Hamm v. South Carolina Public Service Com'n, 23869

• Decision Date: 13 October 1992
• Docket Number: No. 23869,23869
• Court: South Carolina Supreme Court
• Parties: , 144 P.U.R.4th 160 Steven W. HAMM, Consumer Advocate for the State of South Carolina, Appellant, v. SOUTH CAROLINA PUBLIC SERVICE COMMISSION and Carolina Water Service, Inc., Respondents. . Heard

Page 454

432 S.E.2d 454

315 S.C. 119, 144 P.U.R.4th 160

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

Carolina, Appellant, v. SOUTH CAROLINA PUBLIC SERVICE COMMISSION and Carolina Water

Service, Inc., Respondents.

No. 23869.

Supreme Court of South Carolina.

Heard Oct. 13, 1992.

Decided June 7, 1993.

Steven W. Hamm, Raymon E. Lark Jr., and Elliott F. Elam, Jr., Columbia, for appellant.

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

Mitchell M. Willoughby and B. Craig Collins, of Willoughby & Hoefer, P.A., Columbia, and Rex Carter of Carter, Smith, Merriam, Rogers and Traxler, Greenville, for respondent Carolina Water Service, Inc.

FINNEY, Justice:

The State Consumer Advocate appeals from an order of the trial judge which affirmed prior findings of the Public Service Commission granting a rate increase to Carolina Water Service. The issues presented for review involve 1) the level of total operating expenses, 2) an environmental surcharge, and 3) plant impact fees. We affirm in part and reverse in part.

On February 2, 1990, Carolina Water Service, Inc. (CWS) filed an application with the Public Service Commission (the Commission) for approval of a new schedule of rates and charges for water and sewer service. The Commission established docket number 89-610-W/S to consider CWS's request. The Consumer Advocate filed a Petition to Intervene on April 4, 1990, and was made a party of record.

On June 13, 1990, the Commission conducted an evidentiary hearing, which was followed by a night hearing for members of the general public. On August 1, 1990, by Order No. 90-694, the Commission approved an increase in rates, an environmental impact surcharge, and continued previous plant impact fees approved in Order No. 89-573, dated June 5, 1989. The Consumer Advocate petitioned the Commission for rehearing, and on September 21, 1990 the Commission issued Order 90-940, denying rehearing. The Consumer Advocate then filed a petition for judicial review. The Circuit Court affirmed the order of the Commission. This appeal follows.

A. SCOPE OF REVIEW

An appeal from an action of the Commission is governed by the provisions of the South Carolina Administrative Procedures Act. 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 decision of an administrative agency must be sustained if there is substantial evidence to support it. Id. 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 Commission, 258 S.C. 518, 189 S.E.2d 296 (1972). 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. Hamm v. American Telephone and Telegraph Co., 302 S.C. 210, 394 S.E.2d 842 (1990).

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

B. WHETHER THE COMMISSION'S APPROVAL OF THE LEVEL OF OPERATING EXPENSES WAS PROPER AND SUPPORTED BY SUBSTANTIAL EVIDENCE.

The Consumer Advocate argues that CWS did not meet its burden of proving that the increased operating expenses were reasonable, necessary, and appropriate expenses to be passed on to its ratepayers. We disagree.

The Consumer Advocate questions the appropriateness of particular direct general expenses, indirect expenses and expenses related to CWS' computer operations. The record reveals that over a five year period CWS experienced a 44% increase in operation and maintenance expenses, and a 93% increase in general expenses. The reasonableness of these expenses was explained by CWS's witness, Carl J. Wenz. The order of the circuit court discusses the testimony of Wenz. "[T]he reasons for the increase in expenses ... included 1) increased salaries from the expanded level of operations of some systems, 2) increased use of chemicals for improvement of water quality and the dramatic increase in their costs, 3) increased maintenance expenses (approximately $300,000 over the period), reflecting aging of the systems and an upgrade in their degree of quality, 4) increased environmental related costs, such as for sludge hauling and water testing required by the Safe Drinking Water Act, and 5) dramatic increases in insurance costs, including health and liability insurance."

In addition, Wenz revealed that CWS experienced customer growth of approximately 19% during the period in question, which increased revenues by $500,000. Adjusted for customer growth, combined expenses actually increased only approximately 33%, or little more than 7% annually. Order No. 90-940 also notes that the Commission staff audited the expenses of CWS using established auditing procedures, and the staff made adjustments for non allowable expenses and included only allowable expenses associated with the test period.

The substantial evidence test does not require that the Commission cite to facts, but that the evidence is contained in the record as a whole. Hamm v. American Tel. & Tel. Co., 302 S.C. 210, 394 S.E.2d 842 (1990). We find that the record contains substantial evidence in support of the Commission's decision regarding operating expenses and that the Consumer Advocate has failed to prove convincingly that the Commission's actions were arbitrary and capricious as a matter of law.

The Consumer Advocate also alleges that authorizing CWS to recover expenses related to unrecovered property taxes constitutes retroactive ratemaking. We disagree. In Hamm v. South Carolina Public Service Commission and Wild Dunes Utilities, Inc., supra, this Court held that lost revenues may be properly recoverable as an operating and...