Kiawah Property Owners Group v. PSC, 24997.

Citation338 S.C. 92,525 S.E.2d 863
Decision Date07 September 1999
Docket NumberNo. 24997.,24997.
CourtUnited States State Supreme Court of South Carolina
PartiesKIAWAH PROPERTY OWNERS GROUP, Appellant, v. The PUBLIC SERVICE COMMISSION OF SOUTH CAROLINA and Kiawah Island Utility, Inc., Respondents.

Stephen P. Groves, Sr., Michael A. Molony and Stephen L. Brown, all of Young, Clement, Rivers & Tisdale, LLP, of Columbia, for appellant.

G. Trenholm Walker, of Pratt-Thomas, Pearce, Epting & Walker, P.A., of Charleston; and Lucas C. Padgett, Jr., of McNair Law Firm, P.A., of Charleston, both for respondent Kiawah Island Utility, Inc.

F. David Butler, of Public Service Commission, of Columbia, for respondent The Public Service Commission of South Carolina.

TOAL, Justice:

This case is an appeal from the circuit court's order upholding the decisions of the Public Service Commission ("PSC"). We reverse and remand.

FACTUAL/PROCEDURAL BACKGROUND

Kiawah Island Utility, Inc. ("the Utility") provides water and sewer service to the residents of Kiawah Island. The Utility is wholly owned by Kiawah Resort Associates ("the Developer"). In July of 1996, the Utility applied to the Public Service Commission for an increase in its existing rates and charges for water and sewer service. The appellant, Kiawah Property Owners Group ("KPOG"), as well as the consumer advocate and the Town of Kiawah Island, intervened in opposition to the increase and participated in the Commission's proceedings.

Prior to the 1996 adjudication, the rates and charges of the Utility had been approved by the PSC in 1992. The Utility sought to increase its operating margin by 5.43%. After the hearings, the PSC issued an order granting the Utility an increase of only 3.55%. After the PSC's first order in January of 1997, KPOG and the consumer advocate filed a Petition for Rehearing and/or Reconsideration. In February 1997, the PSC issued its second order addressing the Petition for Rehearing and/or Reconsideration and upheld all of its earlier determinations.

Following the second order, KPOG appealed the PSC orders to the circuit court. In March 1998, the circuit court issued its opinion upholding the PSC. KPOG then appealed to this Court raising the following issue:

Did the circuit apply the appropriate level of review to transactions between the Utility and the Developer as these two entities are affiliated companies with the same management and therefore do not transact business at arms length?
LAW/ANALYSIS
A. STANDARD OF REVIEW

KPOG argues that the circuit court applied the wrong level of review to the PSC's analysis of the transactions between the Developer and the Utility. We disagree.

KPOG argues a heightened standard is required where the Developer controls the Utility, the so-called intercompany transactions.1 This Court addressed intercompany dealings in Hilton Head Plantation Utilities, Inc. v. Public Serv. Comm'n of South Carolina, 312 S.C. 448, 451, 441 S.E.2d 321, 323 (1994), and stated:

Charges arising out of intercompany relationships between affiliated companies should be scrutinized with care, and if there is an absence of data and information from which the reasonableness and propriety of the services rendered and the reasonable cost of rendering such services can be ascertained by the Commission, allowance is properly refused.

This language from Hilton Head does not create a "stricter" level of review as argued by KPOG. Normally, the expenses of an Utility are presumed to be reasonable when incurred in good faith. See Hamm v. S.C. Public Serv. Comm'n, 309 S.C. 282, 422 S.E.2d 110 (1992)

. However, when payments are made to an affiliate, a mere showing of actual payment does not establish a prima facie case of reasonableness. Hilton Head Plantation Utilities, Inc.,

312 S.C. at 451,

441 S.E.2d at 323. This language from Hilton Head merely requires the PSC to review and analyze these intercompany dealings and determine if they are reasonable.

Hilton Head does not require intercompany deals to meet a level of review stricter than the other analysis done by the PSC. We disagree with KPOG's argument that the PSC ignored the intercompany relationship. The PSC did not ignore the intercompany relationship, it found that the dealings were reasonable.

B. SUFFICIENCY OF THE PSC ORDERS

Even though the PSC reviewed the reasonableness of the intercompany transactions, the PSC orders addressing these transactions are so inadequate in substance that they cannot be upheld by this Court. "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." Porter v. S.C. Public Serv. Comm'n, 333 S.C. 12, 507 S.E.2d 328 (1998). This Court will not accept an administrative agency's decision at face value without requiring the agency to explain its reasoning. Id. As with all agency orders, when the PSC issues their determination about the reasonableness of intercompany dealings, their findings of fact must be sufficiently detailed to enable the reviewing court to determine whether the findings are supported by the evidence in the record and whether the law has been properly applied. See Able Communications, Inc. v. S.C. Public Serv. Comm'n, 290 S.C. 409, 411, 351 S.E.2d 151, 152 (1986)

. Where material facts are in dispute, the administrative body must make specific, express findings of fact. Id. In the current case, the PSC failed to meet the required standard.

Even though the PSC complied with the mandate of Hilton Head by actually addressing the intercompany dealings and their reasonableness, the orders of the PSC fail to address the basis for their determinations. "[A] recital of conflicting testimony followed by a general conclusion is patently insufficient to enable a reviewing court to address the issues." See Able Communications, Inc., 290 S.C. at 411, 351 S.E.2d at 152. These...

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