Title: Northern Va. Electric v. VEPCO

State: virginia

Issuer: Virginia Supreme Court

Document:

PRESENT: Hassell, C.J., Lacy, Keenan, Koontz, and Lemons, JJ., 
and Carrico1 and Stephenson, S.JJ. 
 
NORTHERN VIRGINIA ELECTRIC COOPERATIVE 
 
v.  Record No. 021998 
 
VIRGINIA ELECTRIC & POWER COMPANY, 
D/B/A DOMINION VIRGINIA POWER, ET AL. 
 
OPINION BY 
SENIOR JUSTICE ROSCOE B. STEPHENSON, JR. 
February 28, 2003 
 
OLD DOMINION ELECTRIC COOPERATIVE, ET AL. 
 
v.  Record No. 022023 
 
VIRGINIA ELECTRIC & POWER COMPANY, 
D/B/A DOMINION VIRGINIA POWER, ET AL. 
 
FROM THE STATE CORPORATION COMMISSION 
 
 
In these consolidated appeals of right, we decide whether 
the State Corporation Commission (the Commission) erred in 
determining which of two utilities is the proper provider of 
electric power service to a customer whose property lies partly 
within the certificated service territory of each utility. 
I 
A 
 
Appellant, Northern Virginia Electric Cooperative (NOVEC), 
is an electric power distribution cooperative organized and 
existing under the Utility Consumer Services Cooperatives Act, 
                     
 
1 Chief Justice Carrico presided and participated in the 
hearing and decision of this case prior to the effective date of 
his retirement on January 31, 2003. 
Code § 56-231.15 et seq., and is a Virginia public service 
corporation.  Appellant, Old Dominion Electric Cooperative (Old 
Dominion), is a utility aggregation cooperative organized and 
existing under the Utility Aggregation Cooperatives Act, Code 
§ 56-231.38 et seq., and is the exclusive wholesale electric 
power supplier for NOVEC.  Appellant, Virginia, Maryland and 
Delaware Association of Electric Cooperatives (the Association),  
is comprised of all the electric power distribution cooperatives 
operating in Virginia, Maryland, and Delaware. 
 
Appellee, Virginia Electric & Power Company (VEPCO), doing 
business as Dominion Virginia Power (Dominion Power), is a 
Virginia public service corporation authorized to transact 
business as an electric utility in the Commonwealth.  Additional 
appellees are the Smithsonian Institution (Smithsonian), United 
States General Services Administration (GSA), and the 
Commission. 
B 
 
A brief summary of the relevant facts will suffice.  
Smithsonian is developing a National Air and Space Museum Annex 
(the Annex) adjacent to Dulles International Airport.  
Smithsonian proposes to open the Annex to the public in December 
2003, a date that will coincide with the centennial celebration 
of the Wright brothers' first powered flight. 
                                                                  
 
 
2
 
The Annex is composed of a main building and a separate 
parking lot and is located on land owned by GSA.  Approximately 
two-thirds of the entire site on which the Annex is located lies 
within Dominion Power's certificated service territory.  
However, approximately 95% of the main building is in NOVEC's 
certificated service territory.  Additionally, it is projected 
that over 95% of the Annex's electric service load will be 
located in NOVEC's certificated service territory. 
 
In order to obtain electric power from Dominion Power, 
Smithsonian installed its own service line.  The line extends 
for one-quarter of a mile from a location at the main building 
and within NOVEC's certificated service territory to a point 
just across the territory border and within Dominion Power's 
certificated service territory.  Smithsonian's project manager 
testified that the service line was designed to enable 
Smithsonian to receive electric power from Dominion Power. 
 
Dominion Power, with NOVEC's consent, has been providing 
temporary electric power service to the Annex during 
construction.  The record shows that both Dominion Power and 
NOVEC are capable of providing reliable electric power service 
to the Annex.  Smithsonian, however, has requested that Dominion 
Power be its service provider.  The parties concede that it 
would be contrary to the public interest for both utilities to 
serve Smithsonian, and the Commission agrees. 
 
3
II 
 
On September 17, 2001, NOVEC filed a petition for 
declaratory judgment with the Commission, seeking a declaration 
that the Annex is within its certificated service territory and 
that, therefore, it possesses the exclusive right under the 
Utility Facilities Act, Code § 56-265.1 et seq., to provide 
electric power service to the Annex.  NOVEC also sought an 
injunction prohibiting Dominion Power from providing such 
service.2  On October 12, 2001, Dominion Power filed an answer 
and counter-petition, seeking a declaration that it has the 
statutory and legal obligation to provide electric power service 
to the Annex.3
 
Thereafter, a Commission examiner conducted a public 
hearing.  Upon the evidence and argument heard ore tenus and the 
parties' post-hearing briefs, the hearing examiner issued her 
report on March 20, 2002.  The hearing examiner found that a 
combination of the "point-of-use" and the "geographic-load-
center" tests should be utilized to resolve this territorial 
dispute.  The hearing examiner further found that: 
                     
 
2 Subsequently, Old Dominion and the Association were 
granted leave to participate in the proceeding in support of 
NOVEC. 
 
 
3 The United States Department of Justice accepted the 
Commission's invitation to respond to NOVEC's petition and filed 
a response on behalf of Smithsonian and GSA in support of 
Dominion Power. 
 
4
1. NOVEC has the right and the obligation to provide 
electric service to the new Smithsonian museum 
facility[,] including the hangar, the main central 
utility plant, four air handling unit areas, and the 
IMAX theatre; and 
2. [Dominion Power] has the right and obligation to 
provide service to the parking lot unless it transfers 
that territory to NOVEC. 
 
The hearing examiner recommended that the Commission enter 
an order that: (1) adopts the findings of the report; (2) grants 
NOVEC's petition for declaratory judgment; (3) denies Dominion 
Power's counter-petition; (4) directs Dominion Power, Old 
Dominion, and NOVEC, in consultation with Smithsonian, to submit 
a plan, within 30 days of the date of the final order, detailing 
how and when NOVEC would begin providing electric power service 
to the Annex; (5) enjoins NOVEC, Old Dominion, and Dominion 
Power to work cooperatively to accommodate a timely and 
efficient transfer of service; (6) directs NOVEC, Old Dominion, 
and Dominion Power to file a joint progress report bimonthly 
until completion of the transfer; and (7) dismisses the matter 
from the Commission's docket after completion of the transfer.4
 
On May 1, 2002, the Commission issued its final order, 
rejecting the hearing examiner's recommendations.  The 
Commission denied NOVEC's request for relief and, instead, 
                     
4 NOVEC, Old Dominion, and the Association filed comments in 
support of the hearing examiner's report and urged the 
Commission to adopt it.  Dominion Power and Smithsonian filed 
objections to the report. 
 
5
granted Dominion Power's counter-petition, allowing Dominion 
Power to provide electric power service to the Annex.  Northern 
Virginia Electric Cooperative, Etc., Case No. PUE-2001-00512.  
These appeals ensued. 
III 
A 
 
It is firmly established that a decision by the Commission 
comes to this court with a presumption of correctness.  
The Constitution of Virginia and statutes enacted by 
the General Assembly thereunder give the Commission 
broad, general and extensive powers in the control and 
regulation of a public service corporation.  The 
Commission is charged with the responsibility of 
finding the facts and making a judgment.  This court 
is neither at liberty to substitute its judgment in 
matters within the province of the Commission nor to 
overrule the Commission's finding of fact unless we 
can say its determination is contrary to the evidence 
or without evidence to support it. 
Campbell County v. Appalachian Pow. Co., 216 Va. 93, 105, 215 
S.E.2d 918, 927 (1975).  Additionally, the Commission's decision 
"is entitled to the respect due judgments of a tribunal informed 
by experience," and we will not disturb the Commission's 
analysis when it is " 'based upon the application of correct 
principles of law.' "  Lawyers Title Insurance Corp. v. Norwest 
Corp., 254 Va. 388, 390-91, 493 S.E.2d 114, 115 (1997) (quoting 
Swiss Re Life Co. Am. v. Gross, 253 Va. 139, 144, 479 S.E.2d 
857, 860 (1997)).  However, the Commission's decision, if based 
                                                                  
 
 
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upon a mistake of law, will be reversed.  First Virginia Bank v. 
Commonwealth, 213 Va. 349, 351, 193 S.E.2d 4, 5 (1972). 
B 
 
The Utility Facilities Act establishes the framework for 
the granting of certificates of public convenience and necessity 
authorizing utilities to provide exclusive service in designated 
territories.  Code § 56-265.3 thereof prohibits a utility from 
providing service unless it first obtains from the Commission 
such a certificate.  Code § 56-265.4 prohibits a utility from 
providing service in another utility's certificated service 
territory unless the utility proves to the Commission's 
satisfaction that the other utility is incapable of providing 
adequate service, but only after the other utility is given a 
reasonable time and opportunity to remedy its inadequacy. 
 
The Commission possesses broad discretion in determining 
whether to grant a certificate of convenience and necessity, and 
we must accept the Commission's findings unless they are 
contrary to or unsupported by the evidence.  Stafford Corps. v. 
Corp. Comm., 220 Va. 559, 562, 260 S.E.2d 226, 228 (1979).  A 
certificate of public convenience and necessity, we have held, 
is a valuable property right entitled to protection by the 
courts.  Culpeper v. VEPCO, 215 Va. 189, 193-94, 207 S.E.2d 864, 
867-68 (1974). 
IV 
 
7
A 
 
NOVEC contends that "[t]he Commission's decision is 
erroneous as a matter of law" because it "contradicts the 
Utility Facilities Act's plain mandate that utilities shall not 
serve customers' facilities that are located in other utilities' 
service territories."  Relying upon Code §§ 56-265.3 and –265.4, 
NOVEC asserts that "no utility is allowed to invade the service 
territory of another utility unless the certificated utility 
cannot provide adequate service, after being given notice and an 
opportunity to cure the deficiency."  Thus, NOVEC asserts, the 
Commission's decision destroyed its valuable property right. 
 
NOVEC further contends that, based upon Commission 
precedent, the "point-of-use" test should be applied to decide 
this territorial dispute.  Application of this test, NOVEC 
asserts, would give it the right to provide electric power 
service to the Annex because 95% of the facility lies within its 
certificated service territory.  NOVEC also asserts that 
Dominion Power and Smithsonian manipulated the delivery point so 
Smithsonian could receive its electric power service from 
Virginia Power. 
 
NOVEC relies upon two Commission cases:  Prince George 
Electric Cooperative, Etc., Case No. PUE-1996-00295, 1998 S.C.C. 
Ann. Rep. 344 (the Prince George Case), and Petition of Kentucky 
Utilities Company, Etc., Case No. PUE-1996-00303, 1999 S.C.C. 
 
8
Ann. Rep. 368 (the Kentucky Utilities Case).  In the Prince 
George Case, a new customer began construction of a mineral 
processing plant on a tract of land located wholly within the 
certificated service territory of Prince George Electric 
Cooperative (Prince George).  The customer, however, desired 
electric power service from VEPCO, and it purchased a narrow 
strip of land, 4,380 feet long and 30 feet wide, that just 
extended into VEPCO's service territory.  VEPCO delivered 
electric power service to the customer through the narrow 
corridor to a point of use located in Prince George's service 
territory.  Prince George Case, 1998 S.C.C. Ann. Rep. at 344. 
 
The Commission, after comparing the "point-of-use" and the 
"point-of-delivery" tests, concluded that the point-of-use test 
would best ensure the integrity of the certificated service 
territories.  The Commission reasoned that the point-of-delivery 
test would destroy the essence of exclusive service territories 
by permitting customers, through manipulation of delivery 
points, to avoid receiving service from a utility that was 
allotted the territory in which the customer was located.  In 
adopting the point-of-use test, however, the Commission made 
plain that the test is not absolute and stated the following: 
While we do not here adopt any absolute test and will 
always consider the practical realities of each 
situation, we intend to ensure that our decisions 
enforce the Code's requirement of strong protection 
 
9
for the exclusive service territories of utilities in 
Virginia. 
Id. at 349. 
 
In the Kentucky Utilities Case, Kentucky Utilities Company 
(Kentucky Utilities) served Sigmon Coal Company (Sigmon Coal) in 
Kentucky Utilities' exclusive service territory.  Sigmon Coal 
installed facilities that allowed it to connect with Powell 
Valley Electric Cooperative (Powell Valley) at a single 
consolidated delivery point located in the adjacent service 
territory allotted to Powell Valley.  Powell Valley and Sigmon 
Coal subsequently constructed additional facilities that enabled 
Sigmon Coal to discontinue all service from Kentucky Utilities.  
Kentucky Utilities Case, 1999 S.C.C. Ann. Rep. at 369. 
 
The Commission ruled that Kentucky Utilities should serve 
all of Sigmon Coal's facilities.  The Commission concluded that, 
if Sigmon Coal had been "allowed to avoid its electric provider 
based on manipulation of its delivery point, the protection and 
certainty that the Utility Facilities Act was designed to 
provide to territorial grants would be diminished, if not 
significantly eroded."  Id. at 376. 
B 
 
Dominion Power contends that, when the facts of this case 
are viewed in the light of the deferential standard we apply to 
the Commission's decisions, NOVEC and Old Dominion cannot 
 
10
prevail.  Dominion Power further contends that the Commission's 
decision does not violate the Utility Facilities Act or destroy 
NOVEC's property right because NOVEC "never possessed an 
exclusive right to serve the new museum."  Dominion Power also 
disputes NOVEC's contention that the Commission simply adopted a 
"customer choice" test in deciding this case.  According to 
Dominion Power, the Commission based its decision on the 
"practical realities" of the situation, as well as the 
customer's stated preference. 
V 
A 
 
In support of her recommendations to the Commission, the 
hearing examiner concluded that "the combination of a point of 
use and geographic load center analysis should be considered to 
resolve the territorial dispute under the facts presented in 
this case."  The "geographic-load-center" test was discussed in 
a Colorado case addressing issues similar to those in the 
present case.  See Public Service Co. v. Public Util. Com'n, 765 
P.2d 1015, 1019 (Colo. 1988).  Under the geographic-load-center 
test, the utility that serves the majority of a customer's load 
is permitted to serve the entire load, regardless of territorial 
boundaries.  Id. 
B 
 
11
 
The Commission did not adopt the hearing examiner's report.  
Instead, it determined that Dominion Power is entitled to 
provide electric power service to the Annex.  After discussing 
the relevant statutes and other authorities previously set forth 
herein, the Commission stated that, "where two public utilities 
hold certificates of public convenience and necessity to serve 
real property that lies in both utilities' allotted service 
territories[,] . . . we must consider the practical realities of 
[the] situation."  This conclusion, the Commission noted, is 
consistent with the Prince George Case. 
 
The Commission observed, however, that, "[u]nlike the 
customer in Prince George, the Smithsonian did not manipulate 
its land purchase to reach into [Dominion Power's] service 
territory to place a meter."  The Commission concluded, 
therefore, that, "[u]nder these circumstances, both NOVEC and 
[Dominion Power] have the right and duty to provide electric 
service to this new customer if requested to do so."  The 
Commission added, however, that the utilities "were also both at 
risk that the customer would request service from one rather 
than the other," but that "no other factors or practical 
realities necessitat[ed] a conclusion that the customer must 
take service from NOVEC."  The Commission agreed with the 
hearing examiner and the parties that "it is impractical to 
 
12
require that electric service be extended by both NOVEC and 
[Dominion Power] to the Smithsonian museum." 
 
The Commission, therefore, held the following: 
[G]iven no extenuating circumstances or other 
practical considerations, where the facilities of a 
new customer straddle the contiguous service territory 
boundaries of two utilities, and with the absence of 
manipulation, that customer may request service from 
the utility of its choice.  Section 56-234 of the Code 
of Virginia directs every utility to "provide adequate 
service and facilities at reasonable and just rates to 
any person, firm, or corporation along its lines 
desiring same."5
VI 
 
 
We do not think that the General Assembly, in enacting the 
Utility Facilities Act, could have envisioned the peculiar facts 
and circumstances of the present case.  Consequently, the 
Commission, as the tribunal informed by experience, was required 
to exercise its broad discretion in order to fashion a fair, 
reasonable, and practical resolution of the issue at hand.  When 
we accord to the Commission's decision the presumption of 
correctness to which it is entitled, it is clear that the 
Commission's decision must be affirmed.  Finding that the 
                     
 
5 NOVEC and Old Dominion assert that Code § 56-234 is 
limited in scope to issues involving rates and that the 
Commission erroneously used this statute to "supersede" the 
operation of the Utility Facilities Act.  We reject this 
assertion and, in doing so, rely upon two non-rate cases in 
which we noted that Code § 56-234 required a public utility to 
furnish adequate service to its customers.  Henderson v. Central 
Telephone Co., 233 Va. 377, 379, 355 S.E.2d 596, 597 (1987); 
 
13
decision is supported by the law and the evidence, we will 
affirm the Commission's order. 
Affirmed. 
                                                                  
Tidewater Utilities  v. Norfolk, 208 Va. 705, 711, 160 S.E.2d 
799, 803 (1968). 
 
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