Court Opinion

ID: 6704003
Source: CourtListenerOpinion
Date Created: 2022-07-20 22:16:19.452202+00
Date Added: 2024-06-11T09:14:34.064709
License: Public Domain

Justice LAKE
dissenting.
Commissioner Purrington, the only dissenting member of the Utilities Commission, summarized rather well my own view of this matter, saying:
“Investment in exploration for natural gas by a gas distribution company is no different from investment in a coal mine by an electric utility except that the risks in the former investment are many times greater. Both investments can be advantageous to the Company in carrying out its utility function, but neither are utility functions (sic). Therefore, the cost of neither should be treated as a utility expense. For in so doing (and thereby passing through the cost thereof to the consumer in his rate), the source of capital funds is shifted from the investor to the consumer.
“In a free enterprise economy, investment decisions must be voluntary rather than imposed by regulatory authority. In my view, both the prior order in this docket and this further order require the consumer to become an involuntary investor in one of the most speculative enterprises known. * * * The company should bear the burden alone of raising investment capital.”
As Chief Justice Barnhill, speaking for a unanimous Court, said in Utilities Commission v. Motor Lines, 240 N.C. 166, 81 S.E. 2d 404 (1954): “The Utilities Commission is a creature of the Legislature. It may exercise only such authority as is vested in it by statute. And such authority must be exercised by it in accord with the standards prescribed by law.” This elementary principle of law has been repeatedly recognized and applied by this Court. Utilities Commission v. Mechandising Corp., 288 N.C. 715, 220 S.E. 2d 304 (1975); Utilities Commission v. Telephone Co., 281 N.C. 318, 336, 189 S.E. 2d 705 (1972); Utilities Commission v. R.R., 268 N.C. 242, 245, 150 S.E. 2d 386 (1966); Utilities Commission v. Finishing Plant, 264 N.C. 416, 420, 142 S.E. 2d 8 (1965); Utilities Commission v. Greyhound Corp., 224 N.C. 293, 29 S.E. 2d 909 (1944).
Before reaching the merits of the Attorney General’s appeal, two preliminary contentions of the appellees should be set at rest. The first is that this appeal is too late, the contention being *614that the Attorney General should have appealed when the Commission entered its order promulgating its Rule Rl-17(h) establishing procedures to be followed in raising rates to recover gas exploration costs. The answer in such order was not then appealable. “[N]o appeal may be taken from an order by which the Commission adopts and promulgates a general regulatory rule of supervisory nature.” Utilities Commission v. Greyhound Corp., supra. Not until rates for gas service were actually changed pursuant to this rule was there an appealable order. Thus, the present appeal is timely.
The second of these contentions is that no ratepayer appeared before the Commission in opposition to the adoption of Rule Rl-17(h), or in opposition to the increase in gas rates presently in controversy and, on the contrary, the Textile Manufacturers Association and the Brick Manufacturers Association appeared before the Commission and expressed their approval of the proposed surcharge to raise funds for gas exploration. Obviously, if these groups of manufacturers, who are so vitally affected by a gas shortage, desire to contribute to the cost of a gas exploration venture, there is nothing which prevents their doing so, but their willingness to make such contributions cannot justify an order by the Commission requiring residential users and operators of small businesses to make proportionate contributions. It is equally obvious that the failure of these small consumers of gas to appear before the Commission does not support the appellees’ inference that they do not object to the increase. We may, and should, take judicial notice of the well known fact that it is exceedingly expensive to employ adequate counsel and qualified expert witnesses to contest a utility’s application for a rate increase. The oft-repreated cry of utility companies, “No one but the Attorney General appeared in opposition to the proposed rate,” ignores the stark fact of economic life that a consumer, whose rate the utility proposes to raise by a relatively small sum per month, cannot afford to contest the lawfulness of the exaction before the Commission and in the appellate courts. That is why there were no consumers before the Commission protesting this rate increase. That is why the Legislature has authorized the Attorney General to appear in behalf of the consumers. G.S. 62-20. The thinly veiled suggestion that the Attorney General is an officious intermeddler in such *615matters is unworthy of serious consideration or extended discussion.
A third preliminary point, which was, in my view, given unjustified importance by the Court of Appeals, is the fact that on 26 June 1975, two days before the Utilities Commission issued its order promulgating Rule Rl-17(h), the Legislature amended G.S. 105-116(c) to add thereto a proviso.
Chapter 105 of the General Statutes is the Revenue Act. It does not relate to public utilities except insofar as it affects them as taxpayers. It has no obvious relation to the regulatory or rate-making powers of the Utilities Commission, these being dealt with in Chapter 62 of the General Statutes. G.S. 105-116 imposes a “franchise or privilege tax on electric light, power, gas, water, sewerage, and other similar public service companies not otherwise taxed.” This tax, computed pursuant to a somewhat complex formula, set forth in the statute, is, roughly, six per cent of the gross receipts derived by the utility from its business within the State. The amendment of 1975 added this proviso to this tax statute:
“Provided further, that said tax shall not be applicable to special charges collected within this State by natural gas utilities pursuant to drilling and exploration surcharges approved by the Utilities Commission, where such surcharges are segregated from the other receipts of the natural gas utility and are devoted to drilling, exploration and other means to acquire additional supplies of natural gas for the account of natural gas customers in North Carolina and where the beneficial interest in said surcharge collections is preserved for the natural gas customers paying said surcharges under rules established by the Utilities Commission.”
The General Assembly adjourned two days later. Sessions Laws 1975, p. 1544.
Obviously, there is a logical basis for exempting from the operation of a franchise tax, measured by a company’s gross receipts from its regular business in this State, which receipts are available for use for its general corporate purposes, revenues collected by it for the financing of explorations elsewhere, especially *616when those revenues are, by order of the Utilities Commission, specifically earmarked for use only in such exploration and, therefore, are received and held by the company as a trust fund for that purpose. To read into such a legislative exemption from such taxation, a legislative intent to grant to the Utilities Commission a wholly new power, never before asserted by it or supposed to reside in it, and so to amend an entirely different chapter of the General Statutes, as did the Court of Appeals, appears to me completely unrealistic and unwarranted. G.S. Chapter 105, the Revenue Act, and G.S. Chapter 62, the Public Utilities Law, are completely unrelated legislative programs. They are not in pari materia.
Such an obscure and circuitous approach by the Legislature, if it were intent upon enlarging the regulatory and rate-making powers of the Utilities Commission, the Legislature’s own creature, seems most unlikely since all that would be needed for that purpose would be a direct and simple amendment to G.S. 62-133, which is the statute prescribing the procedure for fixing a utility company’s rates, or the equally direct and simple addition of a new section to G.S. Chapter 62, Article 3, which is the portion of the chapter specifying the powers conferred upon the Utilities Commission. A far more plausible explanation of this enactment, passed in the haste of the closing days of the legislative session, is that the Legislature had no other purpose than that which plainly appears upon the face of the bill — to exempt such revenues from the reach of the franchise tax. This 1975 amendment to the Revenue Act appears to me, therefore, to shed no light whatever upon the question before us.
These facts plainly appear:
1. The distribution of natural gas for sale to consumers thereof is one business; the production of such gas is another; prospecting, or exploring, for such gas is still another.
2. These North Carolina utility companies have heretofore been engaged in the first such business only, not in the second or the third. They have never held themselves out to the public as being engaged in the business of production of natural gas or in the business of prospecting therefor. They hold no certificate of convenience and necessity for either production of or prospecting for natural gas.
*6173. These North Carolina utility companies have had, and now have, no duty whatsoever to the public to produce natural gas or to prospect therefor. They have not been ordered by the Utilities Commission to engage in either of those businesses, but only permitted by the Commission to do so within limits approved by the Commission. They require no such permission so long as they engage in such business activities, directly or through subsidiaries, with capital supplied by their stockholders, provided they do not jeopardize their public service undertakings to the North Carolina public.
4. What they have been granted by the Commission is not permission to invest their own money in this new business of prospecting for deposits or fields from which natural gas can be produced. What they have been granted by the Commission is permission to extract from North Carolina consumers of natural gas, purchased by these companies from other sources, over and above a fair rate for such purchased gas, new, additional capital with which to embark upon this new business of prospecting for now undiscovered gas fields or deposits.
5. The proposed prospecting will not be done in North Carolina for there is no presently known reason to suppose there are such undiscovered sources of natural gas in this State.
6. Due to the rapid expansion of the use of natural gas in industrial plants, there is presently a critical shortage of such gas in this State and elsewhere.
7. The companies’ motivation in turning into this new business — prospecting for natural gas deposits — is not philanthropic, nor is it concern for the comfort and welfare of consumers of gas per se. Their motivation is certainly not reprehensible, but it keeps the issue sharply defined to label it correctly — self-interest. Each company has many millions of dollars invested in its present plant — a distribution system. If its supply of gas dwindles and sputters out, the company will become bankrupt. It is just as simple as that! The companies fear this may happen, so they want to venture into the wholly new business of prospecting for a new source of gas.
8. The companies’ managements, seeing this ominous prospect, have gone to the companies’ present owners — their *618stockholders and bondholders — have shown them the prospect and have, in effect, said to them: “To save your own present investment, we must have a further investment of new capital with which to prospect for new gas fields. Let us have this new capital in return for new bonds, or new stock, issued by the company, or its new subsidiary.” But the existing bondholders and stockholders, represented in such matters by experienced experts, have said, in effect: “Oh, no! We invest in safe ventures, not in wildcat prospecting schemes. Don’t look to us for capital with which to grubstake such a risky venture as that!”
9. Unable to get any prospecting capital from the “informed” sources, the companies have turned to the Utilities Commission and have said, in effect: “Make the North Carolina householder, merchant and manufacturer supply us with prospecting capital. We shall extract just a little each month from each consumer and then no one will have enough at stake to enable him to afford the cost of fighting the exaction.” The Commission has replied, in effect: “Quite so! This is clearly best for the consumers of gas. We will compel the consumers of natural gas so to contribute the necessary capital by increasing the fair rates, otherwise paid by them, by a surcharge earmarked for prospecting. They will have to put up the capital for this venture, for otherwise you can cut off their gas service for nonpayment of their gas bills.”
The difficulty is that the Commission has not been given authority so to conscript capital from unwilling investors, even if it be true that such a prospecting venture is for the best interests of the consumers of natural gas in North Carolina. The Commission does not have authority to do whatever it believes to be in the best interests of the public, not even if this Court agrees with that evaluation of the proposal. We need not presently inquire into whether the Legislature could, constitutionally, authorize the Commission so to conscript capital for a venture found by the Commission to be in the public interest and reasonably likely to succeed. Presently, it is a sufficient answer as to this question that the Legislature has not conferred upon the Utilities Commission authority to conscript from unwilling investors capital for such a prospecting business.
Prospecting for natural gas is not a public utility business. G.S. 62-3a defines “public utility,” as that term is used throughout G.S. Chapter 62. The term includes the businesses of owning or *619operating “in this State” facilities for “producing,” “transmitting,” “delivering or furnishing” piped gas to the public for compensation. The business of prospecting or exploring for deposits of natural gas is not one of these. “Neither the Commission nor this Court has authority to add to the types of business defined by the Legislature as public utilities.” Utilities Commission v. Telegraph Co., 267 N.C. 257, 268, 148 S.E. 2d 100 (1966).
G.S. 62-3d expressly provides: “If any person conducting a public utility shall also conduct any enterprise not a public utility, such enterprise is not subject to the provisions of this Chapter'' (Emphasis added.) G.S. 62-133, the statute which prescribes the procedure to be followed by the Utilities Commission in fixing rates to be charged for public utility service (i.e., the distribution of natural gas for consumption in this State), does not authorize the Commission to take into consideration expenditures by the utility company in its non-utility business (i.e., its business of prospecting for deposits of natural gas). In fixing rates for a “public utility” service, the Commission has heretofore consistently and properly excluded from consideration revenues derived from and expenses incurred in the company’s non-utility businesses. The above cited statutes plainly so require.
In Utilities Commission v. Lee Telephone Co., 263 N.C. 702, 140 S.E. 2d 319 (1965), this Court held that in fixing rates for public utility service in this State, the Utilities Commission may not take into consideration revenues received, expenses incurred or return derived by a public utility company from even its public utility business in another state. A fortiori in fixing rates for gas distributed in this State, the Commission may not take into account expenses incurred or revenues derived by the company from its non-utility, prospecting business conducted in another state. That is precisely what the Commission has done in authorizing these utilities to impose a surcharge upon the otherwise fair rates for gas distributed by them in North Carolina, which surcharge it computes on the basis of expenses incurred in their prospecting business in states other than North Carolina. For this further reason, the orders from which these appeals are taken were not within the authority of the Utilities Commission and the surcharge may not lawfully be collected, however laudable may have been the purpose of the Commission.
*620The several appellees cite G.S. 62-2, 30, 31, 32, 42(a), 130 and 131 as sources of the Commission’s authority to conscript capital for prospecting from involuntary investors who consume gas purchased and distributed to them by the appellee utilities. These statutes do not support that position.
G.S. 62-2 is entitled, “Declaration of policy.” It declares it to be the policy of this State to provide “fair regulation of public utilities,” “to promote the inherent advantage of regulated public utilities," “to promote adequate * * * utility service," “to provide just and reasonable rates * * * for public utility services,” “to * * * promote harmony between public utilities, their users and the environment,” “to foster the continued service of public utilities," “to seek to adjust the rate of growth of regulated energy supply facilities” and “to cooperate with other states and with the federal government in promoting * * * public utility service and reliability of public utility energy supply.” To those ends, it declares “authority shall be vested in the North Carolina Utilities Commission to regulate public utilities * * * in the manner and in accordance with the policies set forth in this Chapter.” (Emphasis added throughout.) It then expressly states: “Nothing in this Chapter shall be construed to imply any extension of Utilities Commission regulatory jurisdiction over any industry or enterprise that is not subject to the regulatory jurisdiction of said Commission.” (Emphasis added.) As above shown, the business of prospecting for deposits of natural gas in other states is an “enterprise” not subject to the regulatory jurisdiction of the Commission and is not a “public utility” as that term is used throughout G.S. Chapter 62, including this declaration of State policy. In this respect, there is no difference between G.S. 62-2 before and after the 1975 amendment thereof.
G.S. 62-30 provides:
“General powers of Commission.— The Commission shall have and exercise such general power and authority to supervise and control the public utilities of the State as may be necessary to carry out the laws providing for their regulation, and all such other powers and duties as may be necessary or incident to the proper discharge of its duties.” (Emphasis added except section title.)
G.S. 62-31 provides:
*621“Power to make and enforce rules and regulations for public utilities.— The Commission shall have and exercise full power and authority to administer and enforce the provisions of this Chapter and to make and enforce reasonable and necessary rules and regulations to that end." (Emphasis added except section title.)
G.S. 62-32 provides:
“Supervisory powers; rates and services.— (a) Under the rules herein prescribed and subject to the limitations hereinafter set forth, the Commission shall have general supervision over the rates charged and service rendered by all public utilities in this State.” (Emphasis added except section title.)
(b) The Commission is hereby vested with all power necessary to require and compel any public utility to provide and furnish to the citizens of this State reasonable service of the kind it undertakes to furnish and fix and regulate the reasonable rates and charges to be made for such service." (Emphasis added.)
As above noted, the business of prospecting for deposits of natural gas, especially in other states, is not a public utility business or service within the meaning of these sections of Chapter 62. Therefore, these provisions do not empower the Utilities Commission to conscript from unwilling investors (consumers of natural gas) capital with which to finance such prospecting.
G.S. 62-130 authorizes the Commission “to make, fix, establish or allow just and reasonable rates for all public utilities subject to its jurisdiction." (Emphasis added.) Obviously, rates fixed to supply to a prospecting business capital with which to operate its explorations in another state do not fall within the authority granted by this section. By hypothesis, the rates (exclusive of this surcharge) now charged users of gas purchased and distributed by these utility companies to the public in North Carolina are “just and reasonable.” If not, the appropriate procedure for making them so is prescribed in G.S. 62-133.
*622G.S. 62-131 provides:
“Rates must be just and reasonable; service efficient.— (a) Every rate made, demanded or received by any public utility, or by any two or more public utilities jointly, shall be just and reasonable.
“(b) Every public utility shall furnish adequate, efficient and reasonable service.” (Emphasis added except section title.)
Clearly, this statute does not authorize the Commission to conscript capital from unwilling investors (i.e., consumers of gas) in order to finance a non-utility, prospecting venture in another state. We need not presently determine whether it authorizes the Commission to require a distributing gas company to invest its own funds in so hazardous a venture for the Commission has not required any of these utility companies to do that. They are authorized but not required so to invest their own funds. The question before us is, Does G.S. Chapter 62 authorize the Commission to conscript capital for such a venture from users of natural gas in North Carolina? In my opinion, it clearly does not.
G.S. 62-42(a), cited by Piedmont Natural Gas Company and by Public Service Company, simply authorizes the Commission upon its finding, after a hearing, that the service of a public utility is inadequate, to direct such utility to improve its service. Obviously, that statute does not authorize the Commission to conscript capital from the utility’s customers for the purpose of financing the utility’s prospecting ventures in another state.
The reliance by the appellees upon these statutory provisions as support for this unprecedented order of the Commission shows convincingly that there is no provision in G.S. Chapter 62 which confers the authority upon the Commission so to conscript capital for these non-utility, out-of-state ventures.
Justices BRANCH and EXUM join in this dissent.