Hamm v. Public Service Com'n of South Carolina

• Decision Date: 03 February 1992
• Docket Number: No. 23764,23764
• Citation: 310 S.C. 13,425 S.E.2d 28
• Parties: , 139 P.U.R.4th 586, Util. L. Rep. P 26,277 Steven W. HAMM, Consumer Advocate for the State of South Carolina, Respondent, v. PUBLIC SERVICE COMMISSION OF SOUTH CAROLINA, South Carolina Pipeline Corporation, and South Carolina Electric & Gas Company, Appellants; PIEDMONT NATURAL GAS COMPANY, INC., Respondent, v. PUBLIC SERVICE COMMISSION OF SOUTH CAROLINA, South Carolina Pipeline Corporation, and South Carolina Electric & Gas Company, Appellants; SOUTH CAROLINA ENERGY USERS COMMITTEE, Respondent, v. PUBLIC SERVICE COMMISSION OF SOUTH CAROLINA, South Carolina Pipeline Corporation, and South Carolina Electric & Gas Company, Appellants. . Heard
• Court: South Carolina Supreme Court

Page 28

425 S.E.2d 28

310 S.C. 13, 139 P.U.R.4th 586, Util. L.

Rep. P 26,277

Steven W. HAMM, Consumer Advocate for the State of South

Carolina, Respondent, v. PUBLIC SERVICE COMMISSION OF SOUTH CAROLINA, South Carolina

Pipeline Corporation, and South Carolina Electric

& Gas Company, Appellants;

PIEDMONT NATURAL GAS COMPANY, INC., Respondent, v. PUBLIC SERVICE COMMISSION OF SOUTH CAROLINA, South Carolina

Pipeline Corporation, and South Carolina Electric

& Gas Company, Appellants;

SOUTH CAROLINA ENERGY USERS COMMITTEE, Respondent, v. PUBLIC SERVICE COMMISSION OF SOUTH CAROLINA, South Carolina

Pipeline Corporation, and South Carolina Electric

& Gas Company, Appellants.

No. 23764.

Supreme Court of South Carolina.

Heard Feb. 3, 1992.

Decided Dec. 14, 1992.

Rehearing Denied Jan. 20, 1993.

Commission Counsel Marsha A. Ward and Gayle B. Nichols, Columbia, for appellant Public Service Com'n of South Carolina.

Belton T. Zeigler, of Lewis, Babcock & Hawkins; Corporate Counsel H. Thomas Arthur; Mitchell M. Willoughby and Braxton Craig Collins, Columbia, for appellant South Carolina Pipeline Corp.

Robert T. Bockman and Elizabeth F. Mallin, of the McNair Law Firm, P.A., Columbia, for appellant South Carolina Elec. & Gas Co.

South Carolina Dept. of Consumer Affairs Counsel Steven W. Hamm, Raymon E. Lark, Jr., and Elliott F. Elam, Jr., Columbia, for respondent Consumer Advocate.

Rex L. Carter and Jefferson V. Smith, Jr., of Carter, Smith, Merriam, Tapp, Rogers & Traxler, Greenville, and Jerry W. Amos, of Brooks, Pierce, McLendon, Humphrey & Leonard, Greensboro, N.C., for respondent Piedmont Natural Gas Co., Inc.

Arthur G. Fusco, of Sherill And Rogers, P.C., Columbia, for respondent South Carolina Energy Users Committee.

Corporate Counsel Miriam A. Swydan and David J. Muchow, Arlington, Va., and Michael S. Church, of Turner, Padget, Graham & Laney, P.A., Columbia, for amicus curiae The American Gas Ass'n.

FINNEY, Justice:

This is an appeal from a circuit court order reversing and remanding orders of the South Carolina Public Service Commission, which permitted a levelized surcharge based upon a combination of both the volumetric and deficiency-based systems to recover from retail gas customers take-or-pay charges incurred at the wholesale level. We affirm in part and reverse in part.

To compensate the wholesaler for risks involved in the merchandising of natural gas, the retailer agrees to take, or pay for if not taken, a minimum quantity of gas. These take-or-pay (TOP) provisions operate to compensate wholesalers for exclusive commitments of natural gas reserves to a specific sales contract and serves to allocate the risks between the parties.

On September 23, 1988, Appellant South Carolina Pipeline Corporation (Pipeline) filed an application with Appellant South Carolina Public Service Commission (Commission) for approval of a charge to be added to its customers' monthly cost of gas to empower Pipeline to recover TOP costs paid to its wholesale natural gas supplier.

Subsequently, Appellants South Carolina Electric & Gas Company and Respondents Piedmont Natural Gas Company, Inc. (Piedmont), South Carolina Energy Users Committee (SCEUC), and Steven W. Hamm, Consumer Advocate for the State of South Carolina (Consumer Advocate), were permitted to intervene. Thereafter, the American Gas Association was allowed to file an Amicus Curiae brief.

On April 3-6, 1988, the Commission conducted an evidentiary hearing during which the two controlling issues of this appeal were raised. First, how much, if any, of TOP costs should Pipeline be permitted to recover from its customers. Second, if permitted by what method should TOP costs be allocated among Pipeline's customers. On May 31, 1988, the Commission issued Order No. 89-520 in which it approved the implementation of levelized billing on or after June 1, 1989, and imposed a collection methodology. Respondents separately petitioned for rehearing, and on July 12, 1988, by Order No. 89-703, the Commission denied a rehearing and clarified certain determinations in Order No. 89-520.

Respondents petitioned for judicial review, and the cases were consolidated for hearing. Pursuant to SCEUC's motion to stay portions of Orders Nos. 89-520 and 89-703, the circuit court stayed implementation of a deficiency-based collection methodology pending issuance of a final order after a hearing on the merits of the case. After considering briefs and hearing oral arguments, the circuit court reversed the Commission orders and remanded the case based upon its finding that the decision of the Commission was not supported by the evidence and was arbitrary and capricious as a matter of law. This appeal followed.

An appeal from action of the Commission is governed by the provisions of the South Carolina Administrative Procedures Act, S.C.Code Ann. § 1-23-310, et seq. (1986), as amended, and such action must be sustained if supported by substantial evidence. Hamm v. American Telephone & Telegraph Co., 302 S.C. 210, 394 S.E.2d 842 (1990); Lark v. Bi-Lo, Inc., 276 S.C. 130, 276 S.E.2d 304 (1981). The Court cannot substitute its judgment for that of the Commission upon a question as to which there is room for a difference of intelligent opinion. Hamm v. American Telephone & Telegraph Co., supra; Chemical Leaman Tank Lines v. South Carolina Public Service Comm'n, 258 S.C. 518, 189 S.E.2d 296 (1972). The burden is on the respondents to show convincingly that the orders of the Commission are without evidentiary support or are arbitrary or capricious as a matter of law. Hamm v. South Carolina Public Service Comm'n, 294 S.C. 320, 364 S.E.2d 455 (1988).

This Court has defined substantial evidence as

' [PUB#PG=0000705,17] 'such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.' ... This is something less than the weight of the evidence, and the possibility of drawing two inconsistent conclusions from the evidence does not prevent an administrative agency's findings from being supported by substantial evidence.

Hamm v. South Carolina Public Service Comm'n and Wild Dunes Utilities, Inc., --- S.C. ----, 422 S.E.2d 118, 120 (1992) [quoting Lark v. Bi-Lo, Inc., supra ].

We address first the issue of whether Pipeline is entitled to recover from its customers the full amount of TOP charges. The circuit court found that TOP costs do not reflect purchased gas costs. Based upon its reasoning that TOP charges arise out of a failure to purchase gas, the court concluded there was no basis in fact or in law which would mandate their recovery through a purchased-gas expense recovery mechanism.

Appellants Commission and Pipeline argue that TOP costs approved by the Federal Energy Regulation Commission (FERC) may be treated as cost of gas under Pipeline's tariff and recovered from Pipeline's customers. We agree.

Mandated FERC rates may be passed on to customers pursuant to the filed-rate doctrine, a federal preemption rule which requires states to accord binding effect to filed rates approved by the FERC. See General Motors Corp. v. Illinois Commerce Comm'n, 143 Ill.2d 407, 158 Ill.Dec. 537, 574 N.E.2d 650 (1991); Mississippi Power and Light Co. v. Mississippi, 487 U.S. 354, 108 S.Ct. 2428, 101 L.Ed.2d 322 (1988); Nantahala Power and Light Co. v. Thornburg, 476 U.S. 953, 106 S.Ct. 2349, 90 L.Ed.2d 943 (1986).

Local gas companies are permitted to pass on to customers TOP charges if such charges are neither illegal, arbitrary nor unreasonable. General Motors Corp. v. Public Service Comm'n of Maryland, 87 Md.App. 321, 589 A.2d 982 (1991). Additionally, the Commission must authorize sufficient revenue to afford utilities the opportunity to recover expenses and the capital cost of doing business. Southern Bell Telephone and Telegraph v. South Carolina Public Service Comm'n, 270 S.C. 590, 244 S.E.2d 278 (1978).

The record shows that the Commission...