Council, called the ruling "timely and relevant" as state lawmakers debate a separate proposal that would add another new charge to FirstEnergy customers' bills to rescue its two struggling nuclear plants.
"It should serve as a cautionary tale that granting free money with no strings attached is unlawful, unreasonable, and unjust," she said in an emailed statement.
Dissenting justices generally disagreed with the majority's premise that, by failing to attach conditions to the rider, the PUCO handed FirstEnergy a carrot without any stick.
In her dissent, Justice Sharon Kennedy said an incentive doesn't have to be "conditioned or restricted or even related to the action being encouraged."
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