Hamm v. South Carolina Public Service Com'n, 23707

Decision Date04 May 1992
Docket NumberNo. 23707,23707
PartiesSteven W. HAMM, Consumer Advocate for the State of South Carolina, Appellant, v. SOUTH CAROLINA PUBLIC SERVICE COMMISSION and Wild Dunes Utilities, Inc., Respondents. . Heard
CourtSouth Carolina Supreme Court

Steven W. Hamm, Raymon E. Lark, Jr. and Carl F. McIntosh, all of S.C. Dept. of Consumer Affairs, Columbia, for appellant.

Marsha A. Ward and F. David Butler, Columbia, for respondent South Carolina Public Service Com'n.

Rex L. Carter, of Carter, Smith, Merriam, Rogers and Traxler, Greenville, and Mitchell Willoughby and B. Craig Collins, both of Willoughby & Hoefer, P.A., Columbia, for respondent Wild Dunes Utilities, Inc.

HARWELL, Chief Justice:

This is an appeal from an order issued by respondent South Carolina Public Service Commission (PSC) granting respondent Wild Dunes Utilities, Inc. (Wild Dunes) an increase in water and sewerage rates. Appellant Steven W. Hamm, Consumer Advocate for the State of South Carolina (Consumer Advocate), alleges that the trial judge erred in upholding the PSC's order. We affirm.

I. FACTS

Wild Dunes operates a water and sewerage service facility in the Wild Dunes resort area on the Isle of Palms. In January 1990, three months after Hurricane Hugo demolished much of the Isle of Palms and temporarily wiped out one-third of Wild Dunes' customer base, 1 Wild Dunes applied to the PSC for approval of a new schedule of rates and charges. The Consumer Advocate was granted leave to intervene and contested Wild Dunes' application on a variety of grounds. After a hearing on May 9, 1990, the PSC granted Wild Dunes an increase of $294,648 in rates, approved an increase in its operating margin from 9.46% to 26.79%, and granted Wild Dunes permission to begin collecting from each new customer a plant impact fee of $700 for water and sewer service. The Consumer Advocate petitioned for rehearing and then for judicial review. 2 The trial judge denied the relief sought by the Consumer Advocate.

II. DISCUSSION

An appeal from an order issued by the PSC is governed by the provisions of the South Carolina Administrative Procedures Act. Hamm v. American Telephone and Telegraph Co., 302 S.C. 210, 213, 394 S.E.2d 842, 844 (1990). This Court must sustain the PSC's decision if there is substantial evidence to support it. Id. The PSC's order is presumed to be valid and reasonable, and it has the force and effect of law. Id. at 214, 394 S.E.2d at 844. This Court is precluded from substituting its judgment for that of the PSC upon a question as to which there is room for a difference of intelligent opinion. Id. Rather, the Consumer Advocate must prove convincingly to this Court that the PSC's order is unsupported by the evidence or that it embodies arbitrary or capricious action as a matter of law. Id. at 213, 394 S.E.2d at 844.

The Consumer Advocate first asserts that Wild Dunes should not be allowed to recover lost revenues as an operation and maintenance cost but instead should adjust its reported revenues to reflect the revenues it did not realize because it temporarily was unable to serve its customers after Hurricane Hugo. We disagree.

The Consumer Advocate does not contest that Wild Dunes should be allowed to recover the expenses it incurred repairing the damage inflicted by Hurricane Hugo. The controversy centers around Wild Dunes' request to recoup lost revenues as one of these expenses. Wild Dunes estimated that it lost revenues of $221,000 during the period it could not provide service because its plant and many of its customers' homes had been damaged extensively. 3 Wild Dunes proposed that it be permitted to include these lost revenues in the expenses it sustained restoring water and sewer service, amortized over a five year period. The PSC agreed and directed that the $221,000 be charged against Wild Dunes' operation and maintenance account. The Consumer Advocate contends that lost revenues are not an expense Wild Dunes sustained in restoring service, and more properly should be reflected in a reduction of Wild Dunes' revenues for 1989 and 1990. Consequently, according to the Consumer Advocate, the PSC did not base its decision to charge lost revenues as an expense on substantial evidence.

A Wild Dunes representative acknowledged that no accounting principle supported Wild Dunes' request to charge lost revenues as an expense. However, the representative also testified that if Wild Dunes were to adjust revenues to the level of customers on-line at the time of filing, those customers would bear a disproportionate share of the expenses Wild Dunes sought to recover. He testified that the approach advocated by Wild Dunes--charging the lost revenues as an expense--allowed Wild Dunes to recover its costs over a longer period of time from a broader group of customers, so that Wild Dunes' customers would not experience "rate shock."

We have defined "substantial evidence" to mean " '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 finding from being supported by substantial evidence." Lark v. Bi-Lo, Inc., 276 S.C. 130, 135-36, 276 S.E.2d 304, 307 (1981). Where reasonable minds might differ, the PSC's decision may not be set aside. Id. at 136, 276 S.E.2d at 307. Although the PSC's decision to allocate lost revenues as an operating and maintenance expenses is unusual, we discern that, given the unique situation Wild Dunes experienced after Hurricane Hugo, the evidence reasonably supports the conclusion reached by the PSC. Accordingly, we find that the trial judge did not err in affirming the PSC's order allowing Wild Dunes to recover lost revenues.

The Consumer Advocate next contends that the PSC failed to set forth sufficient findings of fact to support its decision to allow Wild Dunes to charge plant impact fees, and that the proposed plant impact fees were not based on substantial evidence. We disagree.

Wild Dunes requested a restructuring of its water and sewer connection and water tap fees for residential and commercial customers after it made capital expenditures of $1,363,066 to upgrade its water operations and $1,195,738 to upgrade its sewer operations. Wild Dunes proposed that it be allowed to collect a plant impact fee of $700 per single family equivalent unit from new residential and commercial customers. The PSC found that the plant impact fee was appropriate because the capital expenditures previously made by Wild Dunes had enabled Wild Dunes to develop sufficient capacity to serve new customers.

An administrative body must make findings which are sufficiently detailed to enable this Court to determine whether the findings are supported by the evidence and whether the law has been applied properly to those findings. Hamm v. Southern Bell Telephone and Telegraph Co., 302 S.C. 132, 394 S.E.2d 311 (1990), cert. denied, --- U.S. ----, 111 S.Ct. 1018, 112 L.Ed.2d 1099 (1991). The Consumer Advocate contends that the PSC should have quantified the amount of existing plant capacity attributable to each customer, specified how the fees would be utilized, and established the reasonableness of the amount of proposed fee based on evidence in the record.

Although the PSC's original order disposes of its reasons for granting the plant impact fees in a somewhat summary fashion, its order on rehearing elaborates on the appropriateness of the plant impact fees requested by Wild...

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