## Facts

- Toledo Edison Company, an investor-owned utility, held a certified territory to provide electric service to Chase Brass & Copper Company, an industrial customer located outside municipal boundaries in Williams County, Ohio.
- The City of Bryan and the Villages of Pioneer, Montpelier, and Edgerton operated municipal electric utilities and formed a joint venture (OMEGA JV-4), with assistance from AMP-Ohio, to supply electricity.
- The municipalities constructed a transmission line from Bryan’s substation to Chase Brass and adopted ordinances authorizing sales of electricity to Chase Brass through that line.
- Chase Brass ended its long-standing relationship with Toledo Edison and began purchasing electricity from the municipalities.
- The municipalities allegedly lacked sufficient generation capacity and therefore purchased electricity to meet the obligation to serve Chase Brass.
- Toledo Edison sued for declaratory and injunctive relief, asserting the municipalities’ conduct exceeded municipal authority to sell electricity outside corporate limits under Article XVIII of the Ohio Constitution.

## Issues

1. Whether Sections 4 and 6, Article XVIII of the Ohio Constitution permit a municipality to purchase electricity solely to resell it to an entity outside the municipality’s geographic limits.
2. Whether Toledo Edison stated a claim sufficient to survive dismissal where it alleged the municipalities created an impermissible “artificial surplus” to serve an extraterritorial customer.

## Decision

- The Supreme Court of Ohio reversed the trial court’s dismissal for failure to state a claim and remanded for further proceedings.
- The Court held that Sections 4 and 6, Article XVIII preclude a municipality from purchasing electricity solely for the purpose of reselling it to an entity outside the municipality’s geographic limits.
- The Court concluded Toledo Edison’s complaint alleged conduct beyond the municipalities’ constitutional authority and therefore stated a cognizable claim.

## Legal Principles

- Municipalities may acquire and operate utilities to supply their inhabitants and may sell electricity outside municipal limits only as constitutionally permitted.
- Under Section 6, Article XVIII, extraterritorial sales must be limited to “surplus” electricity and are capped at no more than 50% of the total product supplied within the municipality in the relevant year.
- “Surplus” presupposes primary service to municipal inhabitants; electricity acquired primarily to serve an outside customer is not “surplus” within the meaning of Section 6.
- Municipalities may not create an “artificial surplus” by purchasing power mainly to resell it outside their boundaries; doing so would circumvent Article XVIII’s limitations and improperly displace service otherwise provided in certified territories.

## Conclusion

The Ohio Supreme Court held that Article XVIII does not allow municipalities to purchase electricity solely to resell it to customers outside municipal limits, reversed the dismissal of Toledo Edison’s complaint, and remanded for further proceedings to apply that constitutional limitation to the alleged arrangement.


Toledo Edison Co. v. City of Bryan, 90 Ohio St. 3d 288, 737 N.E.2d 529 (Ohio 2000)