Court Opinion

ID: 6709527
Source: CourtListenerOpinion
Date Created: 2022-07-20 22:34:28.291228+00
Date Added: 2024-06-11T09:07:07.610208
License: Public Domain

WEBB, Justice.
The appellants-intervenors contend that it was error for the North Carolina Utilities Commission to deny new hearings after the three dockets had been remanded following the decision of the United States Supreme Court. They base this argument on what they say is a misunderstanding by the Commission of the opinion of the United States Supreme Court and the opinions and remand orders of this Court.
The appellants say that a roll-in method for setting rates under which Nantahala and Tapoco are treated as one company has not been prohibited by the United States Supreme Court. They argue that the Utilities Commission should have held a hearing at which evidence could have been received and the Commission could determine whether a roll-in method which does not interfere with the FERC approved entitlements is appropriate in this case. The appellants contend it was error for the Commission *485not to consider a roll-in method for setting rates in light of this Court’s previous opinions directing it to do so, which the appellants contend have only been abrogated by the opinion of the United States Supreme Court to the extent that any such roll-in will not reallocate low-cost hydro power previously allocated by FERC. The appellants argue further that following the original remands the Commission found that Nantahala and Tapoco constituted one company for rate making purposes and it was error for the Commission to find otherwise after the last remand because this was not required by the opinion of the United States Supreme Court. The appellants argue that even though the Commission may not modify the allocation of low-cost hydro power made by FERC the Commission is not powerless to find that concealed benefits to Alcoa, and concomitant detriments to Nantahala do exist. Such findings would then allow the Commission to affirm its earlier conclusions on Alcoa’s total domination of Nantahala so as to apply the roll-in to other areas of cost of service not foreclosed by the opinion of the United States Supreme Court.
The difficulty with the appellants’ argument is that the United States Supreme Court has held that the roll-in method which was adopted by the Utilities Commission is preempted by the action of FERC. That roll-in could not have been used by the Commission. Previous opinions by this Court and the Court of Appeals have made it clear that the purpose of the roll-in would be to eliminate any inequities which Nantahala suffered from the NFA and the apportionment agreement. This has now been prohibited by the United States Supreme Court. The Utilities Commission was not required to let the intervenors start again with a new type roll-in.
It was not error for the Commission to use evidence received at previous evidentiary hearings and set rates based on a theory advanced at those hearings rather than starting anew with the parties advancing new theories. The Utilities Commission used a method for setting rates in this case which complies with the statute. We cannot disturb these rates because we might have used a different method. State ex rel. Utilities Comm. v. Carolina Power and Light Co., 320 N.C. 1, 358 S.E. 2d 35 (1987); Utilities Comm. v. Edmisten, 291 N.C. 327, 230 S.E. 2d 651 (1976); Utilities Comm. v. Telephone Co., 281 N.C. 318, 189 S.E. 2d 705 (1972).
*486The appellants contend that this is a general rate case and N.C.G.S. § 62-81(a) provides there must be a trial or hearing in a general rate case. They also say that the refusal by the Utilities Commission to hold an evidentiary hearing deprived them of due process of law under the Fourteenth Amendment to the Constitution of the United States and violated the law of the land clause of the Constitution of North Carolina, Article I, Section 19. The answer to these contentions is that several evidentiary hearings have been held in these dockets. All parties have been allowed to offer evidence and contend for what they consider to be the proper methods for setting rates. The Utilities Commission has set rates based on this evidence.
We take note of a recital in the Commission’s Sub. 44 Order to the effect that FERC has found that Nantahala and Tapoco do not constitute a unified system and this finding is binding on the Commission. This finding shows a misapprehension of the law. The Commission was not bound by the FERC order to hold Nantahala and Tapoco do not constitute a unified system. Indeed the United States Supreme Court said at Nantahala Power and Light v. Thornburg, 476 U.S. 953, 972, 90 L.Ed. 2d 943, 957 (1986) that
[t]he validity of [the Commission’s] decision to “roll in” the costs of Tapoco and Nantahala is not directly before us. We nonetheless agree . . . that it is at least conceivable that [the Commission] could validly choose to treat Nantahala and Tapoco as a single system for some purposes —for example, with regard to the costs of constructing their facilities.
The Commission’s misapprehension of the law, however, does not constitute prejudicial error for two reasons. See N.C.G.S. § 62-94(c) (1982 Repl. Vol.). First, the Commission properly concluded that even if they were to find that Nantahala and Tapoco constitute a single unified system this would not affect their conclusion to reject appellants’ original roll-in method. Second, and more importantly, the Commission accorded appellants sufficient opportunity to present an alternative roll-in method consistent with the opinion of the United States Supreme Court, yet they failed to do so. In a 25 February 1987 Order Requiring Proposed Orders the Commission said that proposed orders requesting further hearings should set forth the justification for the hearings *487and the proposed method for setting rates. The appellants’ response to this request stated in relevant part:
We shall, relying upon the present records, merely make adjustments that respond appropriately to the defects noted in the decision of the United States Supreme Court (“Thorn-burg”) and perhaps support different rates of return.
Given such a vague response to the Commission’s request, it is neither surprising nor improper that the Commission’s Sub. 44 Order concluded: “further hearings to consider other ratemaking concepts, which are not a part of the record in this docket, are neither timely nor appropriate and are not in the public interest.” See Utilities Commission v. Area Development, Inc., 257 N.C. 560, 569, 126 S.E. 2d 325, 332 (1962). (The Commission “may enlarge or restrict the inquiry before it unless a party is clearly prejudiced thereby.”)
The intervenors also contend that in each of the three dockets the Commission did not properly calculate the rates. In Sub. 29 and Sub. 44 the Commission reinstated the rates it had allowed prior to reversal by the Court of Appeals and by this Court but required in Sub. 29 that the rates be reduced by the amount Nantahala received from Tapoco as a result of the FERC order in regard to the apportionment agreement. It retained jurisdiction to lower the rate in Sub. 44 pending a final decision by FERC in regard to Nantahala’s agreement with TVA. The intervenors contend it was error to reinstate these rates without further hearings after they had been reversed by the Court of Appeals and this Court. As we have said, the original orders were reversed because of the Commission’s failure to give adequate consideration to a method which has now been found to be unlawful by the United States Supreme Court. We cannot hold it was error for the Utilities Commission to reinstate rates which we did not otherwise find to be in error.
The intervenors’ argument as to the Sub. 35 docket is more substantial. In its original filing Nantahala asked for an increase in revenue which would give it a return on rate base of 11.53%. There was evidence and the Commission found in the hearing from which the roll-in method was adopted that Nantahala was entitled to a rate of return of 12.54%. The Commission allowed this rate of return in its final order. This would have had the ef*488feet of giving Nantahala more than it requested in its filing if Nantahala had not been required to reduce its rates by the amount received from Tapoco based on the FERC order. The intervenors argue that Nantahala cannot be granted a rate increase of more than it asked and more than notice was given that it would seek. The fallacy in this argument is that the rate was not more than Nantahala requested. The Utilities Commission ordered a refund based on the compensation Nantahala received from Tapoco. Based on this refund the rate payers did not have to pay as much as they would have paid had the increase in rates been allowed in its entirety. We might not have allowed the rate of return which was allowed by the Utilities Commission but we cannot hold the Commission exceeded its statutory authority by doing so.
The appellants contend it was error for the Commission to show the amount paid by Tapoco to Nantahala as a result of the FERC order as a reduction in the amount of the increase required to produce a 12.54% return. They say that these payments from Tapoco represent a decrease in Nantahala’s purchased power expense which means Nantahala’s operating revenues, purchased power and gross receipt taxes should be reduced and as reduced should be the starting point for showing the effect of Nantahala’s requested rate increase. If the payments from Tapoco to Nantahala had been treated as contended for by the intervenors it would have had the effect of changing other items in the rate structure such as the operating income for return which would have resulted in lower rates. We cannot hold the Commission was in error for not treating this item as a reduction of the purchased power expense. The cost of purchased power remained the same after the FERC order. Tapoco made its payments to Nantahala without affecting the purchase power agreement between Nantahala and TVA. The Commission was not required to treat this item as contended for by the appellants.
Finally, the appellants contend there was not sufficient evidence for the Commission to determine Nantahala’s revenue requirement. They base this argument on what they say was testimony at the hearing which was designed to support a roll-in rate. They say that this testimony will not support a rate for Nantahala on a stand alone basis. As we read this testimony the witnesses testified to Nantahala’s test year cost of service both as *489a stand alone utility and on the basis of a roll-in. This is evidence to support the Commission’s findings.
The Utilities Commission has used a method for setting rates which is within the parameters of the statute. We cannot disturb its order. State ex rel. Utilities Comm. v. Carolina Power and Light Co., 320 N.C. 1, 358 S.E. 2d 35.
Affirmed.