1. Utilities_rate freeze_newly passed legislation
The Utilities Commission properly denied CUCA's petition to initiate a general rate case
because the Legislature had frozen rates for a time after new legislation was passed; there was an
exception for a utility that persistently and substantially earned more than its allowed rate of
return during the freeze period; and CUSA's allegations were based on returns prior to the freeze
period. N.C.G.S. § 62-133.6(e).
2. Utilities_rates_no common law property interest
There is no common law property interest in just and reasonable utility rates, and, even if
such a property right existed, N.C.G.S. § 12-2 (repeal of a statute does not affect pending
actions) would not apply in this case because no statute was repealed by the new legislation and
temporary rate freeze. N.C.G.S. § 62-133.6.
West Law Offices, P.C., by James P. West, for petitioner-
appellant.
Attorney General Roy A. Cooper, III, by Special Deputy
Attorney General Karen E. Long, for respondent-appellee State
of North Carolina ex rel. Utilities Commission.
Kennedy Covington Lobdell & Hickman, L.L.P., by Clarence W.
Walker and Kiran H. Mehta; Law Office of Robert W. Kaylor,
P.A., by Robert W. Kaylor; William Larry Porter, Kodwo
Ghartey-Tagoe and Paul R. Newton, for respondent-appellee,
Duke Energy Corporation.
HUNTER, Judge.
Carolina Utility Customers Association, Inc. (“CUCA”) appeals
an order of the North Carolina Utilities Commission (“the
Commission”) denying CUCA's petition to initiate a general rate
proceeding and dismissing its complaint regarding unjust andunreasonable rates charged by Duke Power, a division of Duke Energy
Corporation (“Duke”). For the reasons stated herein, we affirm.
CUCA is an association representing many of North Carolina's
largest industrial manufacturers. On 12 June 2002, CUCA filed a
verified petition and complaint against Duke alleging that Duke's
base rates for electricity, particularly for CUCA's member base,
were unjust and unreasonable. CUCA specifically alleged, inter
alia, that (1) Duke artificially reduced its regulated earnings by
amortizing asbestos expenses in a manner that was an exception to
standard utility accounting practices, and (2) Duke's allowed rate
of return, originally set in 1991, was too high for the current
economic climate. CUCA supported its allegations by referencing an
audit of Duke that was currently being conducted by Grant Thornton,
L.L.P. as part of an investigation initiated by the Commission, the
South Carolina Public Service Commission, and the North Carolina
Public Staff “regarding Duke's alleged accounting improprieties.”
However, CUCA alleged that since the audit would only address
“discrete accounting issues and discrepancies rather than all of
the records that would be relevant to the setting of general
rates[,]” the need for a comprehensive ratepayer review of Duke's
records was necessary. Thus, CUCA petitioned the Commission to
initiate a general rate case to remedy Duke's alleged overcharges.
While the petition and complaint were pending, clean
smokestack legislation was enacted on 20 June 2002 as Section 62-
133.6 of our statutes. Among other things, Section 62-133.6
declared the “base rates” of investor-owned public utilities, such
as Duke, will remain unchanged from 20 June 2002 until 31 December2007. Three days later, the Commission issued an order concluding
that, pursuant to Section 62-133.6, there were no reasonable
grounds by which to allow CUCA's complaint to proceed. CUCA's
petition to initiate a general rate case against Duke was therefore
denied by the Commission, but CUCA was afforded an opportunity to
be heard as to that decision by filing comments or a motion for
reconsideration.
On 9 August 2002, CUCA filed comments and a motion for
reconsideration, which contended the Commission's “denial of the
petition to initiate a general rate case and its tentative finding
that there are no reasonable grounds to proceed upon CUCA's
complaint both rest upon a misapprehension of applicable law.”
Specifically, CUCA argued (1) the subsequent enactment of Section
62-133.6 had no effect upon pending litigation, and (2) the “base
rates” referred to in Section 62-133.6 represent “base fuel rates”;
thus, as long as base fuel rates are not impacted, the initiation
of either a general rate proceeding or a complaint proceeding
should not be prohibited. Nevertheless, in an order dated 17
October 2002, the Commission denied reconsideration of its previous
order and once again concluded there were “no reasonable grounds to
proceed with a complaint proceeding.” CUCA appeals.
At the outset, Chapter 62 of our statutes governs public
utilities and establishes, in part, that any finding,
determination, or order of the Commission is deemed “prima facie
just and reasonable.” N.C. Gen. Stat. § 62-94(e) (2003).
Therefore, “'[j]udicial reversal of an order of the Utilities
Commission is a serious matter for the reviewing court,' which maybe justified only by strict adherence to the statutory guidelines
governing appellate review.” State ex rel. Util. Comm'n v.
Carolina Indus. Group, 130 N.C. App. 636, 638, 503 S.E.2d 697, 699
(1998) (citation omitted). The applicable statute provides as
follows:
(b) So far as necessary to the decision
and where presented, the court shall decide
all relevant questions of law, interpret
constitutional and statutory provisions, and
determine the meaning and applicability of the
terms of any Commission action. The court may
affirm or reverse the decision of the
Commission, declare the same null and void, or
remand the case for further proceedings; or it
may reverse or modify the decision if the
substantial rights of the appellants have been
prejudiced because the Commission's findings,
inferences, conclusions or decisions are:
(1) In violation of constitutional
provisions, or
(2) In excess of statutory authority or
jurisdiction of the Commission, or
(3) Made upon unlawful proceedings, or
(4) Affected by other errors of law, or
(5) Unsupported by competent, material
and substantial evidence in view of
the entire record as submitted, or
(6) Arbitrary or capricious.
N.C. Gen. Stat. § 62-94(b).
Additionally, Chapter 62 delegates rate making to the
Commission. As stated by our Supreme Court:
In fixing rates to be charged by a public
utility, the Commission is exercising a
function of the legislative branch of the
government. It may not, therefore, exceed the
limitations imposed upon the Legislature by
the State and Federal Constitutions. The
Commission, however, does not have the full
power of the Legislature but only that portionconferred upon it in G.S. Chapter 62. In
fixing the rates to be charged by a public
utility for its service, the Commission must,
therefore, comply with the requirements of
that chapter . . . .
Utilities Comm. v. Telephone Co., 281 N.C. 318, 336, 189 S.E.2d
705, 717 (1972).
[1] CUCA assigns error to the Commission's conclusion that a
newly enacted section of Chapter 62, Section 62-133.6, precluded
the initiation of a rate adjustment proceeding by petition and
complaint against Duke. The enactment of Section 62-133.6 was an
exercise by the Legislature of the power granted to it under the
North Carolina Constitution to alter electricity rates for
investor-owned utilities, such as Duke, for the next five years
while the utilities seek to comply with new air emission standards.
See N.C. Const. art. II, § 1; N.C. Gen. Stat. § 62-133.6 (2003).
The pertinent subsection at issue in this appeal provides as
follows:
(e) Notwithstanding G.S. 62-130(d) and
G.S. 62-136(a), the base rates of the
investor-owned public utilities shall remain
unchanged from the date on which this section
becomes effective through December 31, 2007.
The Commission may, however, consistent with
the public interest:
(1) Allow adjustments to base rates, or
deferral of costs or revenues, due
to one or more of the following
conditions occurring during the rate
freeze period:
. . . .
d. The investor-owned public utility
persistently earns a return
substantially in excess of the rate
of return established and found
reasonable by the Commission in theinvestor-owned public utility's last
general rate case.
N.C. Gen. Stat. § 62-133.6(e).
CUCA initially argues that despite the base rate freeze
provision of Subsection 62-133.6(e), Subsection 62-133.6(h) still
provides a statutory basis to proceed with its petition and
complaint. Subsection 62.133.6(h) states “[n]othing in this
section shall prohibit the Commission from taking any actions
otherwise appropriate to enforce investor-owned public utility
compliance with applicable statutes or Commission rules or to order
any appropriate remedy for such noncompliance allowed by law.”
N.C. Gen. Stat. § 62.133.6(h). CUCA contends this subsection
authorizes the Commission to take “any actions otherwise
appropriate[,]” including the hearing of a complaint and the
initiation of a general rate proceeding, in order to remedy a
utility's noncompliance with applicable statutes and rules. We
disagree.
“'The cardinal principle of statutory construction is that the
intent of the legislature is controlling.'” Nationwide Mutual Ins.
Co. v. Mabe, 342 N.C. 482, 494, 467 S.E.2d 34, 41 (1996) (citation
omitted). To ascertain our General Assembly's legislative intent,
we look at “'the phraseology of the statute [as well as] the nature
and purpose of the act and the consequences which would follow its
construction one way or the other.'” Id. Further, when
reconciling statutes dealing with the same subject matter, they
must be construed in pari materia, and harmonized, if possible, to
give effect to each. Utilities Comm. v. Electric Membership Corp.,
275 N.C. 250, 166 S.E.2d 663 (1969). Subsection 62-133.6(e) plainly provides that base rate
adjustments are allowed “during the rate freeze period” if “[t]he
investor-owned public utility persistently earns a return
substantially in excess of the rate of return established and found
reasonable by the Commission” in the utility's last general rate
case. By this subsection, it is clear that the excessive return
must occur during the rate freeze period. When construed in para
materia with Subsection 62-133.6(h)'s prohibition against the
Commission taking “any actions otherwise appropriate[,]” the
Commission would have the authority to issue fines for bad acts,
issue orders to compel adequate service, and to do any number of
acts which would be appropriate to regulate utilities. However,
the Commission would not have the authority to make base rate
adjustments contrary to Subsection 62-133.6(e) in the absence of
evidence that the investor-owned public utility had persistently
and substantially earned more than its allowed rate of return
during the rate freeze period. Here, CUCA's petition and complaint
were based on alleged excessive rate of returns by Duke that
occurred prior to 20 June 2002. Even if true, CUCA's allegations
do not address rates of return by Duke during the rate freeze
period. Therefore, while the Commission may have done other acts
to enforce Duke's compliance with applicable statutes and rules
(acts which are disputed in State ex rel. Utilities Comm. v.
Carolina Utility Cust. Assn. v. Duke Energy Corp., 163 N.C. App. 1,
592 S.E.2d 277 (2004), initiation of a general rate case was not
such an act. [2] Nevertheless, CUCA also argues that the Commission erred
in denying CUCA's petition and dismissing its complaint because
both were filed prior to the enactment of Section 62-133.6.
Specifically, CUCA contends that it has a common law property
interest to just and reasonable utilities rates; therefore, Section
12-2 of our statutes confirms that the existence of that property
interest prevents subsequently enacted legislation from affecting
CUCA's action. We disagree.
First, we have found no North Carolina case law recognizing
the property interest alleged by CUCA in this appeal. On the
contrary, our case law appears to suggest otherwise. See State ex
rel. Utilities Comm. v. Carolina Utility Cust. Assn., 336 N.C. 657,
446 S.E.2d 332 (1994) (holding that the defendant customers
association's interest in the supplier refunds used to fund the
expansion of natural gas lines was nothing more than a mere
expectation of receiving those refunds and not a property right).
Second, assuming such a property interest did exist, Section 12-2
would still be inapplicable. Section 12-2 provides, in pertinent
part, that “[t]he repeal of a statute shall not affect any action
brought before the repeal, for any forfeitures incurred, or for the
recovery of any rights accruing under such statute.” N.C. Gen.
Stat. § 12-2 (2003). No statute was repealed by the enactment of
Section 62-133.6 in the case sub judice. Subsection 62-133.6(e)
simply allows the Legislature to preempt the Commission's ability
to compel a general rate case by freezing rates until 31 December
2007, not completely revoking that ability. As stated by this
Court in Utilities Comm. v. Utility Co., 30 N.C. App. 336, 340, 226S.E.2d 824, 826 (1976): “The Utilities Commission exercises a
function of the legislative branch of the government, but only that
portion of the legislative power conferred upon it by legislative
act. It may not act in an instance where the Legislature has, by
specific legislation, preempted such action.” Thus, CUCA's second
argument is without merit.
Accordingly, the Commission properly denied CUCA's petition to
initiate a general rate proceeding against Duke and dismissed its
complaint regarding unjust and unreasonable rates charged by the
public utility.
Affirmed.
Chief Judge EAGLES and Judge GEER concur.
Chief Judge Eagles concurred in this case prior to 30 January
2004.
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