Case Name: SENIOR CITIZENS CLUBS OF WINSTON-SALEM, NORTH CAROLINA, et al., Plaintiffs, v. DUKE POWER COMPANY et al., Defendants
Court: United States District Court for the Western District of North Carolina
Jurisdiction: United States
Decision Date: 1976-10-05
Citations: 425 F. Supp. 411
Docket Number: No. C-C-74-76
Parties: SENIOR CITIZENS CLUBS OF WINSTON-SALEM, NORTH CAROLINA, et al., Plaintiffs, v. DUKE POWER COMPANY et al., Defendants.
Judges: Before HAYNSWORTH, Chief Judge, Fourth Circuit, and McMILLAN and WARD, District Judges.
Reporter: Federal Supplement
Volume: 425
Pages: 411–416

Head Matter:
SENIOR CITIZENS CLUBS OF WINSTON-SALEM, NORTH CAROLINA, et al., Plaintiffs, v. DUKE POWER COMPANY et al., Defendants.
No. C-C-74-76.
United States District Court, W. D. North Carolina, Charlotte Division.
Oct. 5, 1976.
Bertram Ervin Brown, II, Forsyth County Legal Aid Society, Winston-Salem, N. C., for plaintiffs.
Clarence W. Walker, Edgar Love, III, and John M. Murchison, Jr., Kennedy, Coving-ton, Lobdell & Hickman, Charlotte, N. C., for defendants.
Before HAYNSWORTH, Chief Judge, Fourth Circuit, and McMILLAN and WARD, District Judges.

Opinion:
HAYNSWORTH, Chief Judge, Fourth Circuit:
The plaintiffs sought injunctive relief against the implementation of an increase in the power company's rates for electricity. They allege that a North Carolina statute, permitting such increases after the expiration of six months of a suspension period, is unconstitutional insofar as it permits the power company to implement the increase before the conclusion of a full due process hearing as to the reasonableness of the increase. Because an injunction was sought against the application and enforcement of the statute upon the ground that it was unconstitutional, this three-judge district court was convened.
North Carolina, by its general statute § 62-134(a), permits an electric utility to increase its rates by giving notice to the North Carolina Utilities Commission thirty days in advance of the proposed increase. By § 62-134(b), however, the Commission is empowered to suspend implementation of the increase in order to permit it to hold hearings into the reasonableness of the rates. The Commission's power of suspension, however, is limited by § 62-135. Notwithstanding the Commission's suspension of the rates, § 62-135 provides that the utility may implement its rate increase after it has been in suspension for six months or more if it files with the Commission a secured undertaking, satisfactory to the Commission, to refund all collections under the new rates insofar as they exceed the rates which the Commission ultimately determines to be just and reasonable. Interest must be paid upon such refunds. It is that section, 62-135, which is challenged by this action.
The plaintiffs allege that they are a group of elderly poor people. They allege that the rate increase will have a substantial adverse effect upon their economic well-being, indeed, it will have an adverse impact upon their financial ability to provide themselves with adequate and wholesome meals. To the extent that the increase is implemented prior to the conclusion of the full hearing before the Commission and Commission approval of the increase, the plaintiffs allege it will deprive them of property rights without due process of law in violation of the Fourteenth Amendment. They rest their claim on 42 U.S.C.A. § 1983.
The plaintiffs can not succeed for at least two reasons. Implementation of the rate increase without the Commission's approval does not involve the requisite state action in a proceeding under § 1983. If the merits are reached, North Carolina's regulatory scheme meets all due process requirements.
I.
Jackson v. Metropolitan Edison, Co., 419 U.S. 345, 95 S.Ct. 449, 42 L.Ed.2d 477 (1974) presented a challenge to an electrical utility's right to terminate a customer's service without a hearing. The utility had filed a tariff with the Pennsylvania Public Utilities Commission in which it reserved such a right of termination. The Commission had not disapproved that provision. In those circumstances, the Supreme Court held that termination of the service did not involve state action by Pennsylvania. It held that no more was shown "than that Metropolitan was a heavily regulated, privately owned utility, enjoying at least a partial monopoly in the providing of electrical service within its territory, and that it elected to terminate service to petitioner in a manner which the Pennsylvania Public Utilities Commission found permissible under state law".
We find the present situation indistinguishable from Jackson. Duke Power, as Metropolitan Edison, is a heavily regulated utility, enjoying a monopoly in providing electrical service within its territory. The North Carolina Utilities Commission is heavily involved in rate making, and it was serving a very positive role during its inquiry into the reasonableness of this increase, but its power of suspension- is limited to a six months period. After that, it has no power to prevent the utility's implementation of the increase if the utility files the requisite bond to secure the payment of whatever refunds, with interest, later may be required. The Commission's role in approving the bond for the refunds, however, is purely ministerial. It has no right to disapprove a proper bond when a proper secured undertaking is filed. Then, it simply has no power under state law to prevent implementation of a rate increase. North Carolina's legislature might have conferred broader powers upon the Commission, but it did not do so, and, to the extent that it did not, it left the utility in the position of an unregulated seller of services. As in Jackson, the utility has simply exercised a choice permitted it by state law. And, as in Jackson, the initiative came from the utility and not from the state. Hence, Jackson's conclusion that under those circumstances state action was not involved is controlling here.
Accordingly, a majority of us would dismiss the complaint.
II.
In light of the dissent of our brother McMillan as to dismissal, we go to the merits, and we see no due process deprivation.
Any state must approach its regulation of electric utility rates with several considerations in mind. The utility, enjoying a monopoly, must provide adequate service to its customers today and tomorrow at rates which are just and reasonable. It must not charge its current customers on the basis of rates which are more than reasonable, but it must not neglect to make adequate provision which may be required of it to meet the demand for its services which may be expected in the years to come. In areas in which the population is on the increase, industry is expanding and the use of electrical machinery and appliances is growing on a per capita and per household basis, both the state and the utility must be concerned with its capital requirements and the expansion of its productive capacity to meet predictable future requirements. Thus, neither the Commission, the state, nor the utility may look alone to the immediate needs or preferences of these plaintiffs or, indeed, of the utility's current customers collectively. The three must look to tomorrow and to the needs and interests of those who will be customers of the utility several years hence.
North Carolina's regulatory scheme with respect to rate increases strikes a reasonable balance between these considerations, even if they be thought sometimes competing. The power of the Commission to suspend a rate increase under investigation for a six months period gives an absolute preference for that period to the interest of current customers in paying no more than they have been paying for the electricity they consume. If increases may be suspended for longer periods, however, the interest of a utility's future customers may be impaired by the lack of adequate capacity to serve their needs. Thus, under the North Carolina statute, after lapse of the six month period during which the interest of present customers has an absolute preference, a conditional preference is given to the interest of future customers by permitting the implementation of the increase subject to mandatory refund to the extent that the implemented increase is larger than the rates ultimately approved by the Commission.
It would be nice, of course, if the Commission could conclude its hearings within the six months period, but rate regulation is not an uncomplicated thing. Extensive hearings may be necessary, and all of the relevant data may not be analyzed in a day.
Our conclusion is dictated by the Supreme Court's summary affirmance of Holt v. Yonce, D.C.S.C., 370 F.Supp. 374. There a three-judge district court upheld the constitutionality of a similar regulatory scheme of South Carolina, though there the Commission had no power of suspension. Implementation of the rate increases subject to refund was held not to deprive complaining customers of their right of due process.
The conclusion of the three-judge court in Holt was foreshadowed by the decision of the Supreme Court in United Gas Pipeline Co. v. Memphis Light, Gas & Water Division, 358 U.S. 103, 79 S.Ct. 194, 3 L.Ed.2d 153. It was specifically but summarily affirmed by the Supreme Court. Holt v. Yonce, 415 U.S. 969, 94 S.Ct. 1553, 39 L.Ed.2d 867.
We are recently reminded by the Supreme Court that its dismissal of appeals for want of a substantial federal question are rulings on the merits binding upon subordinate courts such as this. Hicks v. Miranda, 422 U.S. 332, 95 S.Ct. 2281, 45 L.Ed.2d 223 (1975). A summary affirmance is surely no less binding than a dismissal for want of a substantial federal question. This case is indistinguishable from Holt, and our inquiry need go no further than recognition that the Supreme Court has decided the substantive issue tendered here.
For these reasons, the complaint will be dismissed.
. North Carolina General Statute, § 62-135: Temporary rates under bond.—
(a) Notwithstanding an order of suspension of an increase in rates, any public utility except a common carrier may, subject to the provisions of subsections (b), (c) and (d) hereof, put such suspended rate or rates into effect upon the expiration of six [6] months after the date when such rate or rates would have become effective, if not so suspended, by notifying the Commission and its consumers of its action in making such increase not less than [ten] 10 days prior to the day when it shall be placed in effect; provided, however, that utilities engaged in the distribution of utility commodities bought at wholesale by the utility for distribution to consumers may put such suspended rate or rates, to the extent occasioned by changes in the wholesale rate of such utility commodity, into effect at the expiration of [thirty] 30 days after the date when such rate or rates would become effective if not so suspended; provided that no rate or rates shall be left in effect longer than one year unless the Commission shall have rendered its decision upon the reasonableness thereof within such period. This section to become effective July 1, 1963.
(b) No rate or rates placed in effect pursuant to this section shall result in an increase of more than twenty per cent (20%) on any single rate classification of the public utility.
(c) No rate or rates shall be placed in effect pursuant to this section until the public utility has filed with the Commission a bond in a reasonable amount approved by the Commission, with sureties approved by the Commission, or an undertaking approved by the Commission, conditioned upon the refund in a manner to be prescribed by order of the Commission, to the persons entitled thereto of the amount of the excess and interest at the rate of six per cent (6%) per annum from the date that such rates were put into effect, if the rate or rates so put into effect are finally determined to be excessive.
(d)If the rate or rates so put into effect are finally determined to be excessive, the public utility shall make refund of the excess plus interest to its customers within [thirty] 30 days after such final determination, and the Commission shall set forth in its final order the terms and conditions for such refund. If such refund is not paid in accordance with such order, any persons entitled to such refund may sue therefor, either jointly or severally, and be entitled to recover, in addition to the amount of the refund, all court costs and reasonable attorney fees for the plaintiff, to be fixed by the court.