Court Opinion

ID: 4464785
Source: CourtListenerOpinion
Date Created: 2019-12-17 13:07:12.189181+00
Date Added: 2024-06-11T14:53:36.785852
License: Public Domain

IN THE COURT OF APPEALS OF NORTH CAROLINA

                                         No. COA18-1203

                                    Filed: 17 December 2019

North Carolina Utilities Commission, Nos. E-2, Sub 1177; E-7, Sub 1172

IN THE MATTER OF CUBE YADKIN GENERATION, LLC, Complainant

                v.

DUKE ENERGY PROGRESS, LLC, Respondent

        Appeal by Complainant from Order entered 16 July 2018 by the North

Carolina Utilities Commission. Heard in the Court of Appeals 8 August 2019.

        Kilpatrick Townsend & Stockton LLP, by Joseph S. Dowdy, Benjamin L.
        Snowden, and Phillip A. Harris, Jr., for complainant-appellant.

        The Allen Law Offices, by Dwight W. Allen, Britton H. Allen, and Brady W.
        Allen, and Kendrick Fentress, Associate General Counsel of Duke Energy
        Corporation, for respondent-appellee.

        HAMPSON, Judge.

                          Factual and Procedural Background

        Cube Yadkin Generation, LLC (Cube) is a limited liability company that

acquires, develops, and modernizes hydroelectric facilities.                  The present dispute

arises out of Cube’s purchase of hydroelectric facilities (the Yadkin Project)1 from

Alcoa Power Generating, Inc. (Alcoa) on 1 February 2017 and Cube’s efforts to sell

        1 The Yadkin Project consists of four hydroelectric facilities; however, the parties agree only
three of these facilities are in dispute. Therefore, for ease of reading, the Yadkin Project, as used in
this opinion, refers only to the three disputed facilities.
          CUBE YADKIN GENERATION, LLC V. DUKE ENERGY PROGRESS, LLC

                                   Opinion of the Court

electrical power generated by these facilities to Duke Energy Progress, LLC (Duke).

In this appeal, Cube appeals from the Order Granting Motion to Dismiss (Order)

entered on 16 July 2018 by the North Carolina Utilities Commission (Commission),

dismissing Cube’s Verified Complaint, Request for Declaratory Ruling, and Request

for Arbitration (Complaint) against Duke. The Record tends to show the following:

      In 1978, Congress enacted the Public Utility Regulatory Policies Act of 1978

(PURPA), which sought, inter alia, to encourage a national policy of energy

conservation. See FERC v. Mississippi, 456 U.S. 742, 745, 72 L. Ed. 2d 532, 537-38

(1982). “Pursuant to section 210 of [PURPA], regulations of the Federal Energy

Regulatory Commission (FERC) promulgated thereunder, and implementation

mechanisms of the states, electric utilities are required to purchase power produced

by qualifying cogeneration and small power production facilities [(collectively,

Qualifying Facilities)] and are required to pay their ‘avoided costs’ for the power

unless the rate is negotiated.” State ex rel. Utilities Comm. v. N.C. Power, 338 N.C.
412, 416, 450 S.E.2d 896, 898 (1994); see also 16 U.S.C.A. § 824a-3(d) (West 2010)

(defining avoided cost as “the cost to the electric utility of the electric energy which,

but for the purchase from such [Qualifying Facilities], such utility would generate or

purchase from another source”). Under FERC regulations, a Qualifying Facility can

sell its power pursuant to a Legally Enforceable Obligation and can choose to fix the

                                          -2-
           CUBE YADKIN GENERATION, LLC V. DUKE ENERGY PROGRESS, LLC

                                       Opinion of the Court

price “at the time the [Legally Enforceable Obligation] is incurred” or at the moment

of delivery. 18 C.F.R. § 292.304(d)(2)(i)-(ii) (2019).

       Prior to 2016, the Commission applied a two-part test for determining the

establishment of a Legally Enforceable Obligation. See N.C. Utils. Comm’n, Order

Establishing Standard Rates and Contract Terms for Qualifying Facilities, Docket

No. E-100, Sub 140, at *52 (Dec. 17, 2015) [hereinafter Sub 140 Order].                        The

Commission required a Qualifying Facility to (1) obtain a Certificate of Public

Convenience and Necessity (CPCN)2 and (2) indicate to the utility that it was “seeking

to commit itself to sell its output[.]”          N.C. Utils. Comm’n, Order Establishing

Standard Rates and Contract Terms for Qualifying Facilities, Docket No. E-100, Sub

136, at *37 (Feb. 21, 2014) [hereinafter Sub 136 Order]; see also N.C. Gen. Stat. § 62-

110.1(a) (2017) (requiring a CPCN from the Commission before “construction of any

. . . facility for the generation of electricity”). However, because this second prong was

vague and difficult to establish, the Commission later created the Notice of

Commitment (NOC) Form, demonstrating a Qualifying Facility’s commitment to sell

its output. Sub 140 Order, at *51-52. Effective 26 January 2016, the Commission

thus revised its Legally-Enforceable-Obligation test, ordering that for a Qualifying

Facility to establish a Legally Enforceable Obligation, the developer of the Qualifying

       2 If the Qualifying Facility was under 2 megawatts, the Qualifying Facility filed a Report of
Proposed Construction instead of a CPCN; however, none of Cube’s Qualifying Facilities were under 2
megawatts.

                                               -3-
          CUBE YADKIN GENERATION, LLC V. DUKE ENERGY PROGRESS, LLC

                                   Opinion of the Court

Facility was required to: “(1) have self-certified with the FERC as a [Qualifying

Facility]; (2) have made a commitment to sell the facility’s output to a utility pursuant

to PURPA via the use of [the NOC Form;] and (3) have received a CPCN for the

construction of the facility.” Sub 140 Order, at *52. Indeed, relevant to this appeal,

Section Three of the NOC Form specifically requires a Qualifying Facility to indicate

whether it has applied for or received a CPCN from the Commission.

      According to Cube’s Complaint, the Yadkin Project facilities have been in

operation since at least 1958. In 2000, Alcoa acquired the Yadkin Project, and on 22

September 2016, FERC issued a new long-term license to Alcoa for the Yadkin

Project, allowing for the operation and maintenance of the Yadkin Project until 31

March 2055. On 30 June 2016, Cube signed a contract with Alcoa to acquire the

Yadkin Project, and approximately a month later, Cube submitted an application to

FERC seeking approval of the transfer of Alcoa’s Yadkin Project license. FERC

approved the transfer on 13 December 2016.            Cube “formally consummated its

agreement to purchase the Yadkin Project” on 1 February 2017. Prior to this transfer,

Alcoa self-certified the Yadkin Project as Qualifying Facilities by filing Form 566s

with FERC on 28 September 2016, and on 16 March 2017, Cube filed Form 566s with

FERC, self-recertifying the Yadkin Project as Qualifying Facilities.

      In March 2016, Cube, as part of its due diligence process, contacted Duke to

introduce itself and begin inquiries about entering into a Power Purchase Agreement

                                          -4-
         CUBE YADKIN GENERATION, LLC V. DUKE ENERGY PROGRESS, LLC

                                  Opinion of the Court

(PPA) with Duke. The parties subsequently held an in-person meeting to discuss

entering into “a potential long-term PPA for the [Yadkin Project Qualifying

Facilities].” Cube and Duke continued discussions, and by letter dated 21 September

2016, Duke stated:

         You [(a representative for Cube)] informed me that [Cube] does
         not currently own or operate the Yadkin [Project] system, but
         anticipates that it will close on the transaction to own and operate
         the facilities around November 1, 2016. As I communicated to
         you previously, Duke does not have any current needs for energy
         or capacity . . . . You further informed me that [Cube] is
         considering certifying the [Yadkin Project] as [Q]ualifying
         [F]acilities under [PURPA]. In that regard, I informed you that
         to the extent [Cube] approached Duke under PURPA, that under
         PURPA’s requirements, Duke would likely have no obligation to
         purchase any output of energy or capacity from the Yadkin
         [Project] system units that may be certified as [Q]ualifying
         [F]acilities.

      On or about 11 October 2016, Cube sent Duke a letter in response, indicating

Alcoa had self-certified the Yadkin Project, stating PURPA “require[s] electric

utilities, including Duke, to purchase energy and capacity made available from

[Qualifying Facilities,]” and requesting the parties meet “to discuss the process for

making sales from [the Yadkin Project] to Duke pursuant to PURPA.” Countering

Cube’s assertions, Duke replied by letter dated 14 October 2016, stating because Cube

“neither owns nor is a [Q]ualifying [F]acility with respect to the Yadkin [Project,]”

Cube had no rights to exert under PURPA. Duke further asserted its position that

                                         -5-
           CUBE YADKIN GENERATION, LLC V. DUKE ENERGY PROGRESS, LLC

                                       Opinion of the Court

even if Cube eventually acquired the Yadkin Project and rights under PURPA, Duke

would be exempted from any purchase obligation under PURPA.

        Duke, however, did represent to Cube “it would enter into good faith

negotiations . . . concerning the purchase of the output of the Yadkin [Project]

facilities on a non-PURPA basis.”3 These discussions began in November 2016 and

continued until 10 August 2017; however, the parties never reached a non-PURPA

agreement. According to Cube, “Duke’s conduct since the beginning of the discussions

between the parties appears to have been designed to discourage [Cube] from

pursuing its rights under PURPA.” Importantly, on 15 November 2016, Duke filed

its “2016 Avoided Cost Proposal” with the Commission, which, Cube claimed, “would

have the impact of dramatically reducing the utilities’ avoided costs, and, therefore,

rates offered to [Qualifying Facilities under PURPA].”

       On 29 March 2018, Cube filed its Complaint against Duke, seeking to enforce

its right under PURPA to sell the energy from the Yadkin Project to Duke at the

avoided-cost rates as of the date it first established its Legally Enforceable

Obligation.     Cube asserted the Yadkin Project was self-certified as Qualifying

Facilities by Alcoa on 28 September 2016, which certification “attach[ed] to the

facility[.]” Cube also asserted it was not required to file the NOC Form because Cube

was not required to obtain a CPCN and thus could not make this certification on the

       3  According to FERC regulations, utilities and Qualifying Facilities are free to enter into
negotiations for non-PURPA rates. See 18 C.F.R. 292.301(b)(1) (2019).

                                               -6-
         CUBE YADKIN GENERATION, LLC V. DUKE ENERGY PROGRESS, LLC

                                  Opinion of the Court

NOC Form.      Specifically, Cube’s position was the CPCN requirement was not

applicable because the statute creating the CPCN requirement was enacted after the

Yadkin Project had already been constructed and in operation.         Cube therefore

contended its communications with Duke in September and October established its

“commitment to sell the output of the [Yadkin Project] facilities to Duke.”

      Thus, Cube contended it established a Legally Enforceable Obligation, at the

latest, by 11 October 2016, thereby entitling it to the higher avoided-cost PURPA

rates effective on that date rather than the lower avoided-cost rates established by

Duke’s 15 November 2016 Avoided Cost Proposal.           Although Cube asserted the

Commission’s three-part test was inapplicable because of Cube’s unique situation,

Cube nevertheless argued it had “substantially complied with the substance of the

requirement[s]” and requested the Commission waive the three-part test.            In

addition, Cube alleged Duke acted in bad faith during negotiations by claiming it was

exempt from its PURPA requirements to buy Cube’s energy, which Cube contended

further supported a waiver of the three-part test.

      On 7 May 2018, Duke filed its Joint Answer and Motion to Dismiss Complaint

of Cube Yadkin Generation, LLC (Motion to Dismiss). In its Motion to Dismiss, Duke

disagreed with Cube’s contentions and asserted Cube failed to establish a Legally

Enforceable Obligation prior to the change in its avoided-cost rates because of Cube’s

noncompliance with the Commission’s three-part test.         Therefore, Duke sought

                                         -7-
           CUBE YADKIN GENERATION, LLC V. DUKE ENERGY PROGRESS, LLC

                                         Opinion of the Court

dismissal of Cube’s Complaint for failure to state a claim upon which relief could be

granted.

       On 16 July 2018, the Commission issued its Order granting Duke’s Motion to

Dismiss. The Commission concluded Cube did not establish a Legally Enforceable

Obligation prior to 15 November 2016—the date Duke’s avoided-cost rates changed—

because “[t]he undisputed facts demonstrate that [Cube] did not transmit the [NOC]

Form . . . to make a commitment to sell the output of the [Yadkin Project facilities] to

[Duke].”4 Regarding Cube’s waiver request, the Commission then addressed the

“novel issue” of whether Cube, “as the owner of [Qualifying Facilities] that were

constructed prior to the enactment of [the statute requiring a CPCN], should be

relieved from the required use of the [NOC] Form in demonstrating a commitment to

sell the output of the [Yadkin Project facilities] to [Duke].”                   After “weigh[ing]

equitable considerations, state policy, and considerations of judicial economy in

determining whether [Cube] should be granted a waiver of the required use of the

[NOC] Form[,]” the Commission denied Cube’s request to waive the NOC Form

requirement.5 Cube filed timely Notice of Appeal from the Commission’s Order. See

        4 The Commission did not address whether either of the two additional requirements of the

three-part test were satisfied; rather, the Commission assumed, without deciding, Cube met these
requirements and rested its decision solely on Cube’s failure to submit the NOC Form.
        5 Two Commissioners wrote separate dissents arguing the Commission erred in dismissing the

Complaint because Cube had stated a claim upon which relief could be granted and that “a material
issue of fact, among others, remains, i.e., whether a legally enforceable obligation (LEO) was
established in 2016 by each of [Cube’s Qualifying Facilities] that are the subject of the Complaint[.]”

                                                 -8-
          CUBE YADKIN GENERATION, LLC V. DUKE ENERGY PROGRESS, LLC

                                      Opinion of the Court

N.C. Gen. Stat. § 62-90(a), (d) (2017) (allowing a party to appeal as of right any final

order of the Commission and directing that “[t]he appeal shall lie to the appellate

division . . . as provided in” Section 7A-29 of our General Statutes); see also N.C. Gen.

Stat. § 7A-29(a) (2017) (directing in non-general-rate cases, “appeal as of right lies

directly to the Court of Appeals”).

                                           Issues

       The dispositive issues on appeal are whether: (I) the Commission erred in

ruling Cube failed to establish a Legally Enforceable Obligation by not submitting

the NOC Form and (II) the Commission erred in determining, at the motion-to-

dismiss stage in the litigation, Cube was not entitled to a waiver of the NOC Form

requirement.

                                   Standard of Review

       As our Supreme Court has recognized, “[t]he decision of the Commission will

be upheld on appeal unless it is assailable on one of the statutory grounds

enumerated in [N.C. Gen. Stat. §] 62-94(b).” State ex rel. Util. Comm’n v. Carolina

Util. Customers Ass’n, 348 N.C. 452, 459, 500 S.E.2d 693, 699 (1998) (citation

omitted). Subsection 62-94(b) provides:

          (b) So far as necessary to the decision and where presented, the
          court shall decide all relevant questions of law, interpret

According to these two dissents, the failure to submit the NOC Form was not fatal, and the
Commission had discretion to decide whether to waive this requirement. Further, both dissenting
Commissioners agreed the Commission’s rejection of Cube’s waiver argument was particularly
inappropriate at such an early stage in the proceedings, based solely on the pleadings.

                                             -9-
            CUBE YADKIN GENERATION, LLC V. DUKE ENERGY PROGRESS, LLC

                                    Opinion of the Court

            constitutional and statutory provisions, and determine the
            meaning and applicability of the terms of any Commission action.
            The court may affirm or reverse the decision of the Commission,
            declare the same null and void, or remand the case for further
            proceedings; or it may reverse or modify the decision if the
            substantial rights of the appellants have been prejudiced because
            the Commission’s findings, inferences, conclusions or decisions
            are:

               (1)   In violation of constitutional provisions, or

               (2)   In excess of statutory authority or jurisdiction of the
                     Commission, or

               (3)   Made upon unlawful proceedings, or

               (4)   Affected by other errors of law, or

               (5)   Unsupported by competent, material and substantial
                     evidence in view of the entire record as submitted, or

               (6)   Arbitrary or capricious.

N.C. Gen. Stat. § 62-94(b) (2017). “Under [Section 62-94], the essential test to be

applied is whether the Commission’s order is affected by errors of law or is

unsupported by competent, material, and substantial evidence in view of the entire

record as submitted.” State ex rel. Utilities Comm. v. Village of Pinehurst, 99 N.C.

App. 224, 226, 393 S.E.2d 111, 113 (1990) (citations omitted), aff’d per curiam, 331
N.C. 278, 415 S.E.2d 199 (1992). Yet, “any . . . finding, determination, or order made

by the Commission . . . shall be prima facie just and reasonable.” N.C. Gen. Stat. §

62-94(e).

                                        Analysis

                                           - 10 -
          CUBE YADKIN GENERATION, LLC V. DUKE ENERGY PROGRESS, LLC

                                    Opinion of the Court

       Duke’s Motion to Dismiss requested the Commission “dismiss the Complaint

with prejudice because . . . [Cube] has failed to state a claim upon which relief can be

granted.” When the Commission issues an order, it is acting in a judicial capacity

and “shall render its decisions upon questions of law and of fact in the same manner

as a court of record.” N.C. Gen. Stat. § 62-60 (2017). However, “[o]rdinarily, the

procedure before the Commission is more or less informal, and is not as strict as in

superior court, nor is it confined by technical rules[.]” Utilities Commission v. Area

Development, Inc., 257 N.C. 560, 569, 126 S.E.2d 325, 332 (1962). In proceedings

before the Commission, “[g]reat liberality is indulged in pleadings[,]” and “substance

and not form is controlling.” Id.

       Moreover, under the North Carolina Rules of Civil Procedure, a motion to

dismiss “tests the legal sufficiency of the complaint. In ruling on the motion the

allegations of the complaint must be viewed as admitted, and on that basis the court

must determine as a matter of law whether the allegations state a claim for which

relief may be granted.” Stanback v. Stanback, 297 N.C. 181, 185, 254 S.E.2d 611, 615

(1979) (citations omitted). “The function of a motion to dismiss is to test the law of a

claim, not the facts which support it. Resolution of evidentiary conflicts is thus not

within the scope of the Rule.” White v. White, 296 N.C. 661, 667, 252 S.E.2d 698, 702

(1979) (citation and quotation marks omitted). A motion to dismiss under Rule

12(b)(6) should not be granted “unless it appears to a certainty that plaintiff is entitled

                                           - 11 -
            CUBE YADKIN GENERATION, LLC V. DUKE ENERGY PROGRESS, LLC

                                  Opinion of the Court

to no relief under any state of facts which could be proved in support of the claim.”

Sutton v. Duke, 277 N.C. 94, 103, 176 S.E.2d 161, 166 (1970) (citation and quotation

marks omitted).

                             I. NOC Form Requirement

      Cube first argues the Commission erred by concluding Cube had not

established a Legally Enforceable Obligation. Specifically, Cube asserts “the facts

alleged in the Complaint, if proved, are sufficient to establish that [Cube] had

substantially complied with all of the prerequisites for establishing a [Legally

Enforceable Obligation] prior to 15 November 2016.” Essentially, Cube contends the

Commission acted “contrary to law” by enforcing the NOC Form requirement. We

disagree.

      As previously mentioned, PURPA requires electric utilities to purchase power

from Qualifying Facilities and directs FERC to enact rules to encourage these

purchases. See N.C. Power, 338 N.C. at 417, 450 S.E.2d at 899; see also 16 U.S.C.A.

§ 824a-3(a). PURPA also directs state regulatory agencies, such as the Commission,

to implement PURPA and FERC regulations. 16 U.S.C.A. § 824a-3(f)(1). The United

States Supreme Court has explained a state may comply with this obligation “by

issuing regulations, by resolving disputes on a case-by-case basis, or by taking any

other action reasonably designed to give effect to FERC’s rules.” FERC v. Mississippi,
456 U.S. at 751, 72 L. Ed. 2d at 542.

                                         - 12 -
          CUBE YADKIN GENERATION, LLC V. DUKE ENERGY PROGRESS, LLC

                                   Opinion of the Court

      Pursuant to its authority under PURPA, FERC established a Qualifying

Facility can sell power to a utility via a Legally Enforceable Obligation; however,

FERC did not define what constitutes a Legally Enforceable Obligation. See 18 C.F.R.

§ 292.304(d)(2).    Rather, whether a Legally Enforceable Obligation has been

established is a determination left to state regulatory agencies through their

implementation of PURPA.        See, e.g., New PURPA Section 210(m) Regulations

Applicable to Small Power Production and Cogeneration Facilities, 119 FERC ¶

61,305, at ¶ 128 (June 22, 2007) (codified at 18 C.F.R. pt. 292). In accordance with

FERC v. Mississippi, the Commission has established several tests for determining

the establishment of a Legally Enforceable Obligation. See 456 U.S. at 751, 72 L. Ed.
2d at 542 (allowing a state agency to implement PURPA and FERC regulations “by

issuing [its own] regulations”); see also Sub 140 Order, at *51-52.

      Here, the Commission prescribed its three-part test for determining when a

Legally Enforceable Obligation has been established—the developer of the Qualifying

Facility is required to: “(1) have self-certified with the FERC as a [Qualifying

Facility]; (2) have made a commitment to sell the facility’s output to a utility pursuant

to PURPA via the use of [the NOC Form;] and (3) have received a CPCN for the

construction of the facility.” Sub 140 Order, at *52. When it created this test, the

Commission provided the following justification for the NOC Form:

          [U]se of a simple form clearly establishing a [Qualifying
          Facility’s] commitment to sell its electric output to a utility to

                                          - 13 -
          CUBE YADKIN GENERATION, LLC V. DUKE ENERGY PROGRESS, LLC

                                   Opinion of the Court

          establish the notice of commitment to sell prong for creation of [a
          Legally Enforceable Obligation] would provide clarity both to
          [Qualifying Facilities] and the Utilities and would, therefore,
          reduce the number of disputes between the parties and the
          number of complaints brought before the Commission for
          adjudication as to when [a Legally Enforceable Obligation] was
          established.

Sub 140 Order, at *51.

      The Commission, as the state regulatory agency tasked with implementing

PURPA and FERC regulations, had the authority to create its three-part test for the

establishment of a Legally Enforceable Obligation. See 16 U.S.C. § 824a-3(a); see also

FERC v. Mississippi, 456 U.S. at 751, 72 L. Ed. 2d at 542.               Further, as the

Commission concluded, “use of a simple form . . . to establish the notice of

commitment to sell prong for creation of [a Legally Enforceable Obligation] would

provide clarity both to [Qualifying Facilities] and the Utilities[,]” and this

requirement does not unreasonably interfere with a Qualifying Facility’s right to a

Legally Enforceable Obligation. Cf. Grouse Creek Wind Park, LLC, 142 FERC ¶

61,187, at *17 (Mar. 15, 2013) (concluding the Idaho Commission’s requirement that

a Qualifying Facility file a meritorious complaint to the Idaho Commission before

obtaining a Legally Enforceable Obligation “would . . . unreasonably interfere with a

[Qualifying Facility’s] right to a [Legally Enforceable Obligation]”).

      Because the Commission acted within its authority in creating this

requirement, the Commission did not err in concluding Cube failed to establish a

                                          - 14 -
          CUBE YADKIN GENERATION, LLC V. DUKE ENERGY PROGRESS, LLC

                                    Opinion of the Court

Legally Enforceable Obligation by not submitting the NOC Form. In its Complaint,

Cube admitted it did not submit the NOC Form, arguing instead that it was

inapplicable. However, the Commission correctly noted the Sub 140 Order “requires

all [Qualifying Facilities] to use the [NOC] Form to make a commitment to sell the

output of the facility to a utility.” Therefore, the Commission did not err in concluding

Cube’s failure to tender the NOC Form meant that Cube was not entitled to a Legally

Enforceable Obligation under a strict application of its three-part test.

                                        II. Waiver

       Cube further contends, however, the Commission erred by determining, at this

early stage in the litigation, Cube was not entitled to a waiver of the NOC Form

requirement. Specifically, Cube argues, “[t]here are several factual issues bearing on

the question of waiver that the Majority ignored (or resolved against Cube, contrary

to Cube’s allegations, at the Rule 12(b)(6) stage) in its summary dismissal.” We agree.

       As a motion to dismiss “test[s] the law of a claim, not the facts which support

it[, r]esolution of evidentiary conflicts is thus not within the scope of the Rule.” White,
296 N.C. at 667, 252 S.E.2d at 702 (citation and quotation marks omitted). Generally,

our courts recognize waiver arguments are usually fact intensive and ill-suited for a

motion to dismiss. Cf. Duncan v. Duncan, 232 N.C. App. 369, 377, 754 S.E.2d 451,

457 (2014) (“Whether principles of estoppel apply turns on the particular facts of each

case.” (alteration, citation, and quotation marks omitted)); Jackson/Hill Aviation,

                                           - 15 -
          CUBE YADKIN GENERATION, LLC V. DUKE ENERGY PROGRESS, LLC

                                  Opinion of the Court

Inc. v. Town of Ocean Isle Beach, 251 N.C. App. 771, 775-76, 796 S.E.2d 120, 123-24

(2017) (concluding where the plaintiff’s complaint asserted waiver and estoppel

arguments, the trial court’s granting of the defendant’s motion to dismiss for failure

to state a claim was improper (citations omitted)).

      Here, in its Complaint, Cube asserted it was entitled to a waiver of the NOC

Form requirement for several reasons. For instance, Cube argued the NOC Form did

not apply as Section Three of the Form required a Qualifying Facility to indicate

whether it had applied or received a CPCN; however, Cube alleged the CPCN

requirement was inapplicable as the Yadkin Project facilities were built well before

the statutory enactment of the CPCN requirement.          Cube also asserted it had

“substantially complied with the substance of the requirement” for establishing a

Legally Enforceable Obligation, entitling it to a waiver of the NOC Form

requirement. Lastly, Cube alleged facts in its Complaint that it argued showed a lack

of good faith on the part of Duke, further supporting its request for a waiver.

      In addressing Cube’s substantial compliance argument based on the letters

sent between the parties in September and October 2016, the Commission concluded

these letters “demonstrate[d] the anticipatory nature of [Cube’s] position at that

time” and that Cube thus did not establish its notice of commitment in October.

However, when viewing “the [C]omplaint . . . as admitted,” these letters support

Cube’s assertion that it communicated its commitment to sell to Duke by 11 October

                                         - 16 -
          CUBE YADKIN GENERATION, LLC V. DUKE ENERGY PROGRESS, LLC

                                    Opinion of the Court

2016. Stanback, 297 N.C. at 185, 254 S.E.2d at 615 (citation omitted). In addition,

the Order also illustrates the Commission resolved the factual inquiry of whether

Duke acted in good faith. However, such a question of fact is ill-suited at this stage

in the proceeding. See White, 296 N.C. at 667, 252 S.E.2d at 702 (“Resolution of

evidentiary conflicts is thus not within the scope of the Rule.”); see also Bledsole v.

Johnson, 357 N.C. 133, 138, 579 S.E.2d 379, 382 (2003) (“Whether a party has acted

in good faith is a question of fact for the trier of fact[.]” (citation omitted)). Further,

in   denying   Cube’s    waiver    request,    the   Commission     “weighed    equitable

considerations, state policy, and considerations of judicial economy in determining

whether [Cube] should be granted a waiver of the required use of the [NOC] Form.”

However, the weighing of such evidence on an undeveloped record at this preliminary

motion-to-dismiss stage is improper. See Jackson/Hill Aviation, Inc., 251 N.C. App.

at 775-76, 796 S.E.2d at 123-24 (citations omitted).

      Moreover, Section 62-79 of our General Statutes requires the Commission,

when issuing a final order, to include “[f]indings and conclusions and the reasons or

bases therefor upon all the material issues of fact . . . presented in the record[,]” and

under Section 62-94, the Commission’s findings on material issues of fact must be

supported by “competent, material and substantial evidence[.]” N.C. Gen. Stat. §§

62-79(a)(1); -94(b)(5) (2017). Here, several material issues of fact bearing on whether

Cube was entitled to a waiver of the NOC Form requirement—such as whether Duke

                                           - 17 -
         CUBE YADKIN GENERATION, LLC V. DUKE ENERGY PROGRESS, LLC

                                 Opinion of the Court

acted in bad faith; when Cube committed to sell its energy to Duke; and whether Cube

had “substantially complied with the substance” of the Commission’s three-part

test—were decided by the Commission without the benefit of either party being able

to submit additional evidence besides the pleadings. Thus, the Commission’s finding

that Cube was not entitled to a waiver of the NOC Form requirement could not be

supported by “competent, material and substantial evidence[.]” Id. § 62-94(b)(5).

Therefore, we conclude the Commission erred in dismissing Cube’s claim for a waiver

of the NOC Form requirement.

                                   Conclusion

      Accordingly, for the foregoing reasons, we affirm the Commission’s Order in

part but reverse the portion of the Commission’s Order dismissing Cube’s claim for a

waiver of the NOC Form requirement, and we remand this matter for further

proceedings on the question of whether Cube should be granted a waiver of the NOC

Form requirement.

      AFFIRMED IN PART, REVERSED IN PART, AND REMANDED.

      Judges TYSON and INMAN concur.

                                        - 18 -