[This opinion has been published in Ohio Official Reports at 

.]




TOLEDO EDISON COMPANY, APPELLANT, v. CITY OF BRYAN ET AL., APPELLEES.
               [Cite as Toledo Edison Co. v. Bryan, 

.]
Municipal corporations—Electric service—Sections 4 and 6 of Article XVIII of
        the Ohio Constitution preclude a municipality from purchasing electricity
        solely for the purpose of reselling it to an entity not within the
        municipality’s geographic limits.
     (No. 99-1280—Submitted June 7, 2000—Decided November 15, 2000.)
    APPEAL from the Court of Appeals for Williams County, No. WM-98-017.
                                  __________________
        {¶ 1} This appeal addresses whether a municipality has the right to purchase
electricity solely for the purpose of reselling the electricity to an entity outside the
municipality’s geographic boundaries. Generally public utilities that produce
electricity have exclusive authority to provide electrical service to persons outside
municipalities. However, under Sections 4 and 6, Article XVIII of the Ohio
Constitution, municipalities have home rule authority to purchase or produce
electricity for their inhabitants, as well as the right to sell limited amounts of surplus
electricity to entities outside the geographic boundaries of the municipality.
        {¶ 2} Because the trial court dismissed the appellant, Toledo Edison’s,
complaint for failure to state a claim, the facts stated here are as alleged in the
complaint. Toledo Edison Company is a public utility that generates, transmits,
distributes, and sells electric power to customers in northwest Ohio, including
Williams County, pursuant to the Certified Territories Act (“CTA”), R.C. 4933.81
to 4933.90. Appellees Bryan, Pioneer, Montpelier, and Edgerton (“municipalities”)
are all municipal corporations located in Williams County, Ohio, that own and
operate their own utilities that produce electricity for their inhabitants. Appellee,
Ohio Municipal Electric Generation Agency Joint Venture 4, is a joint venture of
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the four municipalities to facilitate the purchase, transmission, and resale of
electricity. Chase Brass & Copper Company (“Chase Brass”) is a corporation
engaged in smelting and is located in Williams County, but outside of all the
municipalities’ geographic limits.      American Municipal Power-Ohio (“AMP-
Ohio”) is a wholesale electric supplier and trade association that assists in supplying
electricity to its member municipalities.
        {¶ 3} The municipalities, through AMP-Ohio, constructed an electric power
transmission line in Williams County that runs from one of Bryan’s municipal
electrical substations directly to Chase Brass. In July 1995, all the municipalities
adopted ordinances authorizing them to sell electricity to Chase Brass via the Chase
Brass transmission line. On October 17, 1995, Chase Brass terminated its thirty-
three-year history of purchasing electricity from Toledo Edison and began
purchasing electricity from the municipalities. The municipalities had to purchase
electricity in order to fulfill their obligation to provide Chase Brass with electricity.
Toledo Edison believed that the municipalities’ purchase and sale of electricity to
Chase Brass was not within the municipalities’ authority. Consequently, counsel
for Toledo Edison wrote letters to the law director or village solicitor of each of the
municipalities, demanding that they seek injunctions to restrain their municipalities
from expending public money for the purpose of promoting the electrical service
agreements or taking any other action to promote the sale of electricity to Chase
Brass. These officers failed to take any legal action against the municipalities.
        {¶ 4} On February 23, 1996, Toledo Edison filed a complaint for injunctive
and declaratory relief in the Williams County Court of Common Pleas, seeking a
declaration that the municipalities’ sale of electricity to Chase Brass was illegal and
unconstitutional. Specifically, Toledo Edison alleged that the municipalities were
purchasing electricity to sell to Chase Brass in violation of Section 4, Article XVIII
of the Ohio Constitution. Toledo Edison asserted that Section 4 authorizes a
municipality to purchase electricity solely for the use by the municipality or its




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                                 January Term, 2000




inhabitants. Toledo Edison asserted that the municipalities purchased electricity
from AMP-Ohio solely to resell to Chase Brass, a noninhabitant, in violation of
Section 4.
        {¶ 5} Toledo Edison also alleged that the municipalities’ sale of electricity
to Chase Brass violated Section 6, Article XVIII of the Ohio Constitution. Toledo
Edison asserted that Section 6 does not authorize a municipality to purchase
electricity for the purpose of selling it to an entity outside the municipality. Toledo
Edison alleged that the electricity being sold by the municipalities to Chase Brass
was not surplus electricity generated by any of the municipalities’ utilities but rather
electricity purchased by the municipalities specifically for resale to Chase Brass in
violation of Section 6.
        {¶ 6} The municipalities filed a motion to dismiss that alleged that Toledo
Edison lacked standing to challenge the municipalities’ sale of electricity to Chase
Brass. On August 18, 1998, the trial court issued a judgment entry granting the
motion to dismiss for lack of standing. The court also decided that Toledo Edison’s
claims were without merit even assuming that Toledo Edison had standing. Toledo
Edison appealed.
        {¶ 7} The Court of Appeals for Williams County affirmed in part and
reversed in part the trial court’s judgment. The appellate court reversed the trial
court’s holding that Toledo Edison lacked standing to file suit against the
municipalities, finding that Toledo Edison had standing under R.C. 2721.03.
However, the appellate court found that Section 6, Article XVIII of the Ohio
Constitution provided municipalities the right to sell surplus electricity without
regard to whether the municipality bought the electricity for the purpose of resale,
as long as the amount sold outside the municipality did not exceed fifty percent of
the total electricity consumed in the municipality. The appellate court remanded
the cause to the trial court for further proceedings on Toledo Edison’s claim that




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the municipalities’ sale of electricity to Chase Brass exceeded the fifty-percent limit
imposed by Section 6, Article XVIII of the Ohio Constitution.
       {¶ 8} This cause is now before the court pursuant to the allowance of a
discretionary appeal.
                               __________________
       Fuller & Henry, Ltd., Craig J. Van Horsten and Mary Ann Whipple; and
Michael R. Beiting, for appellant.
       Kent L. North, Bryan City Attorney; Chester, Willcox & Saxbe, L.P.A., and
John W. Bentine; Duncan & Allen and John P. Coyle, for appellees.
       Jones, Day, Reavis & Pogue and Paul T. Ruxin, urging reversal for amici
curiae Allegheny Power, Cincinnati Gas & Electric Company, Dayton Power &
Light Company, Ohio Edison Company, and the Cleveland Electric Illuminating
Company.
       Gary A. Jack, urging reversal for amicus curiae Allegheny Power.
       James B. Gainer, urging reversal for amicus curiae Cincinnati Gas &
Electric Company.
       Arthur G. Meyer, urging reversal for amicus curiae Dayton Power & Light
Company.
       Chester, Willcox & Saxbe, L.L.P., J. Craig Wright and Jeffrey L. Small,
urging affirmance for amicus curiae AMP-Ohio.
       Zoll & Kranz, L.L.C., and David W. Zoll; Vorys, Sater, Seymour & Pease,
L.L.P., Sheldon A. Taft and Jason J. Kelroy, urging affirmance for amicus curiae
Chase Brass and Copper Company.
       McNees, Wallace & Nurick and Samuel C. Randazzo, urging affirmance for
amicus curiae Industrial Energy Users-Ohio.
       Lawrence J. Seltzer, Jr., urging affirmance for amicus curiae Ohio Council
of Retail Merchants.




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                                January Term, 2000




       Vorys, Sater, Seymour & Pease, L.L.P., Sheldon A. Taft and Jason J. Kelroy,
urging affirmance for amicus curiae Ohio Manufacturers’ Association.
       John E. Gotherman, urging affirmance for amicus curiae Ohio Municipal
League.
       David C. Reinbolt, urging affirmance for amicus curiae Ohio Partners for
Affordable Energy.
                               __________________
       LUNDBERG STRATTON, J.
       {¶ 9} We are asked to determine whether a municipality has constitutional
authority to purchase electricity solely for direct resale to an entity that is not an
inhabitant of the municipality and not within the municipality’s limits. For the
following reasons we find that the answer is no.
       {¶ 10} Many of Ohio’s inhabitants are provided electrical service by public
utilities. The Ohio Public Utilities Commission has divided Ohio into territories
pursuant to the Certified Territories Act (“CTA”). See R.C. 4933.82. Under the
CTA, each electricity-producing public utility is assigned a territory under which it
has the exclusive right to sell electricity to the inhabitants of that territory.
Cleveland Elec. Illum. Co. v. Pub. Util. Comm. (1996), 

, 

. However, a public utility’s exclusive right to provide
electricity within its territory is subject to an exception. The Ohio Constitution
provides that municipalities may acquire or produce utility services or products for
the municipality and its inhabitants and sell surplus product or service. Sections 4
and 6, Article XVIII of the Ohio Constitution.          The question is whether a
municipality can use this constitutional authority to purchase electricity solely for
the purpose of reselling it to an entity outside the municipality’s geographic
boundaries.
       {¶ 11} The Ohio Constitution addresses a municipality’s authority to
produce and acquire a public utility product or service in Section 4, Article XVIII:




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       “Any municipality may acquire, construct, own, lease and operate within or
without its corporate limits, any public utility the product or service of which is or
is to be supplied to the municipality or its inhabitants, and may contract with others
for any such product or service.” (Emphasis added.)
       {¶ 12} Section 4 authorizes a municipality to establish, maintain, and
operate a power plant to produce electricity. See Orr Felt Co. v. Piqua (1983), 

, 2 OBR 709, 713, 

. It also authorizes a
municipality to contract to purchase electricity. See Cleveland Elec. Illum. Co., 

, 

. However, a municipality’s authority to
produce or purchase electricity is limited “primarily to the furnishing of services to
their own inhabitants.” State ex rel. Wilson v. Hance (1959), 

,
461, 

, 473, 

, 744.
       {¶ 13} Section 6, Article XVIII of the Ohio Constitution provides the
criteria pursuant to which a municipality may sell electricity:
       “Any municipality, owning or operating a public utility for the purpose of
supplying the service or product thereof to the municipality or its inhabitants, may
also sell and deliver to others any transportation service of such utility and the
surplus product of any other utility in an amount not exceeding in either case fifty
per cent of the total service or product supplied by such utility within the
municipality * * *.” (Emphasis added.)
       {¶ 14} Section 6 allows a municipality that owns or operates a utility for the
purpose of generating its own electricity to sell surplus electricity. Critical to our
analysis of Section 6 is the meaning of the word “surplus.” Language used in the
Constitution should be given its usual and ordinary meaning. Cleveland Tel. Co. v.
Cleveland (1918), 

, 368, 

, 704. “Surplus” is defined
as “the amount that remains when use or need is satisfied.” Webster’s Third New
International Dictionary (1993) 2301. Thus, a municipality may sell electricity that




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                                 January Term, 2000




is in excess of what the municipality or its inhabitants use subject to any other
limitations, which we do not address in this opinion.
        {¶ 15} Where provisions of the Constitution address the same subject
matter, they must be read in pari materia and harmonized if possible. State ex rel.
Mitchell v. Council of Village of Milan (1938), 

, 

, 

; Isaac v. Intercoast Sales Corp. (1937), 

, 

, 

. Section 4 and Section 6 of Article XVIII of the Ohio Constitution
define a municipality’s rights pertaining to acquisition and disposition of public
utility products and services. Hance, 169 Ohio St. at 461, 8 O.O.2d at 473, 159
N.E.2d at 744. Thus, Sections 4 and 6 should be construed in pari materia.
        {¶ 16} Section 4 intends to limit a municipality’s authority to produce or
acquire electricity primarily for the purpose of serving it or its inhabitants’ needs.
Hance, 169 Ohio St. at 461, 8 O.O.2d at 473, 159 N.E.2d at 744. Section 6 intends
to limit a municipality’s ability to sell only that electricity that is in excess of what
is needed by the municipality or its inhabitants. Read in pari materia, Sections 4
and 6 only allow a municipality to purchase electricity primarily for the purpose of
supplying its residents and reselling only surplus electricity from that purchase to
entities outside the municipality.      This interpretation necessarily precludes a
municipality from purchasing electricity solely for the purpose of reselling the
entire amount of the purchased electricity to an entity outside the municipality’s
geographic limits.
        {¶ 17} This holding comports with this court’s determination that the
framers “intended to * * * prevent * * * municipalities from entering into the
general public-utility business outside their boundaries in competition with private
enterprise.” Hance, 169 Ohio St. at 461, 8 O.O.2d at 473, 159 N.E.2d at 744.
Public utilities that provide electricity, such as Toledo Edison, are subject to
substantial regulatory controls by the Public Utilities Commission of Ohio,
including regulation of rates. See, e.g., R.C. 4933.13 et seq.; R.C. Chapter 4909.




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Each electric utility is given a territory by the Public Utilities Commission within
which it has the exclusive right to sell its electricity. See R.C. 4933.81 et seq.;
Cleveland Elec. Illum. Co. v. Pub. Util. Comm., 

, 

. In contrast a municipality’s production or purchase of electricity is
not regulated by the PUCO. To allow municipalities the unfettered authority to
purchase and then resell electricity to entities outside their boundaries could create
unfair competition for the heavily regulated public utilities.
          {¶ 18} Thus, we hold that Sections 4 and 6 of Article XVIII of the Ohio
Constitution, read in pari materia, preclude a municipality from purchasing
electricity solely for the purpose of reselling it to an entity that is not within the
municipality’s geographic limits. In other words, a municipality is prohibited from
in effect engaging in the business of brokering electricity to entities outside the
municipality in direct competition with public utilities. This prohibition includes a
de facto brokering of electricity, i.e., where a municipality purchases electricity
solely to create an artificial surplus for the purpose of selling the electricity to an
entity not within the municipality’s geographic boundaries.
          {¶ 19} Ultimately, determination of this issue requires fact-finding by the
trial court as to whether the electricity purchased by the municipalities herein was
solely for the purpose of resale to an entity outside the geographic boundaries of
the municipalities. Thus, we reverse the judgment of the court of appeals and
remand this cause to the trial court for further proceedings on Toledo Edison’s
claims.
                                                                   Judgment reversed
                                                                 and cause remanded.
          F.E. SWEENEY, Acting C.J., GWIN, O’NEILL and YOUNG, JJ., concur.
          PFEIFER, J., concurs in judgment only.
          HADLEY, J., dissents.
          W. SCOTT GWIN, J., of the Fifth Appellate District, sitting for MOYER, C.J.




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                                January Term, 2000




       RONALD E. HADLEY, J., of the Third Appellate District, sitting for
DOUGLAS, J.
       WILLIAM M. O’NEILL, J., of the Eleventh Appellate District, sitting for
RESNICK, J.
       WILLIAM W. YOUNG, J., of the Twelfth Appellate District, sitting for COOK,
J.
                              __________________
       HADLEY, J., dissenting.
       {¶ 20} I respectfully dissent.
       {¶ 21} I agree with the majority’s statement that “[t]he Ohio Constitution
provides that municipalities may acquire or produce utility services or products for
the municipality and its inhabitants and sell surplus product or service.” I disagree
with the majority when it states that a municipality is limited in this endeavor by
any means other than the fifty-percent limitation set forth in Section 6, Article
XVIII of the Constitution.
       {¶ 22} Under the Home Rule Amendment, Article XVIII, adopted after
being proposed by the Constitutional Convention of 1912, “the sovereign people of
the state expressly delegated to the sovereign people of the municipalities of the
state full and complete political power in all matters of ‘local self-government.’ ”
Perrysburg v. Ridgway (1923), 

, 255, 

, 598.
       {¶ 23} In Travelers Ins. Co. v. Wadsworth (1924), 

, 

, at paragraph two of the syllabus, this court held that “in the absence of
specific prohibition, the city acting in a proprietary capacity may exercise its
powers as would an individual or private corporation.”
       {¶ 24} In State ex rel. Indian Hill Acres, Inc. v. Kellogg (1948), 

, 

, 

, the court held that a municipality has full
power to determine the policy to be followed in regard to the sale and delivery of a
surplus product of a municipally owned utility to others and that it may sell and




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dispose of its surplus product in such quantities and in such manner as its council
determines to be in the best interest of the municipality and its inhabitants.
       {¶ 25} Specifically referring to electrical utilities, in State ex rel. McCann
v. Defiance (1958), 

, 

, 

, paragraph
one of the syllabus, the court ruled, “The General Assembly has no power to * * *
[limit] the * * * authority of a municipality * * * to sell and deliver to others the
portion of the surplus product of such utility that it is authorized by Sections 4 and
6 of Article XVIII of the Constitution to sell and deliver to such others.”
       {¶ 26} The majority cities as its authority to limit the sale by municipal
utilities the case of State ex rel. Wilson v. Hance (1959), 

, 461, 

, 473, 

, 744. A close examination of that case reveals
that the court found that the Constitution did in fact authorize municipalities to
acquire public utilities and contract with others for their products and services, but
pointed out that the disposition of surplus products or services of the utilities was
limited by Section 6, Article XVIII, the fifty-percent limitation. The court merely
found that under the circumstances of that case, since it had already been
determined that the city of Piqua had exceeded its fifty-percent limitation, any
further contract to sell surplus electricity outside the city would be invalid due to
that fifty-percent limitation only. Thus neither the Constitution nor case law limits
the action of the municipalities in this action except for the fifty-percent limitation.
       {¶ 27} In conjunction with the constitutional power regarding utilities, the
General Assembly has enacted R.C. 715.02, which provides that two or more
municipal corporations may enter into agreements for the joint construction or
management of a utility, “or for the joint exercise of any power conferred on
municipal corporations by the constitution or laws of this state, in which each of
such municipal corporations is interested.”
       {¶ 28} Thus a municipality has full and complete power to enter into
whatever arrangement it deems necessary for the ownership, operation, and control




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                                 January Term, 2000




of public utilities by itself or in conjunction with other municipalities, subject to the
fifty-percent limitation.
        {¶ 29} The majority concludes without authority that since municipalities
are not regulated by the Public Utility Commission, “[t]o allow municipalities the
unfettered authority to purchase and then resell electricity to entities outside their
boundaries could create unfair competition for the heavily regulated public
utilities.”
        {¶ 30} Examining the limitation provision, I find that Section 6, Article
XVIII does not provide an “unfettered authority”:
        “Any municipality, owning or operating a public utility for the purpose of
supplying the service or product thereof to the municipality or its inhabitants, may
also sell and deliver to others any transportation service of such utility and the
surplus product of any other utility in an amount not exceeding in either case fifty
per cent of the total service or product supplied by such utility within the
municipality, provided that such fifty per cent limitation shall not apply to the sale
of water or sewage services.”
        {¶ 31} The debates and proceedings of the constitutional convention clearly
indicate that the framers considered whether municipalities would be competitive
with private corporations for utilities and concluded that the fifty-percent provision
would be the only necessary limitation and that the implementation of that
limitation should be left to the courts. The court of appeals made the correct
assessment of this matter and remanded it to the trial court for determination
regarding fifty-percent limitation. I believe that the decision of the court of appeals
should be affirmed.
                                __________________




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