Opinion ID: 1214300
Heading Depth: 1
Heading Rank: 2

Heading: Full Margin Transportation Rates

Text: CUCA also assigns error to the Commission's approval of the Company's use of full margin transportation rates. CUCA contends that full margin rates are improper and unlawful due to their inclusion of certain fixed gas costs which, CUCA argues, are not related to the provision of transportation services. CUCA maintains that transportation rates should be based on cost of service alone. We disagree. An examination of prior case law reveals this Court has addressed the lawfulness of full margin rates several times and has consistently affirmed the Commission's approval of such rates. State ex rel. Util. Comm'n v. Carolina Util. Customers Ass'n [CUCA], 328 N.C. 37, 399 S.E.2d 98 (1991); State ex rel. Util. Comm'n v. Carolina Util. Customers Ass'n [CUCA], 323 N.C. 238, 372 S.E.2d 692; State ex rel. Util. Comm'n v. N.C. Textile Mfrs. Ass'n, 313 N.C. 215, 328 S.E.2d 264. While CUCA is correct in its assertion that the final order of the Commission [in a general rate case] is not within the doctrine of stare decisis,  State ex rel. Util. Comm'n v. Carolina Power & Light Co., 250 N.C. 421, 430, 109 S.E.2d 253, 260 (1959); accord State ex rel. Util. Comm'n v. Thornburg, 325 N.C. 463, 468-69, 385 S.E.2d 451, 454 (1989), prior decisions of this Court regarding general questions of law and the principles underlying those decisions serve to guide the Court's decisions in individual cases. In Textile Mfrs., 313 N.C. 215, 328 S.E.2d 264, this Court stated: We do not hold that it is unjust and unreasonable as a matter of law for a utility to earn the same profit margin on transported gas that it earns on its own retail sales of gas. Id. at 225, 328 S.E.2d at 270. This principle was reiterated in Utilities Comm'n v. CUCA, 323 N.C. 238, 372 S.E.2d 692, where we stated, on this record it was not unlawful to permit the transportation rates to have the same margins as the sales rates. Id. at 254, 372 S.E.2d at 701. Finally, in Utilities Comm'n v. CUCA, 328 N.C. 37, 399 S.E.2d 98, we stated, Both the Commission and this Court have consistently rejected the notion that cost of service should be the sole factor in determining rates or rate designs, whether the rates are for the sale of gas or the transportation of gas. Id. at 46, 399 S.E.2d at 103. We decline to overrule these decisions and continue to hold full margin transportation rates proper as a matter of law so long as they are supported by competent, material and substantial evidence in view of the entire record, pursuant to the standard of appellate review codified in N.C.G.S. § 62-94. Examination of the case sub judice reveals substantial evidence to support the Commission's approval of the Company's full margin transportation rates. In its order, the Commission made the following findings of fact regarding full margin transportation rates: 47. The Commission has approved the use of full margin transportation rates for all of the LDCs [local distribution companies] in North Carolina. 48. The underlying premise of full margin transportation rates is that transportation rates should not provide an incentive or disincentive for an LDC to transport gas rather than sell gas under its filed tariff rate. In order for an LDC to be neutral on this issue, transportation customers must pay the same fixed costs they would pay as sales customers. The Commission enunciated its reasons for these findings in its section Evidence and Conclusions for Findings of Fact Nos. 47-48: The Company proposes to continue its use of full margin transportation rates. CUCA witness O'Donnell testified that such rates were unfair because they forced transportation customers to pay a portion of the Company's fixed gas costs. Company witness Carl testified that pipeline capacity costs incurred by the Company support not only peak deliverability but also seasonal and annual deliverability and storage injections as well. The Commission has addressed the issue of full margin transportation rates on many prior occasions, and has approved the use of such rates for each of the LDCs now operating in the State. The Commission continues to believe that such rates are reasonable and appropriate for purposes of this docket. The record also reveals Company witness Carl testified that the ability of certain customers to switch from transportation to sales rates when necessary or expedient necessitated the Company's inclusion of fixed gas costs in its rates to meet such contingencies without costs shifting to customers who do not possess such flexibility. Moreover, Company witness Carl undermined CUCA's assertion that full margin rates exceed cost of service by testifying to the difficulty, if not impossibility, of extracting costs from the full margin rate so as to isolate only transportation services. This record evidence, combined with the Commission's analysis of prior cases addressing the legality of full margin rates, is more than adequate to support the Commission's approval of the Company's full margin transportation rates. This portion of the Commission's order is affirmed. Accordingly, while we affirm the Commission's determination as to full margin transportation rates, we must reverse with respect to its conclusion on rate of return and cost of service and remand for the Commission's further determination not inconsistent with this opinion. The order of the Commission is REVERSED AND REMANDED.