Opinion ID: 1224268
Heading Depth: 1
Heading Rank: 1

Heading: appeal of the municipalities

Text: The appellant municipalities contend: (1) By reason of their respective contracts with Vepco for service at specified rates, the Commission has no authority to enter an order approving increases in those rates until the expiration of such contracts; (2) if this be not so, G.S. § 62-135 does not authorize Vepco to increase such rates prior to the entry of an order by the Commission approving the increase. We find no merit in either of these contentions. Each of the contracts in question contains this provision: The provisions of this agreement are on file with the North Carolina Utilities Commission and this agreement is subject to modification or cancellation by the Commission in the manner prescribed by law. The increases in the rates charged the municipalities were made by an order entered after a full hearing, held upon due notice and in which the appellant municipalities intervened as parties. The procedure prescribed by Chapter 62 of the General Statutes was followed. Thus, by the terms of the contracts, themselves, the provisions thereof fixing the rate for the service were subject to the change made by the order of the Commission. Furthermore, even in the silence of the rate fixing contract upon this question, it is well settled in this State that rates for public utility service fixed by an order of the Commission, otherwise lawful, supersede contrary provisions in private contracts concerning rates for such service. Corporation Commission v. Water Co., 190 N.C. 70, 128 S.E. 465; Corporation Commission v. Manufacturing Co., 185 N.C. 17, 116 S.E. 178; In re Utilities Co., 179 N.C. 151, 101 S.E. 619. The enforcement of such an order of the Commission does not constitute an impairment of the obligation of such contract, in violation of the Contract Clause of the United States Constitution, since contracts of public utilities, fixing rates for service, are subject to the police power of the State. Union Dry Goods Co. v. Georgia Public Service Corp., 248 U.S. 372, 39 S.Ct. 117, 63 L.Ed. 309; Atlantic Coast Line Railroad v. Goldsboro, 232 U.S. 548, 34 S.Ct. 364, 58 L.Ed. 721; In re Utilities Co., supra. In this respect, there is no distinction between a contract made by the public utility with a municipality and one made by it with any other user of its service. Corporation Commission v. Water Co., supra; In re Utilities Co., supra. The appellant municipalities cite in support of their position Federal Power Commission v. Sierra-Pacific Power Co., 350 U.S. 348, 76 S.Ct. 368, 100 L.Ed. 388, and United Gas Pipeline Co. v. Mobile Gas Service Corp., 350 U.S. 332, 76 S.Ct. 373, 100 L.Ed. 373. These cases do not support the contention of the appellant municipalities. While holding that the Federal Power Act and the Federal Natural Gas Act do not evince a purpose to abrogate private contracts fixing rates and that such contracts may not be terminated by the unilateral act of the public utility company (see also, Southern Utilities Company v. Palatka, 268 U.S. 232, 45 S.Ct. 488, 69 L.Ed. 930), these cases recognize the authority of the Federal Power Commission to prescribe a change in the rates fixed by such contracts whenever the Commission determines such rates to be unlawful. See also, United Gas Company v. Memphis Light, Gas and Water Division, 358 U.S. 103, 79 S.Ct. 194, 3 L.Ed.2d 153. It is in the public interest that a public utility company charge for its services rates which will enable it to maintain its financial ability to render adequate service and to attract the capital necessary for expansion and improvement of its service as needed. It is also in the public interest that there be no unreasonable discrimination between the users of such service. The police power of the state extends to the raising of rates fixed by private contract so as to accomplish either or both of these purposes. G.S. § 62-135 was enacted for the purpose of minimizing the effect of the unavoidable time lag between the filing of an application by a utility company for an increase in its rates for service and the entry of an order of the Commission finding such increase proper. This statute authorizes the utility to put its proposed rates into effect after the passage of six months from the filing of its application, if no order has been entered by the Commission determining the validity of the proposed rates, and if the utility company files its undertaking, approved by the Commission, for a refund of any portion of such rates ultimately disapproved by the Commission. Vepco did so in this case. The appellant municipalities contend that this is a mere unilateral termination of its contracts by Vepco. It is true that the mere existence in the Commission of authority to increase the rates specified in its contract does not authorize Vepco at its own will to disregard such contract and to charge the other party thereto a higher rate. Southern Utilities Company v. Palatka, supra. If the rate put into effect by the utility, pursuant to G.S. § 62-135, is completely disallowed by the Commission, after a hearing, the contract remains in effect and the utility must refund the excess so collected. Thus Vepco cannot, by its own decision alone, free itself from its contract. G.S. § 62-135 is a direct exercise of the police power of the State by the Legislature itself. Thus, it too prevails over a private contract in conflict therewith. In Midland Realty Company v. Kansas City Power & Light Co., 300 U.S. 109, 57 S.Ct. 345, 81 L.Ed. 540, the Supreme Court of the United States said: [The plaintiff] here insists that the contracts could not be abrogated `without a proper hearing, finding, and order of the Commission with respect thereto.' It does not, and reasonably could not, contend that immediate exertion by the legislature of the State's power to prescribe and enforce reasonable and nondiscriminatory rates depends upon or is conditioned by specific adjudication in respect of existing contract rates. It is clear that, as against those specified in the contract here involved, the rates first filed by plaintiff and those promulgated by the commission in accordance with the statute have the same force and effect as if directly prescribed by the legislature. Thus, the contracts between Vepco and the appellant municipalities do not bar Vepco from putting different rates into effect pursuant to G.S. § 62-135, pending the final determination by the Commission.