Court Opinion

ID: 6709656
Source: CourtListenerOpinion
Date Created: 2022-07-20 22:34:39.235185+00
Date Added: 2024-06-11T09:07:47.984124
License: Public Domain

Justice MARTIN
dissenting in part.
I cannot agree with the approval by the majority of the Commission’s inclusion of the cost of the abandoned Units 2, 3 and 4 of the Shearon Harris nuclear plant as operating expenses under N.C.G.S. § 62-133. The law does not permit, for rate-making purposes, a utility to earn a return on property not used or useful in rendering services to the public.
N.C.G.S. § 62-133(b) prescribes the formula which the Commission is required to follow in fixing rates for service to be charged by a public utility. The effect of the entire statute is to impose “used and useful” or “operational” limitations on plant costs, revenues and expenses. Therefore, allowable operating expenses must have a nexus with “used and useful” property. The abandoned units have no value. These cancelled nuclear units will never be “used and useful” in providing electrical service to the customers of CP&L.
Thus, the Attorney General is correct in his argument that only those costs associated with operational plants are to be considered expenses. The Commission, by including the costs of the abandoned units in its operating expenses, violates these statutory requirements. The costs of abandoned property, however prudently scheduled at the outset of the project, cannot be recovered under our statute. This may indeed produce a harsh result at times, *482but it is the result required under the law, the Commission having no equitable powers. The utility must look to resources other than the Commission in its efforts to recoup its losses.
This Court has so held in State ex rel. Utilities Comm. v. Nantahala Power & Light Co., 313 N.C. 614, 332 S.E.2d 397 (1985), rev’d on other grounds, 476 U.S. 953, 90 L. Ed. 2d 943 (1987), where we stated that only operating expenses incurred in the provision of service to consumers may be considered by the Commission in setting rates. To the same effect is our holding in State ex rel. Utilities Comm. v. Carolina Utilities Customers Assoc., 314 N.C. 171, 333 S.E.2d 259 (1985). The majority recognizes this principle in footnote two where it states that operating expenses “include costs for fuel, wages and salaries, and maintenance, as well as annual depreciation charges and taxes.” As the majority implicitly recognizes, capital expenses such as costs incurred by the abandonment of plants cannot be properly charged as operating expenses.
Of course, the utility does not contend that the abandoned plant costs were for plant which is now “used and useful” in providing electric service. North Carolina does not recognize such property as “used and useful.” See Utilities Comm. v. Telephone Co., 281 N.C. 318, 189 S.E.2d 705 (1972); Utilities Comm. v. Morgan, Attorney General, 278 N.C. 235, 179 S.E.2d 419 (1971). Nor can such capital expenditures be recovered through amortization as operating expenses incurred in rendering service to customers. In so doing the Commission acted beyond its statutory authority. This the Commission may not do.
These enormous expenses are not operating expenses under the statute — rather, they are capital costs. Without legislative action, cancelled plant costs may not be correctly allowed as operating expenses. The Commission only has its statutory authority which may not be extended by inference for reasons of convenience or necessity.
There is clear authority for this line of reasoning based on decisions from other states. The first decision on this issue by a state’s high court was by the Ohio Supreme Court which held that costs associated with abandoned plants could not be considered operating expenses. Office of Consumers’ Counsel v. Public Utilities Commission, 67 Ohio St. 2d 153, 423 N.E.2d 820 (1981), appeal dismissed sub nom., Cleveland Illuminating Co. v. Office of Consumers’ Counsel, 455 U.S. 914, 71 L. Ed. 2d 455 (1982). Ohio’s *483rate-making statutory scheme set forth in Ohio Rev. Code Ann. § 4909.15(D)(2)(b) is very similar to North Carolina’s. The Wyoming Supreme Court clearly disallowed recovery of any costs of or return on abandoned plants, either in rate base or through operating expenses or through a statutory “other values of the system” provision of its public utilities code. Pacific Power and Light Co. v. Public Service Commission, 677 P.2d 799 (Wyo.), cert. denied, 469 U.S. 831, 83 L. Ed. 2d 62 (1984). See Wyo. Stat. § 37-2-119 (1977). In Citizen’s Action Coalition of Indiana, Inc. v. Northern Indiana Public Service Company, 485 N.E.2d 610 (1985), cert. denied, 476 U.S. 1137, 90 L. Ed. 2d 687 (1986), the Indiana Supreme Court held that the costs of an abandoned nuclear project were not allowable, amortizable operating expenses since the abandoned plant was not “used and useful” property. The relevant Indiana statute required that charges by a public utility for any “service” rendered should be reasonable and just. Ind. Code § 8-1-2-4 (1988). The court reasoned that:
Any allowable operating expense must have a connection to the service rendered before it can be recovered through retail rates. . . . This connection is established when the operating expense is incurred as a result of the process whereby existing “used and useful” property ... is employed to produce the product or commodity ... or accommodation . . . rate payers receive. For example, wages, salaries, fuel, maintenance plus annual charges for depreciation and operating taxes.
Citizen’s Action Coalition, 485 N.E.2d at 614.
The majority recognizes that the Commission in the entry of its order was exercising what it perceived to be its equitable authority. The Commission has no equitable authority, but can only exercise such powers as are expressly delegated to it by the legislature. By using equitable principles in its order, the Commission arrived at the incongruous result of allowing the utility to recoup some, but not all, of its expenditures incurred by the abandonment of the nuclear units. Under the statute granting the Commission its authority, the utility was either, entitled to recover all of these losses or none. I find that the Commission erred as a matter of law by including as operating expenses CP&L’s costs of the abandoned Units 2, 3 and 4 of the Shearon Harris nuclear plant.
I am authorized to state that Justice MITCHELL joins in this dissenting opinion.